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Financial reports

Auditing and Assurance Standards Board

Auditor’s Report
Statement by Directors and Chief Executive
Statement of financial performance
Statement of financial position
Statement of cash flows
Schedule of commitments
Schedule of contingencies
Note 1: Summary of significant accounting policies
Note 2: Adoption of Australian equivalents to international financial reporting standards from 2005-06
Note 3: Economic dependency
Note 4: Operating revenues
Note 5: Operating expenses
Note 6: Financial assets
Note 7: Non-financial assets
Note 8: Provisions
Note 9: Payables
Note 10: Equity
Note 11: Cash Flow Reconciliation
Note 12: Directors’ remuneration
Note 13: Related Party Disclosures
Note 14: Remuneration of officers
Note 15: Remuneration of part-time members of the AUASB
Note 16: Remuneration of auditors
Note 17: Average staffing levels
Note 18: Financial instruments

Auditing and Assurance Standards Board
Statement by Directors and Chief Executive

In our opinion, the attached financial statements for the year ended 30 June 2005 are based on properly maintained financial records and give a true and fair view of the matters required by the Finance Minister’s Orders made under the Commonwealth Authorities and Companies Act 1997.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the Auditing and Assurance Standards Board will be able to pay its debts as and when they become due and payable.

This Statement is made in accordance with a resolution of the directors.

SIGNED	SIGNED	SIGNED
C. Macek Chairman — FRC	Graeme McGregor AO Director	Merran Kelsall Chairman — AUASB
16 September 2005	16 September 2005	16 September 2005

Auditing and Assurance Standards Board
Statement of financial performance
for the year ended 30 June 2005

The above statement should be read in conjunction with the accompanying notes.

Auditing and Assurance Standards Board
Statement of financial position
as at 30 June 2005

The above statement should be read in conjunction with the accompanying notes.

Auditing and Assurance Standards Board
Statement of cash flows
for the year ended 30 June 2005

The above statement should be read in conjunction with the accompanying notes.

Auditing and Assurance Standards Board
Schedule of commitments
as at 30 June 2005

Nature of lease	General description of leasing arrangement
Lease of photocopier	The lessor provides a photocopier for 36 months at a fixed instalment rate.

The above schedule should be read in conjunction with the accompanying notes.

Auditing and Assurance Standards Board
Schedule of contingencies
as at 30 June 2005

There are no known contingencies at 30 June 2005.

The above schedule should be read in conjunction with the accompanying notes.

Notes to and forming part of the financial statements

Note 1: Summary of significant accounting policies

1.1 Basis of Accounting

The financial statements are required by clause 1(b) of Schedule 1 to the Commonwealth Authorities and Companies Act 1997 and are a general purpose financial report.

The statements have been prepared in accordance with:

• Finance Minister’s Orders (being the Commonwealth Authorities and Companies Orders (Financial Statements for reporting periods ending on or after 30 June 2005));
• Australian Accounting Standards and Accounting Interpretations issued by the Australian Accounting Standards Board; and
• Consensus Views of the Urgent Issues Group.

The Auditing and Assurance Standards Board (AUASB) Statements of Financial Performance and Financial Position have been prepared on an accrual basis and are in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

Assets and liabilities are recognised in the AUASB Statement of Financial Position when and only when it is probable that future economic benefits will flow and the amounts of the assets or liabilities can be reliably measured. Assets and liabilities arising under agreements equally proportionately unperformed are however not recognised unless required by an accounting standard. Liabilities and assets which are unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies.

Revenues and expenses are recognised in the AUASB Statement of Financial Performance when and only when the flow or consumption or loss of economic benefits has occurred and can be reliably measured.

1.2 Changes in accounting policy

This the first year of reporting for the AUASB, accordingly no changes to accounting policy are applicable.

1.3 Revenue

The revenues described in this Note are revenues relating to the core operating activities of the AUASB.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised at their fair value as revenue when the asset qualifies for recognition.

Revenue from disposal of non-current assets is recognised when control of the asset has passed to the buyer.

