2007 Annual report (PDF 8.1 Mb) - University of Melbourne

NOTES TO AND FORMING PART OF THE
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted by the University of Melbourne in the preparation of the financial report for the year ended
31 December 2007 are set out below. These policies have been consistently applied to all the years presented, unless otherwise
stated. The financial report includes separate financial statements for the University as an individual entity and the consolidated entity
consisting of the University and its subsidiaries. The University and its subsidiaries are referred to in this financial report as the Group or
the consolidated entity.
1.1 Basis of Preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards (including the Australian
equivalents to International Financial Reporting Standards (AIFRS’s)), the Financial Management Act 1994, AASB Interpretations and
other authoritative pronouncements of the Australian Accounting Standards Board. The financial statements have also been prepared in
accordance with the guidelines issued by the Department of Education, Employment and Workplace Relations (DEEWR) (formerly the
Department of Education, Science and Training (DEST)) applicable to the 2007 year.
Compliance with IFRSs
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). The University and
its subsidiaries are considered to be not-for-profit entities, as such the financial report has been prepared in accordance with the not-forprofit
requirements of the Australian Accounting Standards. In some cases, these requirements are inconsistent with International Financial
Reporting Standards (IFRS).
Reporting Basis and Conventions
The financial statements have been prepared on an accruals basis and are based on the historical cost convention as modified by the
revaluation of available‐for‐sale financial assets, financial assets and liabilities at fair value through profit or loss and certain classes of
property, plant and equipment.
Critical Accounting Estimates
The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting
estimates. The resulting accounting estimates will by definition, seldom equal the related actual results. Estimates and judgments are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. The estimates and assumptions that have a higher risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year include:
(i) Key Estimates - Impairment
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of
assets. Where an impairment trigger exists, the recoverable amount of the assets is determined.
(ii)
(iii)
FINANCIAL
STATEMENTS
Key Estimates – Determination of Fair Values
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The
quoted market price used for financial assets held by the Group is the current bid price. The determination of fair values for financial
assets and financial liabilities for which there is no observable market price requires the use of valuation techniques.
For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying
degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks
affecting the specific instrument.
Key Judgements – Financial Asset and Liability Classification
The Group’s accounting policies provide scope for assets and liabilities to be designated on inception into different accounting
categories in certain circumstances:
a) In designating financial assets at fair value through profit and loss, the Group has determined that it has met one of the criteria for
this designation set out in Note 1.9.
b) The Group classifies financial assets as held-to-maturity where it has determined that it has both the positive intention and ability
to hold the assets until their maturity date as required in Note 1.9.
1.2 Principles of Consolidation
The Financial Statements consist of a consolidated Income Statement, Balance Sheet, Statement of Changes in Equity and a Cash
Flow Statement. The consolidated Financial Statements incorporate the assets and liabilities of all subsidiaries of the University as at 31
December 2007, and their results for the year then ended.
Subsidiaries are all those entities over which the University has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the University controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the University. They are de‐consolidated from the date
that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between consolidated entities are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the University.
The Financial Statements show “University” in addition to “Consolidated” information. The term “University” in this context covers all
aspects of total operations with the exclusion of the subsidiaries (see (5) below).
The University of Melbourne Annual Report 2007 99