Materiality and Information Disclosure
12.1 The requirements of this schedule apply where information resulting from their application is material, or as specifically stated within the schedule.
12.2 Information is material if its omission, misstatement or non-disclosure has the potential, individually or collectively, to:
(a) influence the economic decisions of users taken on the basis of the financial statements; or
(b) affect the discharge of accountability by management or the governing body of the entity.
12.3 Entities must prepare financial statements to reflect materiality of information pursuant to this schedule at the individual entity level.
12.4 Entities must maintain proper accounting records to support all disclosures required by this schedule and the supporting policy.
12.5 Each change in accounting policy must be disclosed separately.
POLICY
Materiality and Presentation of Information
12.51P Entities should present all information necessary to ensure true and fair disclosure. In addition to the requirements of section 12.3, entities must disclose information required by the following parts of this schedule, regardless of materiality:
(a) Division. 24 Remuneration of Auditors;
(b) Part I APPROPRIATIONS;
(c) Division. 120 Special Accounts; and
(d) Division. 122 Compensation and Debt Relief in Special Circumstances.
Retention and Maintenance of Accounting Records
12.52P Proper accounting records of all transactions must be maintained in accordance with legal requirements, including:
(a) section 48 of the FMA Act;
(b) section 20 of the CAC Act;
(c) order 4 of the Financial Management and Accountability Orders (Financial Statements for Reporting Periods Ending on or after 1 July 2009);
(d) sections 9 and 12 of the Electronic Transactions Act 1999; and
(e) section 24 of the Archives Act 1983.
In addition, there may be record-keeping requirements under other legislation beyond the scope of this schedule, e.g. tax laws.
GUIDANCE
Materiality
12.71G In the preparation of financial statements, materiality is considered and determined by entities with reference to AASB 1031.
12.72G AASB 1031 states that significant professional judgement is required when determining the materiality of items. Such judgement is influenced by:
(a) the nature of the entity’s operation/s;
(b) the size of the entity;
(c) materiality requirements outlined in applicable AAS;
(d) the type of the transaction classes of the entity;
(e) any legislative requirements; and
(f) the users of the financial statements.
12.73G Generally, transactions and items need to be considered in context of an appropriate measurement base (this is not the case when an item is deemed to be material by this schedule). An appropriate measurement base could be all items in the financial statements, relative items, or classes of items. For example:
(a) balance sheet items could be assessed relative to the appropriate asset or liability base;
(b) cash flow items could be assessed against the net cash flow for operating, investing or financing activities; and
(c) Statement of comprehensive income items could be assessed against relative net revenue and net expense figures.
Professional judgement is critical to this assessment process.
12.74G Entities should be aware that auditors will determine their own level of materiality in accordance with Australian Auditing Standards (ASA), established under the Auditor General Act 1997.
Retention and Maintenance of Accounting Records
12.75G Retention and maintenance of proper accounting records provides evidentiary support for the true and fair presentation of financial statements.
GUIDANCE
Reclassification of Departmental and Administered Items
15.71G Reclassification of an existing item is not a change in accounting policy.
Criteria for Classifying Items
15.72G Cabinet will use the following to distinguish between departmental and administered items:
(a) Items associated with the day‑to‑day operations and program support activities of the department or agency will be classified as departmental, including:
(i) all salaries and related employment costs, superannuation and other employee benefits other than those specifically determined as being administered in nature;
(ii) property operating expenses;
(iii) goods and services used for operations and program support including contractor and consultancy services, research, advertising and public relations services (excluding campaign and program advertising);
(iv) accounts payable and receivable for departmental operations;
(v) revenue retainable by government policy (e.g. net appropriations); and
(vi) assets for the entity’s own use, including IT systems.
(b) Administered items includes:
(i) all taxes, statutory fees, fines, excises, subsidies, grants and transfers to and from individuals or organisations outside the Government;
(ii) assets and expenses for specific government purposes;
(iii) specific purpose payments, payments to the states, territories and local government (the States);
(iv) public debt liabilities;
(v) liabilities for public sector superannuation schemes; and
(vi) direct program costs, being design and delivery costs and including grants and campaign advertising.
15.73G The key distinction is that activities appropriated as administered usually operate under eligibility rules and conditions set by the Government and Parliament, with little if any discretion for agencies’ Chief Executive Officers in the delivery of these activities or the resources allocated to them. Departmental activities operate within general government policy, but the Chief Executive Officer of the agency has a greater level of discretion in the allocation of resources within the agency to meet government objectives, taking into account changing circumstances and requirements.
