Financial Statements

Statement of comprehensive income

For the period ended 30 June 2011

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

Balance sheet

as at 30 June 2011

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

Statement of changes in equity

for the period ended 30 June 2011

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

Cash flow statement

for the period ended 30 June 2011

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

Schedule of commitments

as at 30 June 2011

Nature of lease/general description of leasing arrangement

1. Commitments are GST inclusive where relevant.

2. Operating leases included are effectively non-cancellable and comprise:

Leases for office accommodation.

Lease payments are subject to annual increases in accordance with upwards movements in the Consumer Price Index.

Lease payments are subject to an annual increase of approximately 4%.

Schedule of contingencies

As at 30 June 2011

There are no known contingencies as at 30 June 2011. (2010: Nil)

The above schedules should be read in conjunction with the accompanying notes

Schedule of asset additions

for the period ended 30 June 2011

The above schedules should be read in conjunction with the accompanying notes

Notes to and forming part of the Financial Statements for the year ended 30 June 2011

1. Summary of Significant Accounting Policies
2. Events after the Reporting Period
3. Expenses
4. Income
5. Financial Assets
6. Non-Financial Assets
7. Payables
8. Provisions
9. Cash Flow Reconciliation
10. Members’ Remuneration
11. Related Party Disclosures
12. Senior Executive Remuneration
13. Remuneration of Auditors
14. Financial Instruments
15. Reporting of Outcomes

Note 1: Summary of Significant Accounting Policies

1.1     Objective of the Australian Law Reform Commission

The Australian Law Reform Commission is an Australian Government controlled entity. The objective of the Commission is to report to the Attorney-General on the results of any review for the purposes of developing and reforming the law.

The ALRC is structured to meet one outcome:

Outcome 1:   Informed government decisions about the development, reform and harmonisation of Australian laws and related processes through research, analysis, reports and community consultation and education.

The continued existence of the Commission in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for the Commission’s administration and programs.

1.2     Basis of Preparation of the Financial Statements

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

The Financial Statements have been prepared in accordance with:

1. Finance Minister’s Orders (or FMOs) for reporting periods ending on or after 1 July 2010; and
2. Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

Unless an alternative treatment is specifically required by an accounting standard or the FMOs, assets and liabilities are recognised in the balance sheet, when and only when, it is probable that future economic benefits will flow to the Commission or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under agreements equally proportionately unperformed are not recognised unless required by an Accounting Standard. Liabilities and assets that are unrecognised are reported in the schedule of commitments or the schedule of contingencies.

Unless alternative treatment is specifically required by an accounting standard, income and expenses are recognised in the Statement of Comprehensive Income when, and only when, the flow, consumption or loss of economic benefits has occurred and can be reliably measured.

1.3     Significant Accounting Judgements and Estimates

In the process of applying the accounting policies listed in this note, the Commission has made a judgement that has been the most significant impact on the amounts recorded in the financial statements.

The fair value of land and buildings has been taken from the market value of similar properties as determined by an independent valuer.

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next accounting period.

1.4     New Australian Accounting Standards

Adoption of New Australian Accounting Standard Requirements

No accounting standard has been adopted earlier than the application date as stated in the standard.

The following (new standards / revised standards / interpretations / amending standards) were issued prior to the sign-off date, were applicable to the current period and had a financial impact on the Commission:

The following new accounting standards (including reissued standards), interpretations are applicable to the 2010/11 financial year:

AASB 2009-5 Further Amendments to Australian Accounting Standards arising from Annual Improvements Project (AASB 5, AASB 8, AASB 101, AASB 107, AASB 117 AASB 118, AASB 136 & AASB 139)

AASB 2009-9 Amendments to Australian Accounting Standards – Additional Exemptions for the First-Time Adopters (AASB-1)

AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19 (AASB 1)

AASB 2010-3 Amendment to Australian Accounting Standards arising from the Annual Improvements Project

Other new standards / revised standards / interpretations / amending standards that were issued prior to the sign-off date and are applicable to the future reporting period are not expected to have a future financial impact on the Commission.

Future Australian Accounting Standard Requirements

The following (new standards / revised standards / interpretations / amending standards) were issued by the Australian Accounting Standards Board prior to the sign-off date, which are expected to have financial impact on the commission for future reporting periods:

AASB 2009-12 Amendments to Australian Accounting Standards

AASB 124 Related Party Disclosures

AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

AASB 2010-5 Amendments to Australian Accounting Standards

AASB 2010-6 Amendments to Australian Accounting Standards-Disclosures on Transfers of Financial Assets

AASB 1054 Australian Additional Disclosures

AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project

AASB 2013 Presentation of items of Other Comprehensive Income

AASB 119 Employee Benefits

AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9

AASB 1053 Application of Tiers of Australian Accounting Standards

AASB 9 Financial Instruments

AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)

AASB 2010-10 Further Amendments to Australian Accounting Standards-Removal of Fixed Dates for First-time Adopters

Other new standards / revised standards / interpretations / amending standards that were issued prior to the sign-off date and are applicable to the current reporting did not have a financial impact, and are not expected to have a future financial impact on the Commission.

