|Note 1: Summary of Significant Accounting Policies|
1.1 Objectives of the Australian Pesticides and Veterinary Medicines Authority
The Australian Pesticides and Veterinary Medicines Authority (APVMA) is an Australian Government controlled entity. The APVMA is responsible for the assessment and registration of pesticides and veterinary medicines and for their regulation up to and including the point of retail sale.
The APVMA administers the National Registration Scheme for Agricultural and Veterinary Chemicals (NRS) in partnership with the states and territories and with the active involvement of other Australian government agencies.
Its role is to independently evaluate the safety and performance of chemical products intended for sale, making sure that the health and safety of people, animals and the environment are protected.
The APVMA is structured to meet a single outcome:
Outcome 1: Protection of the health and safety of people, animals, the environment, and agricultural and livestock industries through regulation of pesticides and veterinary medicines.
The APVMA’s activities contributing toward this outcome are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, revenues and expenses controlled or incurred by the APVMA in its own right. Administered activities involve the management or oversight by the APVMA, on behalf of the Australian Government, of items controlled or incurred by the Australian Government.
The continued existence of the APVMA in its present form and with its present programs is dependent on Australian Government policy and on continuing appropriations by Parliament for the APVMA’s administration and programs.
1.2 Basis of Preparation of the Financial Report
The financial statements and notes are required by section 49 of the Financial Management and Accountability Act 1997 and are a general purpose financial report.
The Financial Statements and notes have been prepared in accordance with:
- Finance Minister’s Orders (or FMOs) or reporting periods ending on or after 1 July 2009; and
- Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.
The financial report has been prepared on an accrual basis and is in accordance with the historical cost convention, except for certain assets at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.
The financial report is presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.
Unless an alternative treatment is specifically required by an accounting standard or the FMO, assets and liabilities are recognised in the balance sheet when and only when it is probable that future economic benefits will flow to the entity or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under Agreements Equally Proportionately Unperformed are not recognised unless required by an accounting standard. Liabilities and assets that are unrecognised are reported in the schedule of commitments and the schedule of contingencies.
Unless alternative treatment is specifically required by an accounting standard, revenues and expenses are recognised in the income statement when and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured.
Administered revenues, expenses, assets and liabilities and cash flows reported in the Schedule of Administered Items and related notes are accounted for on the same basis and using the same policies as for departmental items, except where otherwise stated at Note 1.20.
1.3 Significant Accounting Judgements and Estimates
In the process of applying the accounting policies listed in this note, the APVMA has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:
- The fair value of leasehold improvements have been taken to be the market value of similar properties as determined by an independent valuer.
No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next accounting period.
1.4 New Australian Accounting Standards
Adoption of new Australian Accounting Standard requirements
No accounting standard has been adopted earlier than the application date as stated in the standard. The following new standard was issued prior to the signing of the statements by the chief executive and chief fianncial officer was applicable to the current reporting period and had a financial impact on the entity:
- AASB 101 Presentation of Financial Statements
Future Australian Accounting Standard Requirements
No new standards that were issued prior to the signing of the statement by the chief executive and chief financial officer and are applicable to the future reporting period are expected to have a material future financial impact on the APVMA but may affect the disclosure in future financial reports.
Revenue from Government
Amounts appropriated for departmental output appropriations for the year (adjusted for any formal additions and reductions) are recognised as revenue when the agency gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned.
Appropriations receivable are recognised at their nominal amounts.
Resources Received Free of Charge
Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense.
Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Australian Government agency or authority as a consequence of a restructuring of administrative arrangements (refer to Note 1.7).
Resources received free of charge are recorded as either revenue or gains depending on their nature.
Other Types of Revenue
Revenue from the sale of goods is recognised when:
- the risks and rewards of ownership have been transferred to the buyer
- the seller retains no managerial involvement nor effective control over the goods
- the revenue and transaction costs incurred can be reliably measured
- it is probable that the economic benefits associated with the transaction will flow to the entity.
Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:
- the amount of revenue, stage of completion and transaction costs incurred can be reliably measured
- the probable economic benefits associated with the transaction will flow to the entity.
The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.
Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at balance date. Allowances are made when collectability of the debt is no longer probable.
Interest revenue is recognised using the effective interest method as set out in AASB 139 Financial Instruments: Recognition and Measurement.
Resources Received Free of Charge
Resources received free of charge are recognised as gains when and only when a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense.
Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Australian Government agency or authority as a consequence of a restructuring of administrative arrangements (Refer to Note 1.7).
Resources received free of charge are recorded as either revenue or gains depending on their nature.
Sale of Assets
Gains from disposal of non-current assets are recognised when control of the asset has passed to the buyer.
1.7 Transactions with the Government as Owner
Amounts appropriated that are designated as ‘equity injections’ for a year (less any formal reductions) are recognised directly in contributed equity in that year.
Restructuring of Administrative Arrangements
Net assets received from or relinquished to another Australian Government agency or authority under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.
Other Distributions to Owners
The FMOs require that distributions to owners be debited to contributed equity unless in the nature of a dividend.
1.8 Employee Benefits
Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled.
Liabilities for ‘short-term employee benefits’ (as defined in AASB 119) and termination benefits due within twelve months of balance date are measured at their nominal amounts.
The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.
Other long-term employee benefits are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.
The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the APVMA is estimated to be less than the annual entitlement for sick leave.
The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that applied at the time the leave is taken, including the agency’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.