15.74G Where the classification is not immediately identifiable or where there is uncertainty about which classification should be applied, the Budget Framework Branch within Finance should be contacted to assist in resolving the issue.
Exemptions from this Schedule
16.1 The Finance Minister may grant a written exemption to the Chief Executive Officer of an agency, or directors of an authority, from any specified requirements of this schedule.
16.2 An exemption may be granted subject to conditions, including a requirement for alternative forms of disclosure.
16.3 The Chief Executive Officer or directors must disclose the particulars of any exemptions applied by the entity in the financial statements that were granted under section 16.1 and Division 17.
GUIDANCE
16.71G An exemption that has been granted and not applied by the entity does not have to be disclosed under section 16.3.
Heritage and Cultural Assets
37.1 Heritage and cultural items must only be recognised as assets where they meet the asset definition and recognition criteria set out in AASB 116.
37.2 Only assets that are primarily used for purposes that relate to their cultural, environmental or historical significance are to be accounted for as heritage and cultural assets.
37.3 When an entity controls or administers heritage and cultural items that are not recognised as assets, the notes to the financial statements must disclose:
(a) a description of those items;
(b) the reason for non-recognition of those items;
(c) the amount expended to acquire such items during the financial year; and
(d) the amount of proceeds from the disposal of such items during the financial year.
37.4 For the purposes of this Division, the term ‘government department’ in the Australian Implementation Guidance to AASB 116 means an entity as defined in these Orders.
POLICY
37.51P Entities are required to develop and implement curatorial and preservation policies so that where possible, heritage and cultural assets are not depreciated.
37.52P Heritage and cultural items do not include structures constructed to assist with the display, transport or storage of the asset. For example, backdrops, protective display cases, hanging apparatus, storage racks or protective cases are not captured by the definition of a heritage or cultural asset unless the item has such value in its own right or is an integral part of the item.
GUIDANCE
Asset Recognition Criteria
37.71G Not all heritage or cultural items will meet the accounting definition of assets despite having intrinsic heritage value. Only items that are useful to the entity in achieving its objectives and have a financial value that can be reliably measured are recognised as assets.
37.72G Where a heritage and cultural asset is irreplaceable and has no market price, it is unlikely that its value could be reliably measured.
Heritage and Cultural Items
37.73G The AAS contemplate indefinite useful lives for some assets and non-depreciation in circumstances where assets have indefinite useful lives.
37.74G Heritage and cultural assets are assets used for the community’s benefit, and represent, in part, Australia’s cultural and historic background. Generally such assets attract funding from the budget for preservation, curation and restoration activity, ensuring these assets remain part of Australia’s heritage for as long as possible.
37.75G Heritage and cultural assets are buildings, other structures, works of art, artefacts, collectables, historical treasures, or similar items, which are used for their cultural, environmental or historical significance. Heritage and cultural assets will generally be:
(a) used for public exhibition, education or research; and/or
(b) protected, cared for and preserved.
37.76G In accordance with AASB 116 para. G3, where appropriate curatorial and preservation policies are established, heritage and cultural assets may be deemed to have an indefinite useful life, and as such, not depreciated. Entities should ensure such policies satisfy the criteria in the Implementation Guidance to AASB 116 and only depreciate these assets where they are determined to have a limited life.
Primary Use of Assets
37.77G One example of an item subject to section 37.1 is buildings of historical interest that are used primarily to provide office accommodation. These should not be accounted for as heritage and cultural assets.
Integral parts of Heritage and Cultural items
37.78G One example of an asset being an integral part of a heritage and cultural asset as specified in section 37.52P might be the original frame surrounding a painting that is classified as a heritage and cultural asset.
38 Assets Held in Trust
38.1 Financial statements of entities must include a note giving particulars of assets held in trust when the entity is a trustee in a legal trust arrangement. A legal trustee relationship may occur through formal appointment or otherwise.
38.2 The note referred to in section 38.1 must contain:
(a) a summary of the categories of assets held in trust at the end of the reporting period and the purpose for which they are being held in trust;
(b) in relation to monetary assets held in trust, an entity is required to disclose:
(i) total amount held at the beginning of the reporting period;
(ii) total receipts during the reporting period;
(iii) total payments during the reporting period;
(iv) total amount held at the end of the reporting period; and
(c) in relation to non-monetary assets held in trust, an entity is required to disclose the:
(i) estimated value at the beginning of the reporting period;
(ii) estimated value of assets obtained during the reporting period;
(iii) estimated value of assets disposed of during the reporting period; and
(iv) estimated value of assets at the end of the reporting period.
