South Australia. Model Financial Statements

Transcription

1 South Australia Model Financial Statements 2013

2 Published by the Local Government Association of South Australia under the technical guidance of the South Australian Local Government Financial Management Group Inc. and the Office for State/Local Government Relations. Prepared for the LGA of SA by Coalface Software & Training Solutions Pty Ltd PO Box 5450 Wagga Wagga NSW 2650

3 CONTENTS INTRODUCTION CONTENTS PAGE Numbering of Notes... 3 Note Descriptions... 3 Comparative Figures... 3 COUNCIL CERTIFICATE STATEMENT OF COMPREHENSIVE INCOME Impairment Expense 7 Discontinued Operations 8 Other Comprehensive Income 8 Other Comprehensive Income - Equity accounted Council businesses... 9 Minority Interests 9 BALANCE SHEET Non-current assets held for sale 10 Investment property 10 Liability - Equity accounted council businesses 10 Reserves 12 Minority Interests 12 STATEMENT OF CHANGES IN EQUITY Other Comprehensive Income - equity accounted Council businesses Other equity adjustments - equity accounted Council businesses Minority Interests 14 Accumulated Surplus 15 Revised Australian Accounting Standards Changes in Accounting Policy Accounting Errors Changes in Accounting Estimates Asset Revaluation Reserve 16 Infrastructure, Property, Plant & Equipment Available-for-sale Financial Instruments Other Reserves 17 CASH FLOW STATEMENT Investing Activities 17 Financing Activities 19 Cash Flow Statement Balance 19 Note 1 - SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The Local Government Reporting Entity Income recognition Cash and Cash Equivalent Assets Other Financial Instruments Inventories Infrastructure, Property, Plant & Equipment CONTENTS SOUTH AUSTRALIA

4 CONTENTS SOUTH AUSTRALIA CONTENTS SOUTH AUSTRALIA Payables...30 Borrowings...31 Provisions...31 Employee benefits...31 Provisions for reinstatement, restoration, rehabilitation, etc Provision for Carbon Taxation...32 Leases...33 Joint Ventures and Associated Entities...34 Goods and Services Tax...34 Comparative Information...34 New Accounting Standards...35 Other accounting policies...35 Note 2 - INCOME (1) Other Comprehensive Income...35 General Rates 35 Discretionary Rebates, Remissions & Write-offs...37 Other Rates 37 Other Charges - penalties for late payment...38 Other Charges - Legal & other costs recovered Remissions and write-offs - from other rates...39 Note 2 - INCOME (2) Deciding the disclosures to be made...39 Statutory Charges 40 User Charges 40 Construction Contract Revenue...40 Commercial Activity Revenue...40 Subsidies received on behalf of users...40 Investment Income 41 Reimbursements 42 Other Income 43 Insurance & other recoupments...44 Clean Energy Future revenues ( Carbon Tax )...44 Grants, Subsidies, Contributions 44 What are amounts received specifically for new or upgraded assets?...45 Grants for both new/upgraded and renewal/replacement of assets...45 Clean Energy Future scheme - grants, subsidies, etc Sources of Grants, etc Conditions over grants and contributions...47 Listing of grants, subsidies, etc. received...48 Physical resources received free of charge 48 Note 3 - EXPENSES Deciding the disclosures to be made...48 Employee Costs 49 Salaries & Wages...49 Employee leave expense...49 Superannuation contributions...51 Workers Compensation Insurance...51

5 CONTENTS Capitalised and Distributed Costs Direct Labour Oncosting Procedures...51 Employee numbers Materials, Contracts & Other Expenses 51 Prescribed Expenses Auditors fees...52 Bad and Doubtful Debts Expense...52 Carbon tax expense...52 Elections & Elected Members Expenses...53 Operating Lease Payments...53 Other Materials, Contracts and Expenses Individually significant items...53 Legal expenses...53 Levies paid to government...53 Capitalised and Distributed Costs...54 Plant Hire Profit or Loss...54 Depreciation, Amortisation & Impairment 54 Capitalised and Distributed Costs Impairment Offsets Finance Costs 56 Bank Charges...56 Discounts and Premiums Unwinding of Present Value Discounts Capitalisation of Interest Investment Property expenses 58 Note 4 - ASSET DISPOSAL & FAIR VALUE ADJUSTMENTS Infrastructure, Property, Plant & Equipment 58 Investment Property 60 Available-for-sale Financial Assets 60 Real Estate Developments 61 Fair Value Adjustments 61 Fair Value Adjustment - Investment Property Revaluation decrements previously expensed, now recouped Revaluation decrements expensed Note 5 - CURRENT ASSETS Cash & Equivalent Assets 62 Trade & Other Receivables 62 Deciding the disclosures to be made Rates - General & other Rates postponed for State Seniors Accrued Revenues Debtors - general Fines & Expiation Notices...63 Other levels of government GST Recoupment Prepayments Loans to Community Organisations No- and Low- Interest Loans...66 Aged Care Facility Deposits CONTENTS SOUTH AUSTRALIA

