6. Administered reporting

AAS and AASB interpretations apply to administered items or activities as if the administered reports were the financial statements of the Australian Government as a parent entity.

Disclosures in relation to material accounting policies in accordance with the relevant AAS, such as AASB 1050 Administered Items (AASB 1050) for Tier 1 reporting and AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities (AASB 1060) for Tier 2 reporting need to be included.

Unless otherwise stated in this RMG:

• accounting policies for ‘administered’ are the same as those for ‘departmental’
• administered transactions between entities are accounted for in the same manner as departmental transactions (for example, purchase of services may be recognised as income in one entity and an expense in the other).

A statement of changes in equity is not required for administered items or activities.

AASB 136 Impairment of Assets (AASB 136) applies to administered assets that are not financial instruments. However, estimates, averages and shortcuts may be applied under paragraph 23 of AASB 136 for determining fair value less costs of disposal, or value in use.

The assessment can be made on a portfolio basis where appropriate (for example, impairment of a large portfolio of statutory receivables).

The Australian Government as a whole is not considered a cash-generating operation. Therefore, the provisions of AASB 136 for cash-generating assets will apply to administered assets only where they are used to generate cash inflows primarily from outside the Australian Government economic entity.

For more information, see AASB 136 for impairment assessment of receivables for statutory charges and Receivables for Statutory Charges.

Transfer payments

AAS require entities to disclose the ‘broad categories of recipients’ of transfer payments and amounts transferred to those recipients – however, 'broad categories of recipients' is not defined (Tier 1 reporting: paragraph 22 of AASB 1050, Tier 2 reporting: paragraph 220 of AASB 1060).

Entities are to determine the categories of recipients appropriate to their circumstances. Similar recipients or categories of recipients should be aggregated into broad categories for disclosure purposes.

Where an entity has discretion to determine the amount or timing of a payment, the identity of beneficiaries or conditions under which payments are to be made, judgement is necessary to establish whether or not the entity controls the payment.

Administered reconciliation schedule (in PRIMA forms)

The ‘adjustment for change in accounting policies’ and ‘adjustment for errors’ lines in the Administered Reconciliation Schedule are only for use in the comparative year, not the current year of the financial reports.

Transfers to the OPA of administered amounts are to be recognised in the line ‘Transfers to OPA’, not as administered expenses.

When an entity makes a payment to a CCE that is either an equity injection or a loan, that payment has a zero net change in the schedule of administered assets and liabilities of the entity.

The note to subsection 9(b) of the FRR, requires the disclosure notes relating to administered items include all notes that would have been required, if the disclosures were departmental items and in a similar format to the notes applying to departmental items. This requirement provides for complete information, to enable completion of the Australian Government CFS.

Administered investments include Commonwealth controlled companies and CCEs and are classified as fair value through other comprehensive income in accordance with paragraph 32(3)(c) of the FRR.

Please note that equity investments are presented as financial assets for GFS purposes in the Australian Government CFS, consistent with AASB 1049 Whole of Government and General Government Sector Financial Reporting (AASB 1049).

Fair value measurement

For consistency and comparability in fair value measurements and related disclosures, AASB 13 Fair Value Measurement (AASB 13) establishes a fair value hierarchy (see AASB 13 paragraphs 76–90) that categorises inputs to valuation techniques for measuring fair value:

• level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
• level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
• level 3 inputs are unobservable inputs for the asset or liability – unobservable inputs are inputs for which market data is not available and are developed using the best information about assumptions that market participants would use when pricing the asset or liability.

Under paragraph 61 of AASB 13, entities are required to measure fair value using valuation techniques that are appropriate in the circumstances, for which sufficient data is available, that maximise the use of relevant observable inputs and minimise the use of unobservable inputs.

Entities should consider industry practice when considering applicable valuation techniques (paragraph 62 of AASB 13). Common examples of valuation techniques used in practice where observable inputs are unavailable include but are not limited to:

• discounted cash flows – this method may be used when an entity invests in a for-profit entity that generates significant non-government cash inflows and those cash flows can be reliably predicted.
• net assets – this method may be used for administered investments where the discounted cash flows option is not applicable, such as for not-for-profit entities, and for-profit entities that do not have significant, predictable and consistent cash flows.

For more information on fair valuation of administered investments, see AASB 13, AASB 1049 and paragraphs B5.1.1 to B5.1.2A of AASB 9 Financial Instruments (AASB 9).

Under AASB 5 Non-current Assets Held for Sale and Discontinued Operations (AASB 5), administered investments that are held for sale are to be presented separately from other assets. Administered investments continue to be measured under AASB 9 when they meet the classification threshold for being held for sale.

The costs of sale (or selling costs) of an administered investment typically include:

• project management
• advisory services
• advertising and marketing
• legal fees
• scoping studies
• regulatory fees.

Sale of administered investments managed by Finance

AASB 5 does not apply to the restructuring of administrative arrangements (MoG changes). Finance has responsibility for the sale of assets under a MoG change but this does not mean that Finance needs to own the administered investment being sold. The:

• sale may be managed by Finance on behalf of the portfolio department, or
• the administered investment may be transferred to Finance for sale.

Administered investments should only be transferred to Finance where there is a formal decision of the Australian Government or ministerial agreement to transfer the asset. Under paragraph 33(1)(b) of the FRR, if there is no formal agreement or decision to transfer the assets/investments to Finance, the administered investments ‘held for sale’ must be reported by the relevant portfolio department.