1.4 Employee benefits

(a) Benefits

Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled.

Liabilities for wages and salaries and annual leave are measured at their nominal amounts. Other employee benefits expected to be settled within 12 months of their reporting dates are also measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

All other employee benefit liabilities are measured as the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.

(b) Leave

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 AUASB is estimated to be less than the annual entitlements for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration including the AUASB employer superannuation contribution rates to the extent that leave is likely to be taken during service rather than paid out on termination.

The non-current portion of the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at 30 June 2005. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

(c) Superannuation

The AUASB participates as an Associate Employer in the AASB Superannuation Plan, which provides accumulation benefits to members.

For certain employees, the AUASB has guaranteed minimum accumulated balances equivalent to benefits under a defined benefit plan. Vested and accrued benefits of these members as at 30 June 2005 amounted to $209,500 compared to the net market value of attributable assets of $190,100, giving a deficiency of $19,400. A provision for this guaranteed deficiency has been recognised at 30 June 2005 (refer Notes 5A and 8A).

Contributions during the year ended 30 June 2005 on behalf of employees with minimum guaranteed benefits amounted to $41,987. Contribution expense represents the annual funding which is determined based on actuarial advice and the provision for the deficient asset position. The provision of $19,400 has been recognised.

1.5 Leases

Operating lease payments are expensed on a basis which is representative of the pattern of benefits derived from the leased assets.

1.6 Cash

Cash means notes and coins held and any deposits held at call with a bank or financial institution. Cash is recognised at its nominal amount. Interest is credited to revenue as it accrues.

1.7 Financial instruments

Accounting policies for financial instruments are stated at Note 18.

1.8 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.

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.

1.9 Plant and equipment

Asset recognition threshold

Purchases of plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases less than $500, 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).

Revaluations

Plant and equipment are carried at fair value. Valuations undertaken in any year are as at 30 June.

Fair values for each class of asset are determined as follows:

Furniture and equipment (other than computer equipment)	Market selling price
Computers and related equipment	Depreciated replacement cost

Depreciation and amortisation

Depreciable plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the AUASB using, in all cases, the straight line method of depreciation.

Depreciation rates (useful lives) and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate. Residual values are re-estimated for a change in prices only when assets are revalued.

Depreciation and amortisation rates applying to each class of depreciable asset are based on the following useful lives:

	2005
Plant and equipment	3 to 10 years

1.10 Impairment of non-current assets

Non-current assets carried at fair value have been assessed as having no indications of impairment. Consequently there has been no change to the carrying amounts of non-current assets.

1.11 Taxation

The AUASB is exempt from all forms of taxation except fringe benefits tax 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; and
• except for receivables and payables.

1.12 Insurance

The AUASB has taken insurance cover considered appropriate through the Government’s insurable risk managed fund, called ‘Comcover’. Workers compensation is insured through Comcare Australia.

Note 2: Adoption of Australian equivalents to international financial reporting standards from 2005-06

Accounting Standard AASB 1047 Disclosing the Impact of Adopting Australian Equivalents to International Financial Reporting Standards requires that the financial statements for 2004-05 disclose:

• an explanation of how the transition to the Australian equivalents of International Financial Reporting Standards (AEIFRS) is being managed
• narrative explanations of the key differences in accounting policies arising from the adoption of AEIFRS
• any known or reliably estimable information about the impacts on the financial report had it been prepared using AEIFRS; and
• if the impacts of the above are not known or reliably estimable, a statement to that effect.

Where an entity is not able to make a reliable estimate, or where quantitative information is not known, the entity should update the narrative disclosures of the key differences in accounting policies that are expected to arise from the adoption of AEIFRS.

The purpose of this Note is to make these disclosures.

The Australian Accounting Standards Board has issued replacement Australian Accounting Standards to apply from 2005-06. The new standards are the Australian equivalents to International Financial Reporting Standards (IFRSs). IFRSs are issued by the International Accounting Standards Board. The new standards cannot be adopted early. The standards being replaced are to be withdrawn with effect from 2005-06, but continue to apply in the meantime.