6 CONTENTS SOUTH AUSTRALIA CONTENTS SOUTH AUSTRALIA Accounting for Aged Care Facility Deposits...68 Sundry...68 Disclosure of Amounts Not Realised within 12 Months...68 Other Financial Assets 69 Inventories 69 Stores and materials...69 Trading Stock...69 Work in Progress...69 Real Estate Developments...69 Classification as Current and Non-Current Assets...70 Other Real Estate held for resale...70 Inventory write-downs...70 Note 6 - NON-CURRENT ASSETS Financial Assets 70 Deciding the disclosures to be made...70 Rates & General Receivables...71 Council Rate Postponement Scheme...71 Prepayments...71 Other Financial Assets...71 Equity accounted investments in Council businesses 73 Other Non-current Assets 73 Inventory...73 Capital works-in-progress...74 Interests in Regional Local Government Associations...74 Other Assets...75 Note 7 - FIXED ASSETS Infrastructure, Property, Plant & Equipment 75 Capital v. Maintenance Expenditure...76 Maintenance Expenditure...76 Capital Expenditure...76 Definition - new/upgraded & renewal/replacement of assets...78 Capitalisation Thresholds...79 Determining Asset Components...79 Gravel Re-sheeting...80 Collection Assets...81 Land Under Roads...81 Cost Model or Fair Value Model...83 The Fair Value Model...83 Assets to be measured using the Fair Value Model...83 Revaluation Methods...83 Determining Classes of Assets...84 Frequency of Revaluations...85 Accounting for Revaluations...86 Disclosures of Valuations...87 Depreciation...87 Depreciation Methods...89 Depreciation of Components...89 Useful Life...89 Residual Value...91

7 CONTENTS Impairment Future reinstatement cost Disclosures Investment Property 94 Cost Model or Fair Value Model Fair Value Model Cost Model Note 8 - LIABILITIES Deciding the disclosures to be made Classification of Current and Non-Current Liabilities Trade & other payables 97 Trade Payables Payments received in advance Accrued expenses - employee benefits Annual leave...99 Sick leave...99 Maternity leave...99 Parental leave...99 Accrued expenses - other Aged Care Facility Deposits Deposits, Retentions & Bonds Other payables Suspense Accounts Borrowings 100 Borrowings for periods of less than 12 months Borrowings Provisions 102 Employee Entitlements Long Service Leave Funding Long Service Leave Long Service Leave Payments from other Councils Vesting Sick Leave Attributable on-costs Provision for Carbon Taxation Insurance Losses Future Reinstatement / Restoration, etc Legal or Constructive Obligation Present Obligation arising from a Past Event Best Available Estimate Present Value Changes in Provision For all provisions - Unwinding of Present Value Discounts Movements in Provisions 107 Equity accounted entities with negative equity 108 Other Liabilities 108 Note 9 - RESERVES Asset Revaluation Reserve 108 Infrastructure, Property, Plant & Equipment Available for Sale Investments CONTENTS SOUTH AUSTRALIA

8 CONTENTS SOUTH AUSTRALIA CONTENTS SOUTH AUSTRALIA Other Reserves 110 Section 155 Charges Note 10 - RESTRICTIONS ON ASSETS Limitations on the Use of Assets 112 Note 11 - CASH FLOW RECONCILIATION The Definition of Cash The Reconciliation Non-cash Financing & Investing Activities Financing Arrangements Note 12 - FUNCTIONS Note 13 - FINANCIAL INSTRUMENTS A summary of the Financial Instruments Accounting Standards 119 Comments Accounting Policies 122 Financial Instrument Risks 123 Categorisation of Financial Instruments 125 Recognition of Financial Instruments 126 The fair value hierarchy 126 Liquidity Analysis 128 Local Government Finance Authority of SA Financial Products 129 Loans to Council Deposits by Council Note 14 - EXPENDITURE COMMITMENTS Capital Commitments 131 Other Expenditure Commitments 131 Commitments for Intangible Assets 131 Finance Leases 131 Note 15 - FINANCIAL INDICATORS Indicator 1 - Operating Surplus Ratio 132 Indicator 2 - Net Financial Liabilities Ratio 133 Indicator 3 - Asset Sustainability Ratio 134 Note 16 - UNIFORM PRESENTATION OF FINANCES Compilation Note 17 - OPERATING LEASES Leases providing revenue to the Council Lease payment commitments of Council Note 18 - SUPERANNUATION Note 19 - EQUITY ACCOUNTED COUNCIL BUSINESSES Definitions Significant Influence...141

9 CONTENTS Requirements of the Local Government (Financial Management) Regulations Section 43 Regional Subsidiaries BOO & BOOT Schemes Accounting Procedures for Equity Accounted Associated Entities (Regional Subsidiaries) 144 Disclosures in Note Note 20 - NON-CURRENT ASSETS HELD FOR SALE The Purpose of AASB 5 Non-Current Assets Held for Sale and Discontinued Operations 147 Depreciation Disclosures Note 21 - ASSETS & LIABILITIES NOT RECOGNISED Note 22 - EVENTS AFTER THE BALANCE SHEET DATE COUNCIL CERTIFICATES OF AUDIT INDEPENDENCE AUDIT CERTIFICATE OF AUDIT INDEPENDENCE ADDITIONAL MATERIALS WP 1 - GRANTS RECEIVED & EXPENDED 152 LIST OF CURRENT ACCOUNTING STANDARDS 153 ABS / LGGC CLASSIFICATIONS 153 APPLICABLE AUSTRALIAN ACCOUNTING STANDARDS & INTERPRETA- TIONS TABLE OF ACCOUNTING STANDARDS & INTERPRETATIONS 1 TABLE OF NEW & AMENDED STANDARDS 5 TABLE OF NEW & AMENDED INTERPRETATIONS 9 Exposure Drafts Pending 11 Income from Non-exchange Transactions (Taxes and Transfers) Leases APPENDIX B SUPPLEMENTARY RETURN INTRODUCTION 1 EXECUTIVE SUMMARY 1 SUMMARY OF CHANGES FROM THE SUPPLEMENTARY RETURN 3 INSTRUCTIONS /TIPS ON COMPLETION OF THE RETURN 3 ASSIGNMENT OF ACTIVITIES TO PURPOSES 6 Index of activity by purpose code table - use of "Function", or "Facility Code" instead of a purpose code:... 6 Multi-purpose activities... 6 Materiality and sundry items... 7 GLOSSARY OF PURPOSE CODES 9 INDEX OF ACTIVITIES BY PURPOSE CODE 15 EXAMPLE OF FULL COST ATTRIBUTION 37 CONTENTS SOUTH AUSTRALIA