The liability for long service leave has been determined by reference to the ‘short-hand method’ as outlined in the FMOs as at 30 June 2010. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.
Separation and Redundancy
Provision is made for separation and redundancy benefit payments. The APVMA recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.
The majority of staff of the APVMA are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the PSS accumulation plan (PSSap).
The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.
The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported by the Department of Finance and Administration as an administered item.
The APVMA makes employer contributions to the employee superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Australian Government of the superannuation entitlements of the APVMA’s employees. The APVMA accounts for the contributions as if they were contributions to defined contribution plans.
The liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.
A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased non-current assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits.
Where a non-current asset is acquired by means of a finance lease, the asset is capitalised at either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability is recognised at the same time and for the same amount.
The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.
Operating lease payments are expensed on a straight line basis that is representative of the pattern of benefits derived from the leased assets.
1.10 Borrowing Costs
All borrowing costs are expensed as incurred.
Cash and cash equivalents includes notes and coins held and any deposits in bank accounts with an original maturity of three months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash is recognised at its nominal amount.
1.12 Financial assets
The APVMA classifies its financial assets in the following categories:
- financial assets as at fair value through profit or loss
- held-to-maturity investments
- loans and receivables.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets are recognised and derecognised upon trade date.
Financial Assets at Fair Value Through Profit or Loss
Financial assets are classified as financial assets at fair value through profit or loss where the financial assets:
- have been acquired principally for the purpose of selling in the near future
- are a part of an identified portfolio of financial instruments that the APVMA manages together and has a recent actual pattern of short-term profit-taking, or
- are a derivative that is not designated and effective as a hedging instrument.
Assets in this category are classified as current assets.
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.
Loans and Receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non current assets. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate. The APVMA has no loans.
Impairment of Financial Assets
Financial assets are assessed for impairment at each balance date.
- Financial assets held at amortised cost—if there is objective evidence that an impairment loss has been incurred for loans and receivables or held to maturity investments held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the income statement.
1.13 Financial Liabilities
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.
Financial liabilities are recognised and derecognised upon ‘trade date’.
Financial Liabilities at Fair Value Through Profit or Loss
Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.
Other Financial Liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).
1.14 Contingent Liabilities and Contingent Assets
Contingent Liabilities and Contingent Assets are not recognised in the Balance Sheet but are reported in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.
1.15 Financial Guarantee Contracts
Financial guarantee contracts are accounted for in accordance with AASB 139 Financial Instruments: Recognition and Measurement. They are not treated as a contingent liability, as they are regarded as financial instruments outside the scope of AASB 137 Provisions, Contingent Liabilities and Contingent Assets.
1.16 Acquisition of Assets
Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.
Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and revenues at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor Authority’s accounts immediately prior to the restructuring.
1.17 Property, Plant and Equipment
Asset Recognition Threshold
Purchases of property, plant and equipment are recognised initially at cost in the balance sheet, except for purchases costing less than $5 000 for leasehold improvements and $2 000 for all other types, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).
The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘makegood’ provisions in property leases taken up by the APVMA where there exists an obligation to restore the property to its original condition. These costs are included in the value of the APVMA’s leasehold improvements with a corresponding provision for the ‘makegood’ recognised.
Fair values for each class of asset are determined as shown below:
Fair Value measured at
Depreciated replacement cost
Infrastructure, plant and equipment
Market selling price
Following initial recognition at cost, property plant and equipment are carried at fair value less accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.
Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised through operating result. Revaluation decrements for a class of assets are recognised directly through operating result except to the extent that they reverse a previous revaluation increment for that class.
Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.
Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the APVMA using, in all cases, the straight-line method of depreciation.
Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.
Depreciation rates applying to each class of depreciable asset are based on the following useful lives:
Plant and Equipment
3 to 15 years
3 to 15 years
All assets were assessed for impairment at 30 June 2010. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.
The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the APVMA were deprived of the asset, its value in use is taken to be its depreciated replacement cost.
The APVMA’s intangibles comprise internally developed and externally acquired software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.
Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the APVMA’s software assets are 3 to 10 years (2009: 3 to 10 years).
All software assets were assessed for indications of impairment as at 30 June 2010.
The APVMA is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).
Revenues, expenses and assets are recognised net of GST:
- except where the amount of GST incurred is not recoverable from the Australian Taxation Office
- except for receivables and payables where applicable.
1.20 Reporting of Administered Activities
Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the schedule of administered items and related notes.
Except where otherwise stated below, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.
Administered Cash Transfers to and from the Official Public Account
Revenue collected by the APVMA for use by the Australian Government rather than the agency is administered revenue. Collections are transferred to the APVMA’s Special Account within the Official Public Account (OPA) maintained by the Department of Finance and Deregulation. Conversely, cash is drawn from the Special Account to refund administered revenue. These transfers to and from the OPA are adjustments to the administered cash held by the APVMA on behalf of the Australian Government and reported as such in the Statement of Cash Flows in the Schedule of Administered Items and in the Administered Reconciliation Table in Note 15: Administered Reconcilation Table. The schedule of administered items largely reflects the Australian Government’s transactions, through the APVMA, with parties outside the government.
All administered revenues are revenues relating to the course of ordinary activities performed by the APVMA on behalf of the Australian Government.
Revenue is generated from fees that are charged for services provided to the agricultural and veterinary chemical industry. Administered fee revenue is recognised when revenue is earned.