It is expected that the Finance Minister will continue to require compliance with the Accounting Standards issued by the AASB, including AEIFRS, in his Orders for the Preparation of Authorities’ financial statements for 2005-06 and beyond.

AEIFRS contain certain additional provisions which will apply to not-for-profit entities, including the AUASB. However, it is expected that the AUASB will be able to assert compliance with AEIFRS.

Existing AASB standards that have no IFRS equivalent will continue to apply.

Management of the transition to Australian equivalents to IFRSs

The AUASB has taken the following steps in preparation for the implementation of AEIFRS:

• Identification of all major accounting policy differences between current AASB standards and AEIFRS;
• Identification of system changes necessary to be able to report under AEIFRS, including those necessary to enable capture of data under both sets of rules for 2004-05;
• An AEIFRS compliant balance sheet was prepared during the preparation of the 2004-05 statutory financial reports; and
• The 2004-05 Balance Sheet under AEIFRS will be reported to the Department of Finance and Administration in line with their reporting deadlines.

Changes to major accounting policies are as follows:

Plant and equipment

At 30 June 2005, the AUASB assets were reported at fair value. The AUASB intends to continue to report plant and equipment at fair value and accordingly the application of AEIFRS is expected to have no effect on the carrying value of these assets. In accordance with AEIFRS, plant and equipment will be subject to impairment testing.

Employee benefits

The AUASB has recognised actuarial gains and losses relating to the guaranteed minimum benefits (equivalent to a defined benefit) section of the AASB superannuation plan in 2004-05. These gains and losses have been recognised in the Statement of Financial Performance and as a liability in the Statement of Financial Position of the AUASB.

Under AEIFRS the calculation of actuarial gains and losses may produce slightly different figures and these will be recognised. The differences in gains and losses as calculated under AEIFRS are not expected to be material.

AEIFRS require that annual leave that is not expected to be taken within 12 months of balance date is to be discounted. In 2004-05 the AUASB has recognised this liability at nominal value. The difference in the liability is not expected to be material.

Financial instruments

Cash, receivables and payables will continue to be measured at nominal value.

Other financial assets and liabilities (if any) will be accounted for at fair value. Fair values will be published prices where an active market exists or by appraisal.

Financial assets, except those classified as ‘held at fair value through profit and loss’ will be subject to impairment testing.

This is not expected to have a material effect on any carrying values.

Reconciliation of impacts — AGAAP to AEIFRS

	30 June 2005 $
Reconciliation of AUASB equity
Total equity under AGAAP	380,147
Adjustments to Accumulated Surplus	(17,398)
Total equity under AEIFRS	362,749
Reconciliation of AUASB net surplus
Total net surplus under AGAAP:	380,147
Adjustments
Employee entitlements — non-current annual leave	535
Employee entitlements — superannuation	(17,933)
Total net surplus under AEIFRS	362,749
Reconciliation of AUASB employee Provisions
Total employee provisions under AGAAP	79,287
Adjustment for superannuation	17,933
Adjustment for non-current annual leave	(535)
Total employee provisions under AEIFRS	96,685

Note 3: Economic dependency

The AUASB is dependent on funding from the Parliament of the Commonwealth and contributions from CPA Australia, The Institute of Chartered Accountants in Australia and the National Institute of Accountants to carry out its normal activities.

Note 4: Operating revenues

	2005 $
4A. Interest
Deposits	4,854
4B. Grants and contributions
Contributions
- CPA Australia	425,000
- The Institute of Chartered Accountants in Australia	425,000
- National Institute of Accountants	150,000
- Australian Accounting Standards Board*	544,431
Total grants and contributions revenue	1,544,431
* During the AUASB establishment period AUASB funding from the FRC was via the AASB.
4C. Other revenue
Settlement for Employee Entitlements transferred from Australian Accounting Research Foundation to AUASB	34,804