10 CONTENTS SOUTH AUSTRALIA CONTENTS SOUTH AUSTRALIA

11 INTRODUCTION These model statements have been prepared by Coalface Software Solutions for the Local Government Association of South Australia (LGA), under the technical guidance of the SA Local Government Financial Management Group Inc. (FMG), the Office for State/Local Government Relations (OSLGR) and the SA Local Government Auditors Group. They set out a recommended format for the presentation of the 2013 Annual Financial Statements for South Australian Councils and all other bodies, including regional subsidiaries, established pursuant to the Local Government Act. As such, they provide an example of the level of information that the LGA, FMG and OSLGR consider is appropriate to provide, and an example of the manner in which this information may be presented. The amounts shown are entirely fictitious, and are intended only to illustrate the various relationships between different portions of the statements. Amounts given are shown as being rounded to the nearest thousand dollars ($ 000), and this is recommended, but rounding to the nearest dollar may also be used. INTRODUCTION The model statements include disclosures that apply to a wide range of users, but it is unlikely that any one user will find all of the disclosures appropriate to its circumstances. Similarly, it is likely that most users will need to make one or more disclosures not shown in the model statements, and guidance on many of these is given in the explanatory text. In preparing annual financial statements in the model statements format, it is the responsibility of each user to ensure that its reports comply with (a) the Australian Accounting Standards (i.e. Australian equivalents to International Financial Reporting Standards) and Interpretations as they apply to not-for-profit entities and local government, and having regard to interpretations in these explanatory notes, and (b) additional requirements (if any) imposed under South Australian legislation. A fundamental objective is that the format of the four principal financial statements together with the notes entitled Financial Indicators (Note 15) and Uniform Presentation of Finances (Note 16) be adopted by all Councils in the format shown (other reporting entities are not required to supply Notes 15 & 16). Any variation from the format shown must be strongly supported. However, any user may: (a) include additional disclosures not provided for in the model statements where these are required by any Australian Accounting Standard or Interpretation. (b) use more restricted descriptions of any accounting classification where this is appropriate to the user, not withstanding that a generic description appears in the model statements. (c) omit descriptions on the face of the principal statements, policies in the Statement of Significant Accounting Policies, and detailed Notes in whole or in part, where those descriptions, policies and Notes do not have application to the affairs of the user, and where all disclosures for the current and previous reporting periods would be NIL. With ongoing modifications to the Australian Accounting Standards, it is anticipated that these model statements will be updated annually. These model statements have been designed to be printed - if it is necessary to print - on both sides of the paper. SOUTH AUSTRALIA

12 CONTENTS PAGE SOUTH AUSTRALIA It is recommended that a Contents page be provided as a convenience to users. CONTENTS PAGE SOUTH AUSTRALIA SA MODEL COUNCIL General Purpose Financial Reports for the year ended 30 June 2013 TABLE OF CONTENTS Council Certificate 1 Principal Financial Statements Statement of Comprehensive Income 2 Balance Sheet 3 Statement of Changes in Equity 4 Cash Flow Statement 5 Notes to, and forming part of, the Principal Financial Statements Note 1 - Significant Accounting Policies Note 2 - Income Note 3 - Expenses Note 4 - Gain or Loss on Disposal of Assets Note 5 - Current Assets Note 6 - Non-Current Assets Note 7 - Infrastructure, Property, Plant & Equipment & Investment Property Note 8 - Liabilities Note 9 - Reserves Note 10 - Assets Subject to Restrictions Note 11 - Reconciliation of Cash Flow Statement Note 12 - Functions Note 13 - Financial Instruments Note 14 - Expenditure Commitments Note 15 - Financial Indicators Note 16 - Uniform Presentation of Finances Note 17 - Operating Leases Note 18 - Superannuation Note 19 - Equity accounted Council businesses Note 20 - Discontinued Operations and Non-Current Assets held for sale Note 21 - Assets & Liabilities not Recognised Note 22 - Events Occurring After Reporting Date Audit Report Council Certificate of Audit Independence Audit Certificate of Audit Independence The Annual Financial Statements are not complete unless the Council Certificate and Audit Reports (including independence certificates) are supplied. Annual Financial Statements should only be supplied bound or stapled as a complete set. CONTENTS PAGE Page 2 Page N1 N7 N10 N12 N13 N14 N15 N18 N19 N20 N21 N22 N24 N26 N27 N28 N29 N30 N31 N32 N33 N34

