Complete annual report 2010-11 - Land - NSW Government

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State Property Authority Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2011 (q) Leases A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of the leased assets, and operating leases under which the lessor effectively retains all such risks and benefits. (i) Finance Leases Assets held under finance leases as lessee are recognised on inception at an amount equal to the fair value of the leased property, or if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the Statement of Financial Position as a finance lease liability (Note 14(d)). Lease payments are allocated between the principal component of the lease liability and the interest expense. Finance leases as lessor in which substantially all the risks and rewards incidental to legal ownership are transferred by the Authority to the lessee, are classified in the Statement of Financial Position as Finance Lease Receivables (Note 6). Assets held under a finance lease arrangement are presented as a receivable at an amount equal to the net investment in the lease. Lessee finance lease payments are treated by the Authority as repayment of principal and finance income over the lease term to reimburse and reward the Authority’s investment and services. Lease payments relating to the period, excluding costs for services, are applied against the gross investment in the lease to reduce both the principal and the unearned finance income. (ii) Operating Leases Operating lease payments are recognised in the Net Surplus/Deficit and charged on a straight-line basis over the lease term. Lease incentives received which are less than $500,000 are recognised directly in the Net Surplus/Deficit in the year in which they are received. Lease incentives received which are greater than this amount are recogised in the Statement of Financial Position and are allocated to the Net Surplus/Deficit over the lease term (Notes 3(b) and 12(a)). In accordance with AASB 137 "Provisions, Contingent Liabilities and Contingent Assets", in the case of an onerous contract, the present obligation under the contract is recognised and measured as a provision. The terms of occupancy for government agencies occupying space in Authority owned premises is dictated in the Memorandum of Understanding (MoU) between the Authority and the agency. The provisions of the MoU are generally based on market place conditions applicable to office buildings in commercial centres. The term of the tenancy agreement is indefinite with the agency required to give 18 months notice prior to vacating. Termination of part tenancies is permitted subject to a variety of conditions being satisfied. Rent reviews for owned government office buildings are conducted at two yearly intervals to update rentals to current market rates. There are no ratchet clauses in place and tenants are charged an effective rental, which takes into consideration incentives available in the market place at a particular point in time. Tenants will makegood the premises by undertaking a physical makegood or negotiating a financial settlement with the Authority. (r) Other Assets Other assets are recognised on a cost basis. 32 State Property Authority
State Property Authority 2010-2011 Annual Report State Property Authority Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2011 (s) Financial Instruments Financial instruments give rise to positions that are financial assets or liabilities of either the State Property Authority or its counterparties. These include Cash at Bank, Receivables, Payables and Finance Lease Liabilities (Note 1(q)(i)). (i) Cash and Cash Equivalents Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand, restricted cash and other short-term deposits with an original maturity of three months or less. For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (ii) Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These financial assets are recognised initially at fair value, usually based on the transaction cost or face value. Subsequent measurement is an amortised cost using the effective interest method, less an allowance for any impairment of receivables. Any changes are recognised in the Net Surplus/Deficit when impaired, derecognised or through the amortisation process. Short-term receivables with no stated interest rate are measured at the original invoice amount where the effect of discounting is immaterial. Such receivables, which generally have 30-day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Authority will not be able to collect the debts. Bad debts are written off when identified. (iii) Payables These amounts represent liabilities for goods and services provided to the Authority and other amounts. Payables are recognised initially at fair value, usually based on the transaction cost or face value. Subsequent measurement is at amortised cost using the effective interest method. Short-term payables with no stated interest rate are measured at the original invoice amount where the effect of discounting is immaterial. (t) Impairment of Financial Assets All financial assets, except those measured at fair value through the Net Surplus/Deficit, are subject to an annual review for impairment. An allowance for impairment is established when there is objective evidence that the entity will not be able to collect all amounts due. (u) Financial Distributions As a Government business, the Authority operates under the State Government's Commercial Policy Framework. A key component of this Framework is the requirement to make financial distributions to owners. In the Authority's case, its owner is the State Government. All payments of financial distributions are made to the Crown Finance Entity. The nature and calculation of the required annual distributions is determined by NSW Treasury Policy and Guidelines Paper, TPP 02-3 "Financial Distributions Policy for Government Businesses". The distributions made by the Authority include normal distribution payments from cash operating surpluses and special distribution payments, or capital repatriations, from the sale of its own properties. Normal distributions are payments made from current year cash surpluses. Treasury policy states that a government business should not retain any cash in excess of its requirements for working capital, in addition to a contingency allowance for an appropriate level of financial flexibility. Funds in excess of these requirements are returned to the State Government. Capital repatriations, or special distributions, are additional one-off payments which represent capital repayments of the State Government’s equity in the Authority. In the Authority’s case, capital repatriation payments represent the full return of the net proceeds (ie. total proceeds less costs) of all Authority-owned property sales (Note 13(a)). 2010-2011 Annual Report 33
Page 1: State Property Authority new South
Page 4 and 5: n Letter of submission Bligh House
Page 6 and 7: n Our charter The State Property Au
Page 8 and 9: n Organisational outcomes and achie
Page 10 and 11: leasing staff generated substantial
Page 12 and 13: Other sustainability initiatives la
Page 14 and 15: n Financial performance 2010-11 Ove
Page 16 and 17: n 2010-11 Operating result operatin
Page 18 and 19: n Audited financial information Sta
Page 20 and 21: 18 State Property Authority
Page 22 and 23: State Property Authority Financial
Page 24 and 25: State Property Authority Statement
Page 26 and 27: State Property Authority Statement
Page 28 and 29: State Property Authority Notes to a
Page 60 and 61: n STATUTORY AND STATISTICAL INFORMA
Page 62 and 63: n Personnel policies and practices
Page 64 and 65: 1st qtr $’000 2nd qtr $’000 3rd
Page 66 and 67: A full list of publicly available G
Page 68 and 69: Table F: Timeliness Number of appli
Page 70 and 71: n Agency contacts Postal address: G
Page 72: THIS PAGE HAS INTENTIONALLY BEEN LE

Complete annual report 2010-11 - Land - NSW Government

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