Note 5: Operating expenses

	2005 $
5A. Employee expenses
Wages and salaries	538,542
Superannuation*	63,627
Leave and other benefits	35,106
Total employee benefits expenses	637,275
Comcare premium	1,697
Total employee expenses	638,972
* Includes a provision for superannuation of $19,400. [Note 1.4 (c)]
5B. Suppliers expenses
Goods from external entities	145,866
Services from related entities	216,183
Services from external entities	195,152
Total supplier expenses	557,201
5C. Depreciation and amortisation
Depreciation of plant and equipment	7,769
Total depreciation and amortisation	7,769

Note 6: Financial assets

	2005 $
6A. Cash and Term Deposit
Cash at bank and on hand	399,613
	399,613
Balance of cash as at 30 June shown in the Statement of Cash Flows	399,613
6B. Receivables
Goods and services	132,910
	132,910
Receivables (gross) are aged as follows:
Not overdue	132,910

Note 7: Non-financial assets

		2005 $
7A. Plant and equipment
Plant and equipment at fair value		43,154
Accumulated depreciation		(7,769)
Total Plant and Equipment (non-current)		35,385
7B. Analysis of Plant and Equipment
Table A1: Reconciliation of the opening and closing balances of plant and equipment
		Plant and equipment $
As at 1 July 2004
Gross book value		-
Accumulated depreciation/amortisation		-
Net book value		-
Additions by purchase		43,154
Depreciation/amortisation expense		(7,769)
As at 30 June 2005
Gross book value		43,154
Accumulated Depreciation/Amortisation		(7,769)
Net book value		35,385
Table A2: Assets at valuation
	Plant and Equipment $	Total $
As at 30 June 2005
Gross book value	43,154	43,154
Accumulated Depreciation/Amortisation	(7,769)	(7,769)
Net book value	35,385	35,385

Note 8: Provisions

	2005 $
8A. Employee provisions
Salaries and wages	2,911
Annual leave	32,650
Long service leave	24,326
Superannuation [Note 1.4 (c)]	19,400
Aggregate employee entitlement liability	79,287
Employee provisions are categorised as follows:
Current	24,781
Non-current	54,506
	79,287

Note 9: Payables

	2005 $
Trade creditors	79,930
Other payables	31,688
	111,618

All payables are current.

Note 10: Equity

	Accumulated Surplus 2005 $
Opening balance 1 July	-
Net surplus	380,147
Closing balance as at 30 June	380,147
Total equity attributable to the Commonwealth	380,147

Note 11: Cash Flow Reconciliation

Reconciliation of net surplus to net cash from operating activities

	2005 $
Net surplus	380,147
Depreciation and amortisation	7,769
Contributions in kind	(19,431)
Changes in assets and liabilities
Decrease/(increase) in receivables	(132,910)
Decrease/(increase) in prepaid expenses	(3,144)
Increase/(decrease) in employee provisions	79,287
Increase/(decrease) in liability to suppliers (operating)	74,881
Increase/(decrease) in other payables	31,688
Net cash from operating activities	418,287

Note 12: Directors’ remuneration

	2005
The number of directors of the AUASB included in these figures are shown below in the relevant remuneration bands.
$Nil — $9,999#	22
$70,000 — $79,999	1
Total	23
Aggregate amount of superannuation payments in connection with the retirement of directors	7,412
Other remuneration received or due and receivable by directors of the AUASB	84,402
Total remuneration received or due and receivable by directors of the AUASB*	$91,814

* Directors’ remuneration relates to the remuneration of the FRC Chairman and the sitting fees paid to members of the FRC. The members of the FRC are the Directors of both the AASB and the AUASB, however their remuneration, and all FRC related expenses are met by the Department of Treasury. The AUASB was established on 1 July 2004, therefore no Directors’ remuneration for 2004 relates to the AUASB.
# Thirteen (13) of the 22 members in the Nil — $9,999 range received no remuneration.

Note 13: Related Party Disclosures

The members of the FRC are the Directors of the AUASB.