13 Numbering of Notes AASB requires that the Notes, as far as practicable, be presented in a systematic manner, and that items in the principal statements be cross-referenced to any related information in the notes. The example Notes have been numbered at the macro level in accordance with the main headings on the Statement of Comprehensive Income and Balance Sheet, with sub-headings within these notes for the line items shown on those statements. The main numbering sequence is then continued for notes that deal with the Council as a whole 1, before continuing with specific items required by the standards relating to a line item within a note (which are also the notes that are required by a lesser number of Councils). It is intended that this will result in increased commonality of note numbers across Councils, which will facilitate cross-council comparisons, and increased familiarity with the differing areas contained within the reports. It is anticipated that most Councils will use Notes 1 to 19 inclusive, and that subsequent notes that are used will be numbered consecutively. Councils may choose to adopt another numbering sequence if desired. However, all notes should be listed on the contents page. Notes that would have NIL disclosure are not required to be supplied, and subsequent notes should be renumbered. Regional subsidiaries and other single purpose reporting entities will probably state their purpose in Note 1 (section 2 - the reporting entity) and dispense with Note 12, renumbering all subsequent notes. Regional subsidiaries and other single purpose reporting entities are also not required to supply Notes 15 & 16, and subsequent notes would also be renumbered. Note Descriptions Councils may amend the descriptions of individual notes to more accurately reflect the content of the note as used by that Council. Comparative Figures AASB defines a complete set of financial statements as: 10 A complete set of financial statements comprises: (a) a statement of financial position as at the end of the period; (b) a statement of comprehensive income for the period; (c) a statement of changes in equity for the period; (d) a statement of cash flows for the period; (e) notes, comprising a summary of significant accounting policies and other explanatory information; and (ea) comparative information in respect of the preceding period as specified in paragraphs 38 and 38A; and (f) a statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements in accordance with paragraphs 40A-40D. 1. i.e. Cash Flow Statement Reconciliation, Financial Instruments, Expenditure Commitments and Financial Indicators. 2. As amended by AASB effective 1 Jan CONTENTS PAGE Page 3 CONTENTS PAGE SOUTH AUSTRALIA

14 COUNCIL CERTIFICATE SOUTH AUSTRALIA This requirement is in addition to the previous period comparatives required by paragraphs of the Standard. Consideration should also be given to providing the additional comparative information in the relevant Notes. These additional comparative figures are not exampled in these Model Statements. COUNCIL CERTIFICATE The format of certification of the Annual Financial Statements is governed by Regulation 14 of the Local Government (Financial Management) Regulations The form of certification determined by the Minister under Regulation 14 is set out below: SA MODEL COUNCIL ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2013 CERTIFICATION OF FINANCIAL STATEMENTS We have been authorised by the Council to certify the financial statements in their final form. In our opinion: the accompanying financial statements comply with the Local Government Act 1999, Local Government (Financial Management) Regulations 2011 and Australian Accounting Standards. the financial statements present a true and fair view of the Council s financial position at 30 June 2013 and the results of its operations and cash flows for the financial year. internal controls implemented by the Council provide a reasonable assurance that the Council s financial records are complete, accurate and reliable and were effective throughout the financial year. the financial statements accurately reflect the Council s accounting and other records.. (Insert name) CHIEF EXECUTIVE OFFICER Date:... (Insert name) MAYOR/COUNCILLOR Alternate wording for third dot point: internal controls implemented by the Council provide a reasonable assurance that the Council s financial records are complete, accurate and reliable and were effective throughout the financial year, with the exception of controls related to xxxx which will be improved during 20xx-xx. COUNCIL CERTIFICATE Page 4

15 An important consideration in locating Council s Certificate at the head of the Annual Financial Statements is that the legislation places the responsibility for preparing accurate statements upon the Council, not the Auditor. The Auditor s role is limited to forming and expressing an opinion as to whether those statements show a true and fair view of the matters reported. Accordingly, the Council s Certificate prefaces the Annual Financial Statements, then the statements themselves, then the Auditor s Report and the independence certificates. Separately, the following procedures surrounding the certification process (which Councils are free to adapt to meet their own requirements) are designed to integrate with Audit Committee requirements, and it is envisaged that they will operate in the following manner: Prior to the completion of the annual financial statements, the Council will authorise the principal member of the Council and the Chief Executive Officer to sign the certification of the statements in their final form when completed. The officer responsible for preparing the financial statements, who may or may not be the chief executive officer, will prepare draft statements for submission to the Audit Committee, and for external audit. The Audit Committee will review the draft statements to ensure that they present fairly the affairs of the Council. This review will be conducted independent of the external audit. However, it is anticipated that the Audit Committee will have the benefit of any information available (informal or otherwise) on particular matters raised by the auditor up until the time of the review. Any suggested changes will be provided to the officer responsible for preparing the statements. Following the external audit, the officer responsible for preparing the statements and auditor will propose any necessary amendments to the draft statements, which will be referred to the certifying officers for consideration. The certifying officers will review the proposed amendments to the draft statements and will either refer them to the Audit Committee for further consideration or may, if satisfied that the proposed amendments are appropriate, complete and date the certificate. The date of the certificate will be the date of authorisation for issue of the annual financial statements for the purpose of AASB 110 Events after Balance Sheet Date paragraph 17. As soon as practicable thereafter, the annual financial statements (including the accompanying auditor's report and other certificates) will be sent to the Local Government Grants Commission and will be tabled at an ordinary Council meeting. COUNCIL CERTIFICATE Page 5 COUNCIL CERTIFICATE SOUTH AUSTRALIA

