5 Disclosure of changes in accounting policy and estimates
Change in accounting policy
The PTA recognises the annual rental from a prepaid 49 years operating lease as revenue on a straight-line basis.
In its financial statements for periods beginning before 1 July 2006, PTA recognised the annual rental from a prepaid 49 years operating lease as revenue, together with an associated interest expense, in accordance with net present value principles.
This change in accounting policy was due to applying AASB 117(50) Leases which requires operating lease income to be recognised on a straight-line basis over the term of the lease unless other systematic basis is more representative of the time pattern in which use benefit derived from the asset is diminished.
The benefits from the use of the assets are constant over time. Accordingly straight-line recognition has been adopted.
The change in accounting policy was recognised retrospectively in accordance with the transitional provisions of the standard, and comparatives have been restated. See Note 46 'Correction of error in applying AASB 117 Leases'.
Initial application of an Australian Accounting Standard
The PTA has applied the following Australian Accounting Standards and Australian Accounting Interpretations effective for annual reporting periods beginning on or after 1 July 2006:
- AASB 2005-9 'Amendments to Australian Accounting Standards [AASB 4, AASB 1023, AASB 139 & AASB 132]' (Financial guarantee contracts). The amendment deals with the treatment of financial guarantee contracts, credit insurance contracts, letters of credit or credit derivative default contracts as either an “insurance contract” under AASB 4 'Insurance Contracts' or as a “financial guarantee contract” under AASB 139 'Financial Instruments: Recognition and Measurement'. The PTA does not currently undertake these types of transactions, resulting in no financial impact in applying the Standard.
- UIG Interpretation 4 'Determining whether an Arrangement Contains a Lease' as issued in June 2005. This Interpretation deals with arrangements that comprise a transaction or a series of linked transactions that may not involve a legal form of a lease but by their nature are deemed to be leases for the purposes of applying AASB 117 'Leases'. At balance sheet date, the PTA has not entered into any arrangements as specified in the Interpretation, resulting in no impact in applying the Interpretation.
- UIG Interpretation 9 'Reassessment of Embedded Derivatives'. This Interpretation requires an embedded derivative that has been combined with a non-derivative to be separated from the host contract and accounted for as a derivative in certain circumstances. At balance sheet date, the PTA has not entered into any contracts as specified in the Interpretation, resulting in no impact in applying the Interpretation.
The following Australian Accounting Standards and Interpretations are not applicable to the Authority as they have no impact or do not apply to not-for-profit entities:
2005-1 'Amendments to Australian Accounting Standard' (AASB 139 - Cash flow hedge accounting of forecast intragroup transactions)
2005-5 'Amendments to Australian Accounting Standards [AASB 1 & AASB 139]'
2006-1 'Amendments to Australian Accounting Standards [AASB 121]'
2006-3 'Amendments to Australian Accounting Standards [AASB 1045]'
2006-4 'Amendments to Australian Accounting Standards [AASB 134]'
2007-2 'Amendments to Australian Accounting Standards arising from
AASB Interpretation 12 [AASB 1, AASB 117, AASB 118, AASB 120, AASB 121, AASB 127, AASB 131 & AASB 139]' - paragraph 9
UIG 5 'Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds'
UIG 6 'Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment'
UIG 7 'Applying the Restatement Approach under AASB 129 Financial Reporting in Hyperinflationary Economies'
UIG 8 'Scope of AASB 2'
Future impact of Australian Accounting Standards not yet operative
The PTA cannot early adopt an Australian Accounting Standard or Australian Accounting Interpretation unless specifically permitted by TI 1101 'Application of Australian Accounting Standards and Other Pronouncements'. Consequently, the PTA has not applied the following Australian Accounting Standards and Australian Accounting Interpretations that have been issued but are not yet effective. These will be applied from their application date:
- AASB 7 'Financial Instruments: Disclosures' (including consequential amendments in AASB 2005-10 'Amendments to Australian Accounting Standards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]'). This Standard requires new disclosures in relation to financial instruments. The Standard is considered to result in increased disclosures, both quantitative and qualitative of the PTA's exposure to risks, enhanced disclosure regarding components of the PTA's financial position and performance, and possible changes to the way of presenting certain items in the financial statements. The PTA does not expect any financial impact when the Standard is first applied. The Standard is required to be applied to annual reporting periods beginning on or after 1 January 2007.
- AASB 2005-10 'Amendments to Australian Accounting Standards (AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023, & AASB 1038)'. The amendments are as a result of the issue of AASB 7 'Financial Instruments: Disclosures', which amends the financial instrument disclosure requirements in these standards. The PTA does not expect any financial impact when the Standard is first applied. The Standard is required to be applied to annual reporting periods beginning on or after 1 January 2007.
- AASB 101 'Presentation of Financial Statements'. This Standard was revised and issued in October 2006 so that AASB 101 has the same requirements as IAS 1 'Presentation of Financial Statements' (as issued by the IASB) in respect of for-profit entities. The PTA is a not-for-profit entity and consequently does not expect any financial impact when the Standard is first applied. The Standard is required to be applied to annual reporting periods beginning on or after 1 January 2007.
