ANNUAL REPORT 2007-2008 CITY OF GREATER GEELONG

UNDERSTANDING THE FINANCIAL REPORT
AND FINANCIAL STATEMENTS
Council’s Financial Report, Standard Statements and
Performance Statement are prepared in accordance with
the Australian Accounting Standards, the Local
Government Act 1989 and the Auditor General’s
model accounts.
The Financial Report, Standard Statements and
Performance Statement are audited by the Auditor
General Victoria’s agent and are approved in principle by
both the Council’s Audit Advisory Committee and by
Council. The reports are then forwarded to the Auditor
General’s Office for finalisation and provision of
independent opinions for the Financial Report and
Standard Statements combined and also for the
Performance Statement.
Standard Statements
The Standard Statements compare the actual result for
the financial year to the Annual Budget as originally
adopted and provide explanations for any major
variances.
There are four Standard Statements which are prepared
using the same accounting basis as the Financial
Statements.
> Standard Income Statement
This statement highlights the recurrent surplus which
excludes distortions of capital income and asset
recognition and provides a result that reflects how
Council uses rates and regular income to meet
recurrent expenditure.
> Standard Balance Sheet
This statement also mirrors the statement made according
to Accounting Standards in the Annual Financial Report.
> Standard Cash Flow Statement
This statement mirrors the statement made according to
Accounting Standards in the Annual Financial Report.
> Standard Statement of Capital Works
This statement provides detail of capital expenditure by
asset type and distinguishes renewal, upgrade and new
capital expenditure.
Financial Statements
The financial statements consist of four financial reports,
explanatory notes supporting the reports and
endorsement from the Council and the Victorian
Auditor General.
The four financial reports are:
> Income Statement
> Balance Sheet
> Statement of Changes in Equity
> Cash Flow Statement
The explanatory notes detail Council’s accounting
policies and the make up of the values contained in
the statements.
Income Statement
The Income Statement measures Council’s performance
over the year.
It lists the sources of the Council’s revenue under various
income headings and the expenses incurred in running
the Council during the year. The expenses relate only to
the ‘Operations’ and do not include the cost associated
with the purchase or the building of assets. Expenses
do include an item for depreciation which is the value
of the assets used up during the year.
Balance Sheet
The Balance Sheet shows the assets Council owns and
what it owes (liabilities) as at 30 June 2008.
The bottom line of the Balance Sheet is Net Assets which
is the net worth of the Council which has been built up
over many years.
The assets and liabilities are separated into Current and
Non-Current. Current refers to assets or liabilities that will
fall due within the next 12 months (except Long Service
Leave refer note 1(j) within the Notes to the accounts).
Statement of Changes in Equity
The Statement of Changes in Equity summarises the
change in value of Total Ratepayers Equity. The value of
equity can only change as a result of:
> The profit or loss from operations described as surplus
or deficit in the income statement.
> The use of monies from Council’s Reserves.
> A change in the value of non-current assets resulting
from a revaluation of these assets.
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