16 STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF COMPREHENSIVE INCOME SA MODEL COUNCIL STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June Notes $ $ INCOME Rates 2 5,734 5,431 Statutory charges 2 4,036 3,922 User charges 2 1,172 1,281 Grants, subsidies and contributions 2 2,196 1,916 Investment income Reimbursements 2 2,273 1,595 Other income Net gain - equity accounted Council businesses Total Income 17,188 16,214 EXPENSES Employee costs 3 5,824 5,710 Materials, contracts & other expenses 3 8,430 7,986 Depreciation, amortisation & impairment 3 3,546 1,488 Finance costs Net loss - equity accounted Council businesses Total Expenses 18,363 15,830 OPERATING SURPLUS / (DEFICIT) (1,175) 384 SOUTH AUSTRALIA Shown only if there are applicable amounts. See pages 8 & 9. Asset disposal & fair value adjustments Amounts received specifically for new or upgraded assets Physical resources received free of charge Operating result from discontinued operations NET SURPLUS / (DEFICIT) transferred to Equity Statement 645 2,514 Other Comprehensive Income Amounts which will not be reclassified subsequently to operating result Changes in revaluation surplus - infrastructure, property, plant & equipment Share of other comprehensive income - equity accounted Council businesses Impairment (expense) / recoupments offset to asset revaluation reserve Transfer to accumulated surplus on sale of revalued infrastructure, property, plant & equipment Amounts which will be reclassified subsequently to operating result 9 3,308 1, (33) (279) Available-for-sale Financial Instruments - change in fair value - - Transfer to accumulated surplus on sale of availablefor-sale Financial Instruments - - Total Other Comprehensive Income 2,996 1,650 TOTAL COMPREHENSIVE INCOME 3,641 4,164 This Statement is to be read in conjunction with the attached Notes. STATEMENT OF COMPREHENSIVE INCOME Page 6

17 There is an expectation that no other line item descriptions will be used in the Statement of Comprehensive Income. In drafting the Statement of Comprehensive Income in the format presented, a large number of matters were considered. AASB 101 insists that a Statement of Comprehensive Income MUST be presented, even if there is a separate Income Statement. The Statement of Comprehensive Income must show, as a minimum, the Net Surplus / Deficit, and each item of other comprehensive income individually. It is very likely that most Councils will only have ONE item of other comprehensive income, viz revaluation transfer arising from revaluations of infrastructure, property, plant and equipment. Presenting a Statement with only 3 (or even 2) lines of information is not considered acceptable. Items of other comprehensive income that do not apply to a Council should not be shown. STATEMENT OF COMPREHENSIVE INCOME Details of the content of line items are given in the relevant notes below. If a Council has no amounts in either the current or previous reporting period for any line item, it should not be shown. If an amount is non-material, and a dissection is therefore not given in the subsidiary Note, remove the Note cross-reference. If there are no items of other comprehensive income, a line entitled other comprehensive income, with amounts of 0 in the value columns, must still be shown. Impairment Expense There is no mandatory requirement under the accounting standards that Impairment be separately disclosed on the face of the Statement of Comprehensive Income. These model statements disclose impairments of infrastructure, property, plant and equipment in Note 7, as permitted by AASB , and impairments of receivables through use of an allowance account, as permitted by AASB However, if impairment costs are sufficiently material, disclosure on the face of the Statement of Comprehensive Income would be appropriate. Where an asset that has previously been revalued is subsequently impaired, AASB requires that the impairment loss is offset, through other comprehensive income, against the asset revaluation reserve for that asset class, unless the reserve is exhausted (and the reverse, for the recoupment of an impairment loss - AASB ). For further commentary on impairment, see "Impairment" on page 92 below. STATEMENT OF COMPREHENSIVE INCOME Page 7 SOUTH AUSTRALIA

18 STATEMENT OF COMPREHENSIVE INCOME Discontinued Operations AASB 5.32 defines a discontinued operation as a component of an entity that either has been disposed of or is classified as held for sale and: (a) represents a separate major line of business or geographical area of operations; (b) is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or (c) is a subsidiary acquired exclusively with a view to resale. It does not include a restructuring of a local government 3. As such, the occasions when this will apply to Councils are considered to be rare. AASB 5.33 imposes disclosure requirements which are exampled in "Note 20 - NON-CURRENT ASSETS HELD FOR SALE" on page 145. Other Comprehensive Income The concept of Other Comprehensive Income was introduced by changes to AASB 101 that took effect for reporting periods commencing on and after 1 July Other comprehensive income is defined in the revised Standard as 4 : Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other Australian Accounting Standards. SOUTH AUSTRALIA The components of other comprehensive income include: (a) changes in revaluation surplus (see AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets); (b) actuarial gains and losses on defined benefit plans recognised in accordance with paragraph 93A of AASB 119 Employee Benefits; (c) gains and losses arising from translating the financial statements of a foreign operation (see AASB 121 The Effects of Changes in Foreign Exchange Rates); (d) gains and losses on remeasuring available-for-sale financial assets (see AASB 139 Financial Instruments: Recognition and Measurement); and (e) the effective portion of gains and losses on hedging instruments in a cash flow hedge (see AASB 139). Items which have NIL amounts for current and comparative reporting periods should be omitted. Many Councils will not have any items of other comprehensive income to report in any given reporting period. In this case, the amount 0 should be shown against the sub-heading other comprehensive income and the detailed rows hidden. The totals NET SURPLUS / (DEFICIT) transferred to Equity Statement and TOTAL COMPREHENSIVE INCOME must still be shown. OTHER COMPREHENSIVE INCOME MAY BE POSITIVE OR NEGATIVE IN AMOUNT. Both are termed other comprehensive income. 3. AASB 5.Aus AASB Definitions; additional information relating to other comprehensive income is provided in paragraphs and of the Standard. STATEMENT OF COMPREHENSIVE INCOME Page 8

