LEGAL SERVICES COMMISSIONER ANNUAL REPORT 2012

1 Summary of significant accounting policies CONTINUEDDerecognition of financial assetsA financial asset (or, where applicable,a part of a financial asset or part ofa group of similar financial assets) isderecognised when:• the rights to receive cash flows fromthe asset have expired; or• the LSC retains the right to receivecash flows from the asset, but hasassumed an obligation to pay themin full without material delay to athird party under a ‘pass through’arrangement; or• the LSC has transferred its rightsto receive cash flows from the assetand either:(a) has transferred substantially all therisks and rewards of the asset, or(b) has neither transferred norretained substantially all the risksand rewards of the asset, but hastransferred control of the asset.Where the LSC has neither transferrednor retained substantially all the risksand rewards or transferred control,the asset is recognised to the extentof the LSC’s continuing involvement inthe asset.Impairment of financial assetsAt the end of each reporting periodthe LSC assesses whether there isobjective evidence that a financial assetor group of financial assets is impaired.All financial instrument assets, exceptthose measured at fair value throughprofit or loss, are subject to annualreview for impairment.Receivables are assessed for bad anddoubtful debts on a regular basis.Those bad debts considered as writtenoff by mutual consent are classified asa transaction expense. Bad debts notwritten off by mutual consent and theallowance for doubtful receivables areclassified as other economic flows inthe net result.The amount of the allowance is thedifference between the financialasset’s carrying amount and thepresent value of estimated futurecash flows, discounted at the effectiveinterest rate.In assessing impairment of statutory(non-contractual) financial assets,which are not financial instruments,professional judgement is appliedin assessing materiality and usingestimates, averages and othercomputational methods in accordancewith AASB 136 Impairment of Assets.(j) Non-financial assetsPlant and equipmentAll non-financial physical assets,are measured initially at cost andsubsequently revalued at fair valueless accumulated depreciationand impairment. Where an asset isacquired for no or nominal cost, thecost is its fair value at the date ofacquisition.The initial cost for non-financialphysical assets under a finance lease(refer to Note 1(l)) is measured atamounts equal to the fair value of theleased asset or, if lower, the presentvalue of the minimum lease payments,each determined at the inception ofthe lease.The fair value of plant, equipment andvehicles is normally determined byreference to the asset’s depreciatedreplacement cost. Existing depreciatedhistorical cost is generally areasonable proxy for depreciatedreplacement cost because of the shortlives of the assets concerned.For the accounting policy onimpairment of non-financial physicalassets, refer to impairment of nonfinancialassets under Note 1(g)Impairment of non-financial assets.Physical assetsPurchased physical assets are initiallyrecognised at cost. Subsequently,physical assets with finite useful livesare carried at cost less accumulateddepreciation and accumulatedimpairment losses.Intangible assetsPurchased intangible assetsare initially recognised at cost.Subsequently, intangible assetswith finite useful lives are carried atcost less accumulated depreciation/amortisation and accumulatedimpairment losses. Costs incurredsubsequent to initial acquisition arecapitalised when it is expected thatadditional future economic benefitswill flow to the LSC.When the recognition criteria inAASB 138 Intangible Assets are met,internally generated intangible assetsare recognised and measured atcost less accumulated depreciation/amortisation and impairment.Refer to Note 1(f) Depreciation andNote 1(g) Impairment of non-financialassets.Change in accounting policyDuring the financial year the LSCincreased its recognition threshold forphysical and intangible assets from$1,000 to $5,000. Since the changein policy newly acquired physicaland intangible assets below thecapitalisation threshold of $5,000 areexpensed. The change in policy hasresulted in a net impact of $49,322on this financial year’s result.Other non-financial assetsPrepaymentsOther non-financial assets includeprepayments which representpayments in advance of receipt ofgoods or services or that part ofexpenditure made in one accountingperiod covering a term extendingbeyond that period.54 Legal Services COMMISSIONER Annual Report 2012