1.5     Revenue

Revenue from sale of goods is recognised when:

1. The risks and rewards of ownership have been transferred to the buyer;
2. The Commission retains no managerial involvement nor effective control over the goods;
3. The revenue and transaction costs incurred can be reliably measured; and
4. It is probable that the economic benefits associated with the transaction will flow to the entity.

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

1. The amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and
2. The probable economic benefits with the transaction will flow to the entity.

The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at balance date. Allowances are made when collectability of the debt is no longer probable.

Interest revenue is recognised on receipt using the effective interest method as set out in AASB 139 Financial Instruments: Recognition and Measurement.

Revenue from Government

Funding received or receivable from agencies (appropriated to the agency as a CAC Act body item for payment to the Commission) is recognised as Revenue from Government unless it is in the nature of an equity injection or a loan.

1.6     Gains

Sale of Assets

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

1.7     Transactions with Government as Owner

Equity Injections

Amounts that are designated as equity injections for a year are recognised directly in contributed equity in that year.

Restructuring of Administrative Arrangements

Net assets received from or relinquished to another Government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed entity.

Other Distributions to Owners

The FMOs require that distributions to owners be debited to contributed equity unless it is in the nature of a dividend.

1.8     Employee Benefits

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

Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of the end of reporting period are measured at their nominal amounts.

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

Other long-term employee benefit liabilities are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

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 Commission is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the Commission’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by reference to the work of an actuary as at 30 June 2011. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Superannuation

Since 1 July 1997, the Commission has not been an approved authority for the purposes of the Superannuation Act 1990 (Cth) and therefore employees appointed on or after that date are not eligible for membership of the PSS.

Employees who were appointed prior to 1 July 1997, and who have maintained their membership of the PSS or CSS, are permitted to continue their membership of those schemes.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. The liability is reported by the Department of Finance and Deregulation as an administered item.

For employees not covered by the above, the Commission contributes to the superannuation fund nominated by the employee at the rate of 9% of salary, provided that the nominated fund is regulated by the Superannuation Industry (Supervision) Act 1993 (Cth). In addition, in the case of an employee who elects to make an additional personal superannuation contribution, the Commission makes a matching contribution up to a maximum of 3% of the employee’s annual salary.

The liability for superannuation recognised as at 30 June 2011 represents outstanding contributions for the final fortnight of the year.

1.9     Leases

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

1.10   Cash

Cash is recognised at its nominal amount. Cash and cash equivalents includes cash on hand and demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

1.11   Financial Liabilities

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

Financial liabilities are recognised and derecognised upon trade date.

Trade creditors and accruals are recognised at their nominal amounts, being the amounts at which liabilities will be settled. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

Supplier and other payables

Supplier and other payables are recognised at their nominal amounts. Liabilities are recognised to the extent that the goods and services have been received and irrespective of having been invoiced.

1.12   Financial Assets

The Australian Law Reform Commission classifies its financial assets in the following category:

a)       loans and receivables.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets are recognised and derecognised upon trade date.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Impairment of Financial Assets

Financial assets are assessed for impairment at end of each reporting period.

Financial assets held at cost – If there is objective evidence that an impairment loss has been incurred, the amount of the impairment loss is the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate for similar assets.

1.13   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. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

1.14   Property, Plant and Equipment

Asset Recognition Threshold

Purchases of property, plant and equipment are recognised initially at cost in the Balance Sheet, except for purchases costing less than $1,000, 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). The $1,000 threshold was selected because it facilitates efficient asset management and recording without greatly affecting asset values recognised.

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to make good provisions in property leases taken up by the Commission where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Commission’s leasehold improvements with a corresponding provision for the make good recognised.

Property, plant and equipment are carried at fair value, being revalued with sufficient frequency such that the carrying amount of each asset is not materially different, at reporting date, from its fair value. Valuations undertaken in each year are as at 30 June.

Revaluations

Fair values for each class of asset are determined as shown below:

Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not materially differ from assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised through the Income Statement. Revaluation decrements for a class of assets are recognised directly through the Income Statement except to the extent that they reverse a previous revaluation increment for that class.