19 Other Comprehensive Income - Equity accounted Council businesses This item includes your Council s share of all amounts shown below the Operating Surplus / (Deficit) in the Statement of Comprehensive Income of the joint venture / associated entity / regional subsidiary, including Asset disposal & fair value adjustments Amounts received specifically for new and upgraded assets Physical resources received free of charge Operating result from discontinued operations (All of the above show in the Accumulated Surplus column in the Statement of Changes in Equity.) Changes in revaluation surplus - infrastructure, property, plant & equipment (Shown in Asset Revaluation Reserve column.) Available-for-sale Financial Instruments - change in fair value (Shown in Available-for-sale Financial Instruments column.) Impairment (expense) / recoupments offset to asset revaluation reserve (Shown in Asset Revaluation Reserve column.) Transfer to accumulated surplus on sale of revalued infrastructure, property, plant & equipment (Shown DR in Asset Revaluation Reserve; CR in Accumulated Surplus; Net NIL.) Transfer to accumulated surplus on sale of available-for-sale Financial Instruments (Shown in Available-for-sale Financial Instruments column.) Thus the line in the Statement of Changes in Equity for Other Comprehensive Income - Joint Ventures and Associates may have amounts in up to 3 different columns. STATEMENT OF COMPREHENSIVE INCOME Minority Interests There a limited number of Councils whose interest in a joint venture / associated entity (e.g. regional subsidiary) exceeds 50% and hence they are deemed to be in a position of control. In such cases the joint venture / associated entity must be consolidated into the financial statements. AASB requires that the Council s, and the minority interest s, share of the profit or loss for the period, and of total comprehensive income must be shown. In this case, a short summary should be shown at the foot of the Statement of Comprehensive Income: Share of Net Surplus / (Deficit) Council $xxxx $xxxx Minority Interest $xxxx $xxxx $xxxx $xxxx Share of other comprehensive income Council $xxxx $xxxx Minority Interest $xxxx $xxxx $xxxx $xxxx Total $xxxx $xxxx STATEMENT OF COMPREHENSIVE INCOME Page 9 SOUTH AUSTRALIA

20 BALANCE SHEET SOUTH AUSTRALIA BALANCE SHEET Details of the content of line items are given in the relevant notes below. If a Council has no amounts in either the current or previous reporting period for any line item, it should not be shown. If an amount is non-material, and a dissection is therefore not given in the subsidiary Note, remove the Note cross-reference. If your Council has applied an accounting policy retrospectively, or made a retrospective restatement of items in its financial statements, or reclassified items that affect the Balance Sheet, you must show an additional set of comparative figures - see "Comparative Figures" on page 3 above. (Non-material reclassifications within a section of a Note, provided they do not affect any amount transferred to the Balance Sheet may be exempted from this.) Where additional comparatives are shown, additional comparatives should also be shown for the relevant section of the Note. Non-current assets held for sale An asset may be classified under this heading in accordance with AASB 5 if: it is normally classified as a non-current asset, its carrying amount will be recovered principally through a sale transaction rather than through continuing use, and its sale must be highly probable. All three elements must be satisfied. For practical purposes, it is suggested that for a sale to have been highly probable at balance date, by the time the accounts are being prepared a legally enforceable contract for sale would be in existence. Specific disclosure requirements apply - see AASB , AASB 5.39 and and these disclosures are exampled in "Note 20 - NON-CURRENT ASSETS HELD FOR SALE" on page 145 below. Do not show this item - as asset or liability - if Council had no applicable amounts in either the current or comparative reporting periods. Investment property Where a Council has investment property (see "Investment Property" on page 94 below for definition) it is required to be disclosed on the face of the Balance Sheet 5. Councils with no investment property do not show the item. Liability - Equity accounted council businesses The Accounting Standards do not provide for a line item of this nature, but the enabling legislation under which some regional subsidiaries are established does not permit a Council to walk away from a negative equity situation, thus converting a provision to an actual liability. The matter is further discussed under "Note 19 - EQUITY ACCOUNTED COUNCIL BUSINESSES" on page 140 below. 5. AASB (b) BALANCE SHEET Page 10

21 SA MODEL COUNCIL BALANCE SHEET as at 30 June ASSETS Notes $'000 $'000 Current Assets Cash and cash equivalents 5 3,791 3,712 Trade & other receivables 5 1,471 2,991 Other financial assets 5 1,445 3,504 Inventories 5 1, ,719 10,660 Non-current Assets held for Sale Total Current Assets 8,555 11,482 BALANCE SHEET Non-current Assets Financial assets 6 1,016 1,212 Equity accounted investments in Council businesses Investment property 7 1,538 1,588 Infrastructure, property, plant & equipment 7 246, ,046 Other non-current assets 6 2,784 2,591 Total Non-current Assets 252, ,202 Total Assets 261, ,684 LIABILITIES Current Liabilities Trade & other payables 8 2,095 1,300 Borrowings 8 1,529 1,047 Provisions 8 2,960 2,633 Other current liabilities ,676 5,066 Liabilities relating to Non-current Assets held for Sale Total Current Liabilities 6,720 5,102 Non-current Liabilities Trade & Other Payables Borrowings 8 6,001 6,153 Provisions 8 1,828 1,743 Liability - Equity accounted Council businesses Other Non-current Liabilities Total Non-current Liabilities 8,245 8,173 Total Liabilities 14,965 13,275 NET ASSETS 246, ,409 EQUITY Accumulated Surplus 202, ,633 Asset Revaluation Reserves 9 39,181 36,252 Available for sale Financial Assets Other Reserves 9 2,263 3,118 TOTAL EQUITY 246, ,409 This Statement is to be read in conjunction with the attached Notes. BALANCE SHEET Page 11 SOUTH AUSTRALIA