38.3 Where an estimated value cannot be assigned to a non-monetary asset, either because it is uneconomical or impractical to do so, the details in section 38.2(c) do not need to be disclosed. A statement from the entity asserting that it is uneconomical or impractical is taken to be sufficient evidence. However, an entity must provide additional disclosure stating why estimated values have not been used.
38.4 Intelligence and security agencies, defence agencies and prescribed law enforcement agencies are exempt from the disclosure requirements under Division 38.
POLICY
Trust Disclosures
38.51P Section 38.2 applies to agreements that constitute a legal trust (including for charitable purposes under trust law). Legal advice should be obtained if an entity is unsure as to whether or not an asset is held in trust.
38.52P All trust accounts must be identified by the type of trust (beneficiary or other third party purpose) and must be disclosed in the notes to the financial statements.
38.53P The valuation of non-financial assets held in trust is dependent on the asset having an active market as well as the cost of valuation to the entity. Where an active market exists and the asset can be cost-effectively and reliably measured, a fair valuation must be made. Where a valuation would be impractical or uneconomical to perform, a disclosure to this effect may be made in place of a valuation under section 38.3.
38.54P Intelligence and security agencies, defence agencies and prescribed law enforcement agencies, while exempt from the disclosure requirements under Division 38 due to the nature of their operations, are encouraged to disclose the general nature of assets held in trust.
38.55P Section 38.3 does not limit the measurement and disclosure requirements otherwise imposed by this schedule. Where, for example, an entity is both trustee and beneficiary of a trust, trust assets will be required to be disclosed in the entity’s financial statements in accordance with this Division.
38.56P Entities should also report assets covered by section 38.1 that stand to the credit of a special account in the notes to the financial statements for special accounts (see Division 120). A footnote in the assets held in trust note must cross reference to the relevant special account note.
Unidentified Receipts
38.57P Money found on Australian Government premises and other unidentified receipts are administered revenue and are not to be treated as assets held in trust.
12.1 The requirements of this schedule apply where information resulting from their application is material, or as specifically stated within the schedule.
12.2 Information is material if its omission, misstatement or non-disclosure has the potential, individually or collectively, to:
(a) influence the economic decisions of users taken on the basis of the financial statements; or
(b) affect the discharge of accountability by management or the governing body of the entity.
12.3 Entities must prepare financial statements to reflect materiality of information pursuant to this schedule at the individual entity level.
12.4 Entities must maintain proper accounting records to support all disclosures required by this schedule and the supporting policy.
12.5 Each change in accounting policy must be disclosed separately.
POLICY
Materiality and Presentation of Information
12.51P Entities should present all information necessary to ensure true and fair disclosure. In addition to the requirements of section 12.3, entities must disclose information required by the following parts of this schedule, regardless of materiality:
(a) Division. 24 Remuneration of Auditors;
(b) Part I APPROPRIATIONS;
(c) Division. 120 Special Accounts; and
(d) Division. 122 Compensation and Debt Relief in Special Circumstances.
Retention and Maintenance of Accounting Records
12.52P Proper accounting records of all transactions must be maintained in accordance with legal requirements, including:
(a) section 48 of the FMA Act;
(b) section 20 of the CAC Act;
(c) order 4 of the Financial Management and Accountability Orders (Financial Statements for Reporting Periods Ending on or after 1 July 2009);
(d) sections 9 and 12 of the Electronic Transactions Act 1999; and
(e) section 24 of the Archives Act 1983.
In addition, there may be record-keeping requirements under other legislation beyond the scope of this schedule, e.g. tax laws.
GUIDANCE
Materiality
12.71G In the preparation of financial statements, materiality is considered and determined by entities with reference to AASB 1031.
12.72G AASB 1031 states that significant professional judgement is required when determining the materiality of items. Such judgement is influenced by:
(a) the nature of the entity’s operation/s;
(b) the size of the entity;
(c) materiality requirements outlined in applicable AAS;
(d) the type of the transaction classes of the entity;
(e) any legislative requirements; and
(f) the users of the financial statements.
