LEGAL SERVICES COMMISSIONER ANNUAL REPORT 2012

1 Summary of significant accounting policies CONTINUEDEmployee benefits on-costsEmployee benefits on-costs such aspayroll tax, workers compensationand superannuation are recognisedseparately from the provision foremployee benefits.Derecognition of financial liabilitiesA financial liability is derecognisedwhen the obligation under the liabilityis discharged, cancelled or expires.When an existing financial liability isreplaced by another from the samelender on substantially different terms,or the terms of an existing liabilityare substantially modified, such anexchange or modification is treated asa derecognition of the original liabilityand the recognition of a new liability.The difference in the respectivecarrying amounts is recognised as another economic flow in the estimatedconsolidated comprehensive operatingstatement.(l) LeasesA lease is a right to use an asset foran agreed period of time in exchangefor payment.Leases are classified at their inceptionas either operating or finance leasesbased on the economic substance ofthe agreement so as to reflect the risksand rewards incidental to ownership.Leases of plant and equipment areclassified as finance leases wheneverthe terms of the lease transfersubstantially all the risks and rewardsof ownership from the lessor to thelessee. All other leases are classifiedas operating leases.Finance leasesLSC as lesseeAt the commencement of the leaseterm, finance leases are initiallyrecognised as assets and liabilities atamounts equal to the fair value of thelease property or, if lower, the presentvalue of the minimum lease payment,each determined at the inception of thelease. The lease asset is depreciatedover the shorter of the estimateduseful life of the asset or the termof the lease.Minimum finance lease payments areapportioned between reduction of theoutstanding lease liability, and periodicfinance expense which is calculatedusing the interest rate implicit in thelease and charged directly to thecomprehensive operating statement.Contingent rentals associated withfinance leases are recognised as anexpense in the period in which theyare incurred.(m) EquityContributions by ownersAdditions to net assets which havebeen designated as contributions byowners are recognised as contributedcapital. Other transfers that are in thenature of contributions or distributionshave also been designated ascontributions by owners.Transfers of net assets arisingfrom administrative restructuringsare treated as distributions to orcontributions by owners. Transfersof net liabilities arising fromadministrative restructurings aretreated as distributions to owners.(n) CommitmentsCommitments for future expenditureinclude operating and capitalcommitments arising from contracts.These commitments are disclosedby way of a note at their nominalvalue and inclusive of the goods andservices tax (GST) payable. In addition,where it is considered appropriateand provides additional relevantinformation to users, the net presentvalues of significant individual projectsare stated. These future expenditurescease to be disclosed as commitmentsonce the related liabilities arerecognised in the balance sheet.(o) Contingent assets andcontingent liabilitiesContingent assets and contingentliabilities are not recognised in thebalance sheet, but are disclosed byway of a note and, if quantifiable,are measured at nominal value.Contingent assets and liabilities arepresented inclusive of GST receivableor payable respectively.(p) Accounting for the Goods andServices Tax (GST)Income, expenses and assets arerecognised net of the amount ofassociated GST, except where GSTincurred is not recoverable from thetaxation authority. In this case, the GSTpayable is recognised as part of thecost of acquisition of the asset or aspart of the expense.Receivables and payables are statedinclusive of the amount of GSTreceivable or payable. The net amountof GST recoverable from, or payable to,the taxation authority is included withother receivables or payables in thebalance sheet.Cash flows are presented on agross basis. The GST componentsof cash flows arising from investingor financing activities which arerecoverable from, or payable to thetaxation authority, are presented asoperating cash flow.Commitments and contingent assetsand liabilities are also stated inclusiveof GST.(q) Events after the reportingperiodAssets, liabilities, income or expensesarise from past transactions or otherpast events. Where the transactionsresult from an agreement betweenthe LSC and other parties, thetransactions are only recognised whenthe agreement is irrevocable at orbefore the end of the reporting period.Adjustments are made to amountsrecognised in the financial statementsfor events which occur after thereporting period and before the datethe financial statements are authorisedfor issue, where those events provideinformation about conditions whichexisted in the reporting period. Notedisclosure is made about eventsbetween the end of the reporting periodand the date the financial statementsare authorised for issue where theevents relate to conditions which aroseafter the end of the reporting periodand which may have a material impacton the results of subsequent years.56 Legal Services COMMISSIONER Annual Report 2012