22 STATEMENT OF CHANGES IN EQUITY Reserves There are two basic types of reserves: Asset Revaluation Reserves arise in compliance with the accounting standards as a consequence of the disclosure of certain assets on the fair value basis. Reserves for future expenditure arise as a result of a formal resolution by Council to set aside a portion of its resources for a specified future purpose. Appropriate use of the reserves is discussed further in "Other Reserves" on page 110 below. Accordingly, it is considered appropriate that the totals of the two types of reserves are separately disclosed in the Statement of Changes in Equity, and consequently on the face of the Balance Sheet. Minority Interests For those few Councils whose interest in a joint venture / associated entity (e.g. regional subsidiary) exceeds 50% and are deemed to be in a position of control, AASB (a) requires that total of the amounts attributable to the Council, and the minority interest, must be shown separately. A short summary should be shown in the Equity section of the Balance Sheet: EQUITY Accumulated Surplus $xxxx $xxxx Asset Revaluation Reserves $xxxx $xxxx Available for sale Financial Assets $xxxx $xxxx SOUTH AUSTRALIA Other Reserves $xxxx $xxxx Total Council Equity $xxxx $xxxx Minority Interests $xxxx $xxxx TOTAL EQUITY $xxxx $xxxx STATEMENT OF CHANGES IN EQUITY Movements in Accumulated Surplus must always be shown. If a Council has no amounts in either the current or comparative figures for a class of other comprehensive income, a type of reserve, or a line item, they should not be shown. AASB requires that each item of other comprehensive income is shown in the Statement of Changes in Equity as well as in the Statement of Comprehensive Income. AASB requires that the balances and movements in each class of other comprehensive income be shown on the Statement of Changes in Equity. Thus, in the totals column, the Statement of Changes in Equity largely duplicates the bottom section of the Statement of Comprehensive Income. The columns to which the relevant movements are allocated are largely self-explanatory. STATEMENT OF CHANGES IN EQUITY Page 12

23 Other Comprehensive Income - equity accounted Council businesses This item includes your Council s share of all amounts shown below the Operating Surplus / (Deficit) in the Statement of Comprehensive Income of the joint venture / associated entity / regional subsidiary, including Asset disposal & fair value adjustments Amounts received specifically for new and upgraded assets Physical resources received free of charge Operating result from discontinued operations (All of the above show in the Accumulated Surplus column in the Statement of Changes in Equity.) Changes in revaluation surplus - infrastructure, property, plant & equipment (Shown in Asset Revaluation Reserve column.) Available-for-sale Financial Instruments - change in fair value (Shown in Available-for-sale Financial Instruments column.) Impairment (expense) / recoupments offset to asset revaluation reserve (Shown in Asset Revaluation Reserve column.) Transfer to accumulated surplus on sale of revalued infrastructure, property, plant & equipment (Shown DR in Asset Revaluation Reserve; CR in Accumulated Surplus; Net NIL.) Transfer to accumulated surplus on sale of available-for-sale Financial Instruments (Shown in Available-for-sale Financial Instruments column.) Thus the line for Other Comprehensive Income - Joint Ventures and Associates may have amounts in up to 3 different columns. Other equity adjustments - equity accounted Council businesses Some Councils are involved in equity accounted operations where the equity share of the participating Councils (and future contribution shares) are periodically adjusted based on a factor such as population or use of a health service etc. The change in Council share in the equity of the operation is recognised direct in Council s equity statement as part of Accumulated Surplus An entity shall present a statement of changes in equity showing in the statement: (a) total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests; (b) for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with AASB 108; and (c) [deleted by the IASB] (d) for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from: (i) profit or loss; (ii) each item of other comprehensive income; and (iii) transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control. STATEMENT OF CHANGES IN EQUITY Page 13 STATEMENT OF CHANGES IN EQUITY SOUTH AUSTRALIA

24 STATEMENT OF CHANGES IN EQUITY If these items are used, note references MUST be given. SA MODEL COUNCIL STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2013 Accumulated Surplus Asset Revaluation Reserve Available for sale Financial Assets Other Reserves TOTAL EQUITY 2013 Notes $'000 $'000 $'000 $'000 $'000 Balance at end of previous reporting period 200,633 36, , ,409 Adjustment due to compliance with revised Accounting Standards - Adjustment to give effect to changed accounting policies - Restated opening balance 200,633 36, , ,409 Net Surplus / (Deficit) for Year Other Comprehensive Income Gain on revaluation of infrastructure, property, plant & equipment 3,308 3,308 Available-for-sale Financial Instruments - change in fair value - Impairment (expense) / recoupments offset to asset revaluation reserve (279) (279) Transfer to accumulated surplus on sale of infrastructure, property, plant & equipment 67 (67) - Transfer to accumulated surplus on sale of available-forsale Financial Instruments - - Share of other comprehensive income - equity accounted Council businesses (33) (33) Other equity adjustments - equity accounted Council businesses Transfers between reserves 855 (855) - Balance at end of period 202,144 39, , , SOUTH AUSTRALIA Balance at end of previous reporting period 197,160 35, , ,730 Adjustment due to compliance with revised Accounting Standards (100) Adjustment to give effect to changed accounting policies 1,403 1,603 Restated opening balance 198,563 35, , ,233 Net Surplus / (Deficit) for Year 2,439 2,514 Other Comprehensive Income Changes in revaluation surplus - infrastructure, property, plant & equipment 1,312 1,462 Available-for-sale Financial Instruments - change in fair value - - Impairment (expense) / recoupments offset to asset revaluation reserve - - Transfer to accumulated surplus on sale of infrastructure, property, plant & equipment 523 (523) - Transfer to accumulated surplus on sale of available-forsale Financial Instruments Share of other comprehensive income - equity accounted Council businesses Other equity adjustments - equity accounted Council businesses Transfers between reserves (904) Balance at end of period 200,633 36, , ,409 This Statement is to be read in conjunction with the attached Notes Minority Interests For those few Councils whose interest in a joint venture / associated entity (e.g. regional subsidiary) exceeds 50% and are deemed to be in a position of control, AASB (a) requires that total of the amounts attributable to the Council, and the minority interest, must be shown separately. STATEMENT OF CHANGES IN EQUITY Page 14