12.73G Generally, transactions and items need to be considered in context of an appropriate measurement base (this is not the case when an item is deemed to be material by this schedule). An appropriate measurement base could be all items in the financial statements, relative items, or classes of items. For example:
(a) balance sheet items could be assessed relative to the appropriate asset or liability base;
(b) cash flow items could be assessed against the net cash flow for operating, investing or financing activities; and
(c) Statement of comprehensive income items could be assessed against relative net revenue and net expense figures.
Professional judgement is critical to this assessment process.
12.74G Entities should be aware that auditors will determine their own level of materiality in accordance with Australian Auditing Standards (ASA), established under the Auditor General Act 1997.
Retention and Maintenance of Accounting Records
12.75G Retention and maintenance of proper accounting records provides evidentiary support for the true and fair presentation of financial statements.
GUIDANCE
Reclassification of Departmental and Administered Items
15.71G Reclassification of an existing item is not a change in accounting policy.
Criteria for Classifying Items
15.72G Cabinet will use the following to distinguish between departmental and administered items:
(a) Items associated with the day‑to‑day operations and program support activities of the department or agency will be classified as departmental, including:
(i) all salaries and related employment costs, superannuation and other employee benefits other than those specifically determined as being administered in nature;
(ii) property operating expenses;
(iii) goods and services used for operations and program support including contractor and consultancy services, research, advertising and public relations services (excluding campaign and program advertising);
(iv) accounts payable and receivable for departmental operations;
(v) revenue retainable by government policy (e.g. net appropriations); and
(vi) assets for the entity’s own use, including IT systems.
(b) Administered items includes:
(i) all taxes, statutory fees, fines, excises, subsidies, grants and transfers to and from individuals or organisations outside the Government;
(ii) assets and expenses for specific government purposes;
(iii) specific purpose payments, payments to the states, territories and local government (the States);
(iv) public debt liabilities;
(v) liabilities for public sector superannuation schemes; and
(vi) direct program costs, being design and delivery costs and including grants and campaign advertising.
15.73G The key distinction is that activities appropriated as administered usually operate under eligibility rules and conditions set by the Government and Parliament, with little if any discretion for agencies’ Chief Executive Officers in the delivery of these activities or the resources allocated to them. Departmental activities operate within general government policy, but the Chief Executive Officer of the agency has a greater level of discretion in the allocation of resources within the agency to meet government objectives, taking into account changing circumstances and requirements.
15.74G Where the classification is not immediately identifiable or where there is uncertainty about which classification should be applied, the Budget Framework Branch within Finance should be contacted to assist in resolving the issue.
Exemptions from this Schedule
16.1 The Finance Minister may grant a written exemption to the Chief Executive Officer of an agency, or directors of an authority, from any specified requirements of this schedule.
16.2 An exemption may be granted subject to conditions, including a requirement for alternative forms of disclosure.
16.3 The Chief Executive Officer or directors must disclose the particulars of any exemptions applied by the entity in the financial statements that were granted under section 16.1 and Division 17.
GUIDANCE
16.71G An exemption that has been granted and not applied by the entity does not have to be disclosed under section 16.3.
Heritage and Cultural Assets
37.1 Heritage and cultural items must only be recognised as assets where they meet the asset definition and recognition criteria set out in AASB 116.
37.2 Only assets that are primarily used for purposes that relate to their cultural, environmental or historical significance are to be accounted for as heritage and cultural assets.
37.3 When an entity controls or administers heritage and cultural items that are not recognised as assets, the notes to the financial statements must disclose:
(a) a description of those items;
(b) the reason for non-recognition of those items;
(c) the amount expended to acquire such items during the financial year; and
(d) the amount of proceeds from the disposal of such items during the financial year.
37.4 For the purposes of this Division, the term ‘government department’ in the Australian Implementation Guidance to AASB 116 means an entity as defined in these Orders.
POLICY
37.51P Entities are required to develop and implement curatorial and preservation policies so that where possible, heritage and cultural assets are not depreciated.
37.52P Heritage and cultural items do not include structures constructed to assist with the display, transport or storage of the asset. For example, backdrops, protective display cases, hanging apparatus, storage racks or protective cases are not captured by the definition of a heritage or cultural asset unless the item has such value in its own right or is an integral part of the item.
GUIDANCE
Asset Recognition Criteria
37.71G Not all heritage or cultural items will meet the accounting definition of assets despite having intrinsic heritage value. Only items that are useful to the entity in achieving its objectives and have a financial value that can be reliably measured are recognised as assets.