The Directors and Alternate Directors of the AUASB during the year were:

• Charles Macek — Chairman
• Elizabeth Alexander, AM — Deputy Chairman
• Don Challen
• Karen Hamilton (resigned 31 December 2004)
• Richard Humphry, AO (appointed 7 March 2005)
• Warwick Hunt (appointed 9 February 2005)
• David Jackson
• John Langoulant (resigned 16 July 2004)
• Graeme McGregor, AO
  • Greg Larsen (alternate to Mr McGregor until 6 March 2005)
• Jim Murphy
• Mike Rawstron (alternate to Mr Murphy)
• Tom Pockett
• Gregory Pound (resigned 30 June 2005)
• Phillip Prior
  • James Kerwin (alternate to Mr Prior until 12 September 2004)
• Brian Scullin
• Lewis Ting (resigned 6 September 2004)
• Catherine Walter AM
• Jan West (appointed 7 March 2005)
  • Stephen Harrison, AO (alternate to Ms West)
• Klaus Zimmermann
  • Roger Cotton (alternate to Mr Zimmermann)

Note 14: Remuneration of officers

	2005
The number of Officers who received or were due to receive total remuneration of $100,000 or more:
$140,000 — $149,999	1
	1
The aggregate amount of total remuneration of officers shown above	$142,248

The officer remuneration includes officers concerned with or taking part in the management of the AUASB during 2004-05 except the FRC Chairman. Details in relation to the remuneration of the FRC Chairman and FRC members have been incorporated into Note 12: Directors Remuneration.

Note 15: Remuneration of part-time members of the AUASB

	2005 $
Sitting fees	32,776

Note 16: Remuneration of auditors

	2005 $
Remuneration to the Australian National Audit Office (ANAO) for auditing the financial statements for the reporting period	15,000

No other services were provided by the ANAO during the reporting period.

Note 17: Average staffing levels

	2005
The average staffing levels for the AUASB during the year were (equivalent full time staff)	7

Note 18: Financial instruments

(a) Terms, conditions and accounting policies

Financial Instrument	Notes	Accounting Policies and Methods (including recognition criteria and measurement basis)	Nature of underlying instruments (including significant terms and conditions affecting the amount, timing and certainty of cash flows)
Financial assets		Financial assets are recognised when control over future economic benefits is established and the amount of the benefit can be reliably measured.
Cash and Term Deposit	6A	Deposits are recognised at their nominal amounts. Interest is credited to revenue as it accrues.	Temporarily surplus funds are placed on deposit at call with the AUASB's bank in a Business Investment Account.
Receivables	6B	These receivables are recognised at the nominal amounts due less any provision for bad and doubtful debts.	Credit terms are net 14 days (2004: N/A).
Financial Liabilities		Financial liabilities are recognised when a present obligation to another party is entered into and the amount of the liability can be reliably measured.
Supplier payables	9	Creditors and accruals are recognised at their nominal amounts, being the amounts at which the liabilities will be settled. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).	Settlement is usually made net 30 days.
Other payables	9	Refer to Note 9.	Refer to Note 9.

(b) Interest rate risk

	Notes	Floating Interest Rate	Non-Interest Bearing	Total	Weighted Average Effective Interest Rate
		2004-05 $	2004-05 $	2004-05 $	2004-05 %
Financial assets (recognised)
Cash on hand	6A	-	300	300	n/a
Cash at Bank-Cheque Account	6A	292,387	-	292,387	3.45
Cash at Bank-AUASB Bus Invest A/c	6A	106,926	-	106,926	4.68
Receivables	6B	-	132,910	132,910	n/a
Total financial assets (recognised)		399,313	133,210	532,523
Total assets				571,052
Financial liabilities (recognised)
Supplier payables	9	-	79,930	79,930	n/a
Other payables	9	-	31,688	31,688	n/a
Total financial liabilities (recognised)		-	111,618	111,618
Total liabilities				190,905

(c) The fair value of financial assets and liabilities approximate their carrying amounts.

(d) Credit risk exposures

The economic entity’s maximum exposures to credit risk at reporting date in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the Statement of Financial Position.

The economic entity has no significant exposures to any concentrations of credit risk.