Financial Statements

Statement of Accounting Policies

for the year ended 30 June 2005

Reporting Entity

The Department of Building and Housing is a government department as defined by the Public Finance Act 1989.

The financial statements of the Department of Building and Housing have been prepared pursuant to the Public Finance Act 1989, and comply with generally accepted accounting practice.

In addition, the Department of Building and Housing has reported on the Crown activities and trust monies that it administers.

Measurement System

The financial statements have been prepared on a historical cost basis.

Accounting Policies

Budget Figures
The budget figures are those presented in the Budget Night Main Estimates, and those amended by the Supplementary Estimates and any transfer made by Order in Council under the Public Finance Act 1989.

Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments to the extent that they are equally unperformed obligations.

Contingent Liabilities
Contingent liabilities are disclosed at the point at which the contingency is evident.

Cost Allocation
The Department has determined the cost of outputs using a cost allocation system outlined below.

Cost Allocation Policy: Direct costs are charged directly to significant activities. Indirect costs are charged to significant activities based on cost drivers and related activity/use information.

Criteria for Direct and Indirect Costs: 'Direct costs' are those costs directly attributable to an output. 'Indirect costs' are those costs that cannot be identified, in an economically feasible manner, with a specific output.

Assignment of Costs to Outputs: Direct costs are charged directly to outputs. Indirect costs are assigned to outputs based on a number of cost drivers. Depreciation and capital charge are charged on the basis of asset utilisation. Personnel costs are charged on the basis of actual time incurred. Property and other premises costs, such as maintenance, are charged on the basis of floor area occupied for the production of each output. Remaining indirect costs are assigned on the proportion of direct costs for each output.

Debtors and Receivables
Receivables are stated at their estimated realisable value.

Depreciation of fixed assets is calculated on a straight-line basis to allocate the cost of the asset over its economic life.

The depreciation rates applied are:

Office equipment 20%
Office renovations 10-20%
Furniture and fittings 10%
Computer hardware 25%
Software development/licence 12.5-33%
Communications equipment 25%
Motor vehicles 16%
Leased assets 25%

The cost of leasehold improvements is capitalised and amortised over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is shorter. The depreciation rate for motor vehicles is based on rates that will write down the cost of vehicles to their estimated residual value (40 percent of retail value at time of purchase) over 4 years.

Employee entitlements
Liabilities for annual leave are recognised as they accrue to employees. Provision is also made for payments of long- service leave, retiring leave and resigning leave obligations to employees. Annual leave provisions, retiring leave and resigning leave have been calculated on an actual entitlement basis at current rates of pay. Long-service leave is calculated on a present value basis.

Financial instruments
The Department is party to financial instruments as part of its normal operations. These financial instruments include accounts payable and receivable, cash and short-term deposits. Revenues and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance.

Property, Plant and Equipment
Fixed assets costing more than $2,000 are capitalised and recorded at historical cost. Any write-down of an item to its recoverable amount is recognised in the Statement of Financial Performance. No revaluations have been performed on any class of fixed assets.

Foreign Currency
Foreign currency transactions are recorded at the date of settlement of the transaction.

Goods and Services Tax (GST)
The Statements of Departmental and Non-Departmental Expenditure and Appropriations are inclusive of GST. All other statements are GST-exclusive. The Statement of Financial Position is also exclusive of GST, except for Creditors and Payables and Debtors and Receivables, which are stated inclusive of GST.

Finance leases: A liability equal to the present value of the future minimum lease payments is recognised for office equipment acquired by way of finance lease. Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The interest expense component of the finance lease payments is recognised in the Statement of Financial Performance using the effective interest rate method.

Operating leases: The Department leases office premises. These leases are operating leases and the costs are expensed in the period in which they are incurred.

The Department derives revenue through the provision of outputs to the Crown, for services to third parties and interest from the Residential Tenancies Trust Account. Revenue is recognised when earned and is reported in the financial period to which it relates.

Residential Tenancies Trust Account: In accordance with the Residential Tenancies Act 1986, the Department administers a trust account for tenancy bond investments. Interest is payable to the Department and interest income is recognised on an accrual basis.

Statement of Cash Flows
Cash means cash balances on hand and held in bank accounts. Operating activities include cash received from all income sources of the Department and record the cash payments for the supply of goods and services. Investing activities are those activities relating to the acquisition and disposal of non-current assets. Financing activities comprise capital injections by, or repayment of capital to, the Crown.

Government departments are exempt from the payment of income tax in terms of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided for.

Taxpayers' Funds
This is the Crown's net investment in the Department.

Changes in accounting policies

There were no changes in accounting policies, including cost allocation accounting policies, since the date of the last audited financial statements.

All policies have been applied on a basis consistent with other years.

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