37.72G Where a heritage and cultural asset is irreplaceable and has no market price, it is unlikely that its value could be reliably measured.
Heritage and Cultural Items
37.73G The AAS contemplate indefinite useful lives for some assets and non-depreciation in circumstances where assets have indefinite useful lives.
37.74G Heritage and cultural assets are assets used for the community’s benefit, and represent, in part, Australia’s cultural and historic background. Generally such assets attract funding from the budget for preservation, curation and restoration activity, ensuring these assets remain part of Australia’s heritage for as long as possible.
37.75G Heritage and cultural assets are buildings, other structures, works of art, artefacts, collectables, historical treasures, or similar items, which are used for their cultural, environmental or historical significance. Heritage and cultural assets will generally be:
(a) used for public exhibition, education or research; and/or
(b) protected, cared for and preserved.
37.76G In accordance with AASB 116 para. G3, where appropriate curatorial and preservation policies are established, heritage and cultural assets may be deemed to have an indefinite useful life, and as such, not depreciated. Entities should ensure such policies satisfy the criteria in the Implementation Guidance to AASB 116 and only depreciate these assets where they are determined to have a limited life.
Primary Use of Assets
37.77G One example of an item subject to section 37.1 is buildings of historical interest that are used primarily to provide office accommodation. These should not be accounted for as heritage and cultural assets.
Integral parts of Heritage and Cultural items
37.78G One example of an asset being an integral part of a heritage and cultural asset as specified in section 37.52P might be the original frame surrounding a painting that is classified as a heritage and cultural asset.
38 Assets Held in Trust
38.1 Financial statements of entities must include a note giving particulars of assets held in trust when the entity is a trustee in a legal trust arrangement. A legal trustee relationship may occur through formal appointment or otherwise.
38.2 The note referred to in section 38.1 must contain:
(a) a summary of the categories of assets held in trust at the end of the reporting period and the purpose for which they are being held in trust;
(b) in relation to monetary assets held in trust, an entity is required to disclose:
(i) total amount held at the beginning of the reporting period;
(ii) total receipts during the reporting period;
(iii) total payments during the reporting period;
(iv) total amount held at the end of the reporting period; and
(c) in relation to non-monetary assets held in trust, an entity is required to disclose the:
(i) estimated value at the beginning of the reporting period;
(ii) estimated value of assets obtained during the reporting period;
(iii) estimated value of assets disposed of during the reporting period; and
(iv) estimated value of assets at the end of the reporting period.
38.3 Where an estimated value cannot be assigned to a non-monetary asset, either because it is uneconomical or impractical to do so, the details in section 38.2(c) do not need to be disclosed. A statement from the entity asserting that it is uneconomical or impractical is taken to be sufficient evidence. However, an entity must provide additional disclosure stating why estimated values have not been used.
38.4 Intelligence and security agencies, defence agencies and prescribed law enforcement agencies are exempt from the disclosure requirements under Division 38.
POLICY
Trust Disclosures
38.51P Section 38.2 applies to agreements that constitute a legal trust (including for charitable purposes under trust law). Legal advice should be obtained if an entity is unsure as to whether or not an asset is held in trust.
38.52P All trust accounts must be identified by the type of trust (beneficiary or other third party purpose) and must be disclosed in the notes to the financial statements.
38.53P The valuation of non-financial assets held in trust is dependent on the asset having an active market as well as the cost of valuation to the entity. Where an active market exists and the asset can be cost-effectively and reliably measured, a fair valuation must be made. Where a valuation would be impractical or uneconomical to perform, a disclosure to this effect may be made in place of a valuation under section 38.3.
38.54P Intelligence and security agencies, defence agencies and prescribed law enforcement agencies, while exempt from the disclosure requirements under Division 38 due to the nature of their operations, are encouraged to disclose the general nature of assets held in trust.
38.55P Section 38.3 does not limit the measurement and disclosure requirements otherwise imposed by this schedule. Where, for example, an entity is both trustee and beneficiary of a trust, trust assets will be required to be disclosed in the entity’s financial statements in accordance with this Division.
38.56P Entities should also report assets covered by section 38.1 that stand to the credit of a special account in the notes to the financial statements for special accounts (see Division 120). A footnote in the assets held in trust note must cross reference to the relevant special account note.
Unidentified Receipts
38.57P Money found on Australian Government premises and other unidentified receipts are administered revenue and are not to be treated as assets held in trust.
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