- AASB 2007-4 'Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments (AASB 1, 2, 3, 4, 5, 6, 7, 102, 107, 108, 110, 112, 114, 116, 117, 118, 119, 120, 121, 127, 128, 129, 130, 131, 132, 133, 134, 136, 137, 138, 139, 141, 1023 & 1038)'. This Standard introduces policy options and modifies disclosures. These amendments arise as a result of the AASB decision that, in principle, all options that currently exist under IFRSs should be included in the Australian equivalents to IFRSs and additional Australian disclosures should be eliminated, other than those now considered particularly relevant in the Australian reporting environment. The Department of Treasury and Finance has indicated that it will mandate to remove the policy options added by this amending Standard. This will result in no impact as a consequence of application of the Standard. The Standard is required to be applied to annual reporting periods beginning on or after 1 July 2007.
- AASB 2007-5 'Amendment to Australian Accounting Standard - Inventories Held for Distribution by Not-for-Profit Entities (AASB 102)'. This amendment changes AASB 102 'Inventories' so that inventories held for distribution by not-for-profit entities are measured at cost, adjusted when applicable for any loss of service potential. The PTA does not have any inventories held for distribution so does not expect any financial impact when the Standard is first applied. The Standard is required to be applied to annual reporting periods beginning on or after 1 July 2007.
- AASB Interpretation 4 'Determining whether an Arrangement Contains a Lease [revised]'. This Interpretation was revised and issued in February 2007 to specify that if a public-to-private service concession arrangement meets the scope requirements of AASB Interpretation 12 'Service Concession Arrangements' as issued in February 2007, it would not be within the scope of Interpretation 4. At balance sheet date, the PTA has not entered into any arrangements as specified in the Interpretation or within the scope of Interpretation 12, resulting in no impact when the Interpretation is first applied. The Interpretation is required to be applied to annual reporting periods beginning on or after 1 January 2008.
- AASB Interpretation 12 'Service Concession Arrangements'. This Interpretation was issued in February 2007 and gives guidance on the accounting by operators (usually a private sector entity) for public-to-private service concession arrangements. It does not address the accounting by grantors (usually a public sector entity). It is currently unclear as to the application of the Interpretation to the PTA if and when public-to-private service concession arrangements are entered into in the future. At balance sheet date, the PTA has not entered into any public-to-private service concession arrangements resulting in no impact when the Interpretation is first applied. The Interpretation is required to be applied to annual reporting periods beginning on or after 1 January 2008.
- AASB Interpretation 129 'Service Concession Arrangements: Disclosures [revised]'. This Interpretation was revised and issued in February 2007 to be consistent with the requirements in AASB Interpretation 12 'Service Concession Arrangements' as issued in February 2007. Specific disclosures about service concession arrangements entered into are required in the notes accompanying the financial statements, whether as a grantor or an operator. At balance sheet date, the PTA has not entered into any public-to-private service concession arrangements resulting in no impact when the Interpretation is first applied. The Interpretation is required to be applied to annual reporting periods beginning on or after 1 January 2008.
- AASB 2007-6 'Amendments to Australian Accounting Standards arising from [AASB 123] [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]'. The revision of AASB 123 necessitates consequential amendments to the pronouncements listed above. The amendments principally remove references to expensing borrowing costs on qualifying assets, as AASB 123 was revised to require such borrowing costs to be capitalised. This Standard is applicable to annual reporting periods beginning on or after 1 January 2009, with early adoption permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided AASB 123 is also adopted for the same period. This Standard is applied when AASB 123 is applied. The PTA has not yet adopted the AASB 123 and will continue expensing the borrowing costs until the standard comes into force.
- 1AASB 2007-7 'Amendments to Australian Accounting Standards [AASB 1, AASB 2, AASB 4, AASB 5, AASB 107 & AASB 128]'. These amendments follow the issuance, in April 2007, of AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments. That Standard implemented the AASB's decision that, in principle, all options that currently exist under International Financial Reporting Standards should be included in the Australian equivalents to IFRSs and additional Australian disclosures should be eliminated, other than those considered particularly relevant in the Australian reporting environment.
In addition to editorial amendments, this Standard removes the encouragement in paragraph Aus12.1 of AASB 107 to adopt a particular format for the cash flow statement, as it is no longer relevant due to the amendments made to AASB 107 by AASB 2007-4. The superseded implementation guidance accompanying AASB 4 is also deleted. The Department of Treasury and Finance has indicated that it will mandate to remove the policy options added by the AASB 2007-4 amending Standard. This will result in no impact as a consequence of application of the Standard. The Standard is required to be applied to annual reporting periods beginning on or after 1 July 2007.
The following Australian Accounting Standards and Interpretations are not applicable to the PTA as they will have no impact or do not apply to not-for-profit entities:
AASB 8 'Operating Segments'
AASB 1049 'Financial Reporting of General Government Sectors by Governments'
AASB 2007-1 'Amendments to Australian Accounting Standards arising from AASB Interpretation 11 [AASB 2]'
AASB 2007-2 'Amendments to Australian Accounting Standards arising from AASB Interpretation 12 [AASB 1, AASB 117, AASB 118, AASB 120, AASB 121, AASB 127, AASB 131 & AASB 139]' - paragraphs 1 to 8
AASB 2007-3 'Amendments to Australian Accounting Standards arising from AASB 8 [AASB 5, AASB 6, AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 & AASB 1038]'
Interpretation 10 'Interim Financial Reporting and Impairment'
Interpretation 11 'AASB 2 - Group and Treasury Share Transactions'