2004-05 Annual Report - Australia Post

Australia Post Annual Report 2004/05 Financial and Statutory Reports
Notes to and forming part of the financial statements
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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2005
38. ADOPTION OF AUSTRALIAN
EQUIVALENTS TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS (CONT.)
Notes
The notes below provide descriptions of the
adjustments included in the net equity reconciliation
of the corporation as at 1 July 2004 shown above.
In addition, these notes describe the currently known
impacts on the 2005 balance sheet and profit and
loss as a result of the implementation of A-IFRS.
Management is in the process of completing the
corporation’s A-IFRS balance sheet as at 30 June 2005
and the A-IFRS income statement for the year ended
30 June 2005.
(i) The corporation has elected to adopt early the
revised standard, AASB 119 Employee Benefits
(December 2004 version). Under this standard
the corporation will recognise the net surplus
in its employer-sponsored defined benefit fund
as an asset. This differs to the existing policy
where amounts relating to the fund remain off
balance sheet. The recognised asset will be
subject to future changes in value resulting from
movements in the fair value of the assets of the
fund and changes in the underlying defined benefit
obligation. Independent actuaries have been
engaged to assist in calculating the impacts of
AASB 119 on the corporation.
The implementation of A-IFRS also impacts the
superannuation expense. Under current accounting
policies, superannuation expense is recorded
when cash contributions are made to the fund.
The accounting policy the corporation has adopted
under AASB 119 requires the inclusion of the
current service cost, interest cost, expected return
on plan assets and past service cost as part of the
superannuation expense. Under AASB 119, the
corporation will recognise actuarial gains and losses
directly in the statement of changes in shareholder’s
equity. The implementation of AASB 119 is expected
to reduce the 2005 earnings of the corporation
compared to the existing accounting policy.
(ii) Under AASB 116, Property, Plant and Equipment,
the corporation is required to perform valuations on
an asset-by-asset basis rather than the current basis
where certain valuations are performed on a class
basis. If AASB 116 had been applied historically,
certain assets would have been reduced in value
when valued on an individual asset basis.
(iii) Under AASB 116, Property, Plant and Equipment, the
corporation is required to account for revaluations
of assets on an asset-by-asset basis rather than the
current basis where valuation re-assessments are
accounted for on a class basis. If AASB 116 had
historically been applied to the corporation, certain
devaluations that had been applied to the asset
revaluation reserve would have been required to be
taken directly to the income statement. The effect
of this is a reduction in retained earnings and an
increase in the asset revaluation reserve on adoption
of AASB 116.
(iv) Under AASB 120 Government Grants, grant income
is matched according to the pattern of benefit
or obligation. Accordingly, any unearned income
will be deferred rather than be recognised where
the corporation has control of the grant, as is the
case under the existing accounting policy. This
results in a decrease in net equity upon adoption
of AASB 120. The introduction of AASB 120
will increase 2005 earnings.
(v) Under AASB 112 Income Taxes, the corporation
would be required to use a balance sheet liability
method, rather then the current income statement
method which recognises deferred tax balances
where there is a difference between the carrying
value of an asset or liability and its tax base. The
primary impact of this approach is the recognition
of a deferred tax liability in relation to the revalued
assets. Under the existing accounting policy the tax
effect of asset revaluations was not recognised.
Further, as a result of recognising deferred tax
liabilities in relation to the revaluation of land,
unused tax capital losses will be recognised on the
balance sheet as an asset.
The above changes will result in an increase in the
net deferred tax liability under A-IFRS at transition
balance sheet as follows:
Retained earnings
impact of items (i)
to (v) above
Reserves impact of
item (v) above
Increase in deferred
tax liability
Consolidated
$m
Corporation
$m
218.2 218.2
52.3 52.3
270.5 270.5
No other material adjustments to deferred taxes would
be expected on adoption of AASB 112 Income Taxes.