25 To achieve this, 2 additional columns will need to be inserted between the Other Reserves and TOTAL EQUITY columns. The additional columns are entitled Total Council Equity and Minority Interest respectively. Accumulated Surplus Revised Australian Accounting Standards There are no changes in Accounting Standards that affect the 2013 reporting period that will result in amounts to be disclosed under this item. Changes in Accounting Policy There are many accounting policies that underly the preparation of financial statements. These may be changed where required by an Australian Accounting Standard or where, in the opinion of Council, the change in policy results in the financial report providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity's financial position, financial performance or cash flows. 7 Examples of this type of change would be a decision to measure investment property at fair value instead of on the cost basis, or to change from diminishing value method to prime cost method for the calculation of depreciation for a class of assets. The change in accounting policy must be adjusted retrospectively, and comparative figures adjusted - and this results in a change in the opening accumulated surplus. (It is not necessary to reopen Council s previous year ledger to process the journal entries retrospectively - adjust only the accumulated surplus amount carried forward. However, the comparative figures in Council s annual statements must be adjusted.) The following are the only exceptions: The initial application of a policy to revalue assets in accordance with AASB 116 Property, Plant and Equipment or AASB 138 Intangible Assets is a change in an accounting policy to be dealt with as a revaluation in accordance with AASB 116 or AASB 138, rather than in accordance with this Standard 8 A revision in interpretation mandated by these Model Statements may, with the concurrence of the SA Local Government Auditors Group, be declared to be a change in accounting standard interpretation applicable to SA Councils for which the disclosure of additional comparatives does not apply. Any such declarations will not involve a change in accumulated surplus. Full disclosures must be made in accordance with Accounting Standard AAS 108 Accounting Policies, Changes in Accounting Estimates and Errors. Examples of such disclosures are not included in these Model Statements. Disclosure of the changes resulting from a changed accounting policy would also necessitate the disclosure of additional comparative figures in the Balance Sheet - see "Comparative Figures" on page 3 above. 7. AASB AASB STATEMENT OF CHANGES IN EQUITY Page 15 STATEMENT OF CHANGES IN EQUITY SOUTH AUSTRALIA

26 STATEMENT OF CHANGES IN EQUITY Accounting Errors It can happen that an accounting error affecting a previous year s financial statements is detected long after they have been completed. Such an error might be the accidental omission of a number of (say) infrastructure assets during a revaluation, or the double-counting of assets. Where the error is sufficiently material, the correction must be made retrospectively 9. Full disclosures must be made in accordance with Accounting Standard AAS 108 Accounting Policies, Changes in Accounting Estimates and Errors. Examples of such disclosures are not included in these Model Statements. In these cases, the description shown is amended to read adjustment to correct prior period errors. Disclosure of the changes resulting from correction of accounting errors would also necessitate the disclosure of additional comparative figures in the Balance Sheet - see "Comparative Figures" on page 3 above. Changes in Accounting Estimates Accounting estimates include estimates of useful life or residual value of infrastructure, property, plant and equipment, of impairment of receivables, or of future outgoings in relation to a liability. These estimates are reviewed annually, and updated to the latest best available estimate. The effects of the changes to estimates are only recognised prospectively. Do NOT retrospectively calculate what the amounts would have been if the previous estimates had been more accurate, However, it may be approprate to assess whether an impairment should be recognised - see "Impairment" on page 92 below. Asset Revaluation Reserve SOUTH AUSTRALIA Infrastructure, Property, Plant & Equipment Appropriate for Councils who have adopted the fair value basis for some or all of their infrastructure, property, plant & equipment assets 10 (as required by the Local Government (Financial Management) Regulation - see "Fair Value Model" on page 96 below). Transfers to and from Asset Revaluation Reserve are classified as other comprehensive income. Voluntary transfer to accumulated surplus on sale of infrastructure, property, plant & equipment assets is permitted, but not made compulsory, by AASB for further information see "Asset Revaluation Reserve" on page 108 below. It is recommended that this procedure NOT be adopted. Available-for-sale Financial Instruments Where a Council has classified (see "Categorisation of Financial Instruments" on page 125 below) financial instruments traded in an active market as available-for-sale, AASB requires that these assets be recognised at fair value at reporting date, with any increment being recognised as other comprehensive income. The appropriate location in equity for this transfer is Asset Revaluation Reserve. (Revaluation decrements - except to the extent that they offset previous increments - are immediately recognised as an expense.) On disposal, the amounts previously recognised in equity are transferred to P&L. 9. AASB AASB STATEMENT OF CHANGES IN EQUITY Page 16