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
(e) Dividends
A provision for dividend is not recognised as a liability
unless the dividend is declared, determined or publicly
recommended on or before the reporting date.
(f) Cash
Cash on hand and in financial institutions and on
short-term deposit are stated at nominal value. Cash
includes certain receipts relating to the corporation’s
agency arrangements. These amounts are payable to
the various principals (refer note 17).
(g) Receivables
Trade receivables are recognised and carried at original
invoice amount less a provision for any uncollectible
debts. Terms are 14 days. An estimate for doubtful
debts is made when collection of the full amount is no
longer probable. Bad debts are written off as incurred.
(h) Inventories
Raw materials, work in progress and finished goods
are stated at the lower of cost and net realisable
value. For products manufactured by the corporation,
cost comprises direct materials, direct labour and an
appropriate proportion of variable and fixed overhead
expenditure. Costs are assigned to inventory quantities
on hand at balance date on the basis of weighted
average costs. Inventory on hand at balance date is
held for resale.
(i) Investments
Interests in joint-venture entities, over which the
corporation exercises significant influence but not
control, are accounted for in the consolidated financial
statements using the equity method and at the lower
of cost and recoverable amount in the corporation’s
own statements. Under the equity method, the
corporation’s share of the post-acquisition profits or
losses of the joint-venture is recognised as revenue
or expense in the consolidated Statement of Financial
Performance and its share of movements in reserves
is recognised in consolidated reserves. The cumulative
post-acquisition movements are adjusted against the
cost of the investment.
Interests in joint-venture partnerships are equity
accounted on consolidation and in the corporation’s
statements. All other non-current investments are
carried at the lower of cost and recoverable amount.
(j) Leased assets
In the case of operational leases, where the risks and
benefits remain with the lessor, lease payments are
charged as expense to net profit or loss in the periods
in which they are incurred.
In the case of assets acquired under finance leases,
where substantially all the risks and benefits transfer to
the corporation, the non-current asset is capitalised at
the present value of minimum lease payments at the
inception of the lease and a liability recognised for the
same amount. Leased assets are amortised over the
term of the lease. Lease payments are allocated between
interest expense and reduction in the lease liability.
The corporation entered sale and leaseback
transactions for certain plant and equipment assets
during the years ended 30 June 2000 and 30 June
2001. The carrying amounts of these assets
were written down to fair value at the date of the
transactions and the consequent profit on sale is
being amortised over the lower of the remaining
useful life of the assets and the lease term. These
assets have been valued using the same methodology
as specialised plant and equipment that is owned.
(k) Property, plant and equipment (PP&E)
(i) Initial recognition
Purchases of property, plant and equipment are
recognised initially at cost, with the exception of
plant and equipment under one thousand dollars
(and not part of a major re-equipment program)
which is expensed in the year of acquisition.
(ii) Basis of revaluation
Land and buildings
Property revaluations undertaken are subject to
revaluation on a fair value basis in accordance
with Finance Minister’s Orders.
Land and buildings consists of:
° special-purpose buildings – facilities purpose built to
meet the mail processing and network requirements
of the corporation’s mail services
° general-purpose buildings – owned freehold
properties not included in the special purpose
class and improvements to properties on leased
land. This includes post offices, administrative and
operational support facilities.
Special-purpose properties are valued using a
market price assuming continued occupation by the
corporation. General-purpose properties are valued
using a market selling price.
Assets which are surplus to requirements are
measured at their expected net realisable value.
At 30 June 2005 the corporation held surplus property
assets estimated to realise $21.6 million (30 June
2004, $21.8 million).
Plant and equipment (P&E)
Plant and equipment assets are subject to revaluation
on a fair value basis in accordance with Finance
Minister’s Orders.
Plant and equipment consists of:
° specialised plant and equipment – items that are
specific to the mail handling, retail and agency
operations including letter, parcel, retail and agency
systems
° non-specialised plant and equipment – items that
have general usage in industrial and commercial
operations such as motor vehicles, stores handling
equipment, office furniture and retail fixtures and
fittings.
For specialised plant and equipment, where no active
market exists for assets of similar use, type and
condition, fair value is established for cash generating
units using the net present value (NPV) of future cash
flows that arise from the highest and best use of the
cash generating unit. Where the NPV of these cash
flows is greater than the written-down current cost
(WDCC), fair value is recorded as the WDCC. Where
the NPV of these cash flows is less than the WDCC,
fair value is recorded at the WDCC reduced pro-rata by
the excess of WDCC over the NPV of these cash flows.