The Commission revalued its leasehold improvements and property, plant and equipment assets as at 30 June 2010, and thereafter these assets will be revalued progressively every three years.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Depreciation

Depreciable property, plant and equipment are written off to their estimated residual values over their estimated useful lives to the Commission using, in all cases, the straight-line method of depreciation. Useful lives are reviewed at each balance date.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate. Depreciation rates applying to each class of depreciable asset are based on the following useful lives.

Impairment

All assets were assessed for impairment at 30 June 2011. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the Commission were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

1.15   Taxation

The Commission is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Revenues, expenses and assets are recognised as net GST except:

1. where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
2. for receivables and payables.

Note 2: Events after the Balance Sheet Date

Effective on 1 July 2011, the ALRC became a prescribed agency under the Financial Management and Accountability Act 1997 (Cth). This transition was effected on 17 December 2010 with the enactment of the Financial Framework Legislation Amendment Act 2010 (Cth).

The Commission is not aware of any other significant events that have occurred since balance date which warrant disclosure in these statements.

Note 3: Expenses

Note 4: Income

Note 5: Financial Assets

Note 6:Non-Financial Assets

Note 7: Payables

Note 8: Provisions

Note 9: Cash Flow Reconciliation

Note 10: Members’ Remuneration

Note 11: Related Party Disclosures

Members of the Commission during the year were:

Full-time Members

Professor Rosalind Croucher (from 05/02/07)

Professor Terry Flew (from 28/04/11)

Part-time Members

Justice Berna Collier (from 27/10/10)

Magistrate Anne Goldsbrough (from 14/12/09–31/8/10)

Justice Susan Kenny (from 14/05/09)

Justice Bruce Lander (from 27/10/10–30/4/11)

Justice Arthur Emmett (from 27/10/10–30/4/11)

The aggregate remuneration of Members is disclosed in Note 10.

In accordance with the Australian Law Reform Commission Act 1996, only Members who do not hold a judicial office are to be paid such remuneration as the Remuneration Tribunal determines.

All part-time Members hold judicial office and therefore are not remunerated.

Note 12: Senior Executive Remuneration

Variable Elements:

With the exception of bonuses, variable elements were not included in the ‘Fixed Elements’ and ‘Bonus Paid’ table above. The following variable elements were available as part of Senior Executive remuneration package.

1. Bonuses: Bonuses were based on the performance rating of the individual. The maximum bonus that an individual could receive was 8 per cent of the base salary.
2. On average the Senior Executive was entitled to the following leave entitlements:
   Annual Leave (AL) entitled to 20 days (2010: 20 days) each full year worked.
   Personal Leave (PL) entitled to 15 days (2010: 15 days); and
   Long Service Leave (LSL): in accordance with Long Service Leave (Commonwealth Employees) Act 1976.
3. The Senior Executive was a member of the following superannuation fund:
   Public Sector Superannuation Scheme (PSS): this scheme is closed to new members, with current employer contributions were approximately at 15.4 per cent (2010: 15.4 per cent) (including productivity component). More information on PSS can be found at http://www.pss.gov.au.

Note 12C. Other Highly Paid Staff

During the reporting period, there was no employees (2010: no employees) whose salary plus performance bonus were $150,000 or more.

Note 13: Remuneration of Auditors

Note 14: Financial Instruments

Note 14 E. Credit Risk

The Commission’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 Balance Sheet.

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

Note 14 F. Liquidity Risk

The Commission’s financial liabilities are supplier payables. The exposure to liquidity risk is based on the notion that the Commission will encounter difficulty in meeting its obligations associated with financial liabilities. This is highly unlikely due to CAC Act payments and internal policies and procedures put in place to ensure there are appropriate resources to meet its financial obligations.

Note 14 G. Market Risk

The Commission holds basic financial instruments that do not expose the Commission to certain market risks. The Commission is not exposed to ‘Currency Risk’ or ‘Other Price Risk’.

Interest Rate Risk

The Commission is not exposed to Interest Rate Risk.

Note 15: Reporting of Outcomes

Note 15A: Outcomes of the Commission

The Commission operates predominantly in one industry, being a statutory authority whose primary function is to provide policy advice to the Federal Government and Parliament on matters referred to it by the Attorney-General.

Outcome: Informed government decisions about the development, reform and harmonisation of Australian laws and related processes through research, analysis, reports and community consultation and education.

Note 15B: Net Cost of Outcome Delivery

Note 15C. Major Classes of Expenses, Income, Assets and Liabilities by Outcome.

The Commission’s outcomes are described in Note 15A.