annual report/2006 - University of Melbourne

Notes to and forming part of the Financial Statements
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 2006 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 equivalents to International Financial
Reporting Standards (AIFRS), the Financial Management Act 1994, Urgent Issues Group 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, Science and Training (DEST) applicable to the 2006 year.
Compliance with IFRS
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-for-profit requirements of AIFRS. 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 AIFRS 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) Key Estimates – Determination of Fair Values
The determination of fair values for financial assets and liabilities for which there is no observable market price requires the
use of valuation techniques as described in note 1.8. 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.
(iii) 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 accounting policy 1.8.
b) In classifying financial assets as held-to-maturity, the Group has determined that it has both the positive intention and
ability to hold the assets until their maturity date as required in accounting policy 1.8.
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 2006 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.
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The University of Melbourne Annual Report 2006