Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) section 26 – Restructures of administrative arrangements
This section of the FRR sets out reporting and disclosure requirements for when a restructure of administrative arrangements has occurred.
Restructures of administrative arrangements are defined in Australian Accounting Standards Board (AASB) 1004.
Accounting entries do not need to be processed by the date of the transfer for an entity to make the disclosures required.
Assets, liabilities, revenue, expenses and appropriations should be accounted for by the entity that has responsibility for them. The timing for the change of control should align with the change of responsibility, based on legal requirements, and this may vary from item to item. Reporting of administered items should be by the entity responsible for the function, applying the approach that custody does not change until there is either a legal mandate to do so, or as agreed between entities (subject to legal advice).
Section 75 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) provides for adjustments to annual appropriations related to the transfer of functions between non-corporate Commonwealth entities (NCEs). For further information, see RMG-116 Accounting for annual appropriations and RMG-118 Accounting for machinery of government changes.
Disclosures and notes for financial statements
In preparing financial statements to reflect a restructure of administrative arrangements:
assumed functions (disclosure of income and expenses)
- The statement of comprehensive income recognises only those expenses and income incurred/earned whilst the functions were under the control of the reporting entity.
- In the restructure note, the transferee is required to disclose the full income and expenses related to the transferred functions for the whole reporting period, including separately those amounts recognised by the transferor during the reporting period.
Transfer of assets and/or liabilities
Transfers of assets and/or liabilities for no consideration to a wholly-owned Commonwealth entity, must be recognised by the transferee as a contribution by owners when, and only when, it satisfies the definition of contributions by owners in AASB Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities. For more information, see RMG-123 Designating transfers of assets and liabilities as 'contributions by owners' (equity).
For not-for-profit entities, where an asset is acquired at no cost or nominal cost, the cost is its fair value as at the date of acquisition.
Where a restructure of administrative arrangements has occurred, all assets and liabilities transferred must be recognised at their net book value immediately prior to the transfer date in line with section 26(1)(b) of the FRR.
Special reporting requirements following machinery of government changes
Division 4 of Part 2-3 of the Public Governance, Performance and Accessibility Rule 2014 (PGPA Rule) provides special reporting requirements for Commonwealth entities that have ceased to exist or whose functions have been transferred following machinery of government changes. Under subsection 26(1A) of the FRR, where these circumstances occur, the relevant reporting entity must prepare financial statements accordingly.
For guidance on the special reporting requirements under the Division 4 of Part 2-3 of the PGPA Rule, see RMG-119 Reporting requirements following machinery of government changes.
