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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2004
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Tasmanian Public Finance Corporation (TASCORP or the Corporation) was established under the Tasmanian Public Finance Corporation Act 1985, as amended by the Tasmanian Public Finance Corporation Amendment Act 1995. The Corporation operates in the Tasmanian public sector, providing borrowings, investments, debt and asset management, and advisory services on behalf of government business enterprises, state owned companies, local government councils, port corporations and other public entities. The principal accounting policies adopted in preparing the general purpose financial report of the Corporation are stated hereafter to assist in the general understanding of these financial statements.
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Accounting Cost Convention (Historical Cost)
The Financial Statements are prepared on the basis of historical cost except in the case of assets and liabilities held specifically for trading purposes, which have been valued at market value. Where the intention is to hold assets to maturity, those assets are recorded at historical cost.
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| (b) |
Basis of Accounting
The Financial Statements have been prepared on an accruals basis and in accordance with the requirements of the Government Business Enterprises Act 1995. They also comply with the Australian Accounting Standards, other authoritative announcements and Urgent Issues Group Abstracts (UIG’s). The accounting policies are consistent with those applied in the previous financial year.
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| (c) |
Cash Flows
For the purpose of the Statement of Cash Flows, Cash and Cash Equivalents includes “at call” deposits with banks, net of bank overdrafts, highly liquid investments with short periods to maturity, and advances at call which are subject to insignificant risk of changes in value, and borrowings and deposits from clients at call.
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| (d) |
Comparative Figures
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
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| (e) |
Depreciation
Office furniture and equipment, computer systems, and vehicles are depreciated over their estimated useful lives on a straight line basis. The expected useful life of Plant and Equipment ranges from 3 to 7 years. Leasehold Improvements are depreciated over 5 years.
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| (f) |
Derivatives
Gains and losses on derivatives used as hedges are accounted for on the same basis as the underlying physical exposures they are hedging. Accordingly, hedge gains and losses are included in the Statement of Financial Performance when the gains and losses arising on the related physical exposures are recognised in the Statement of Financial Performance. All derivative transactions have been entered into as designated hedges of underlying physical positions or as designated hedges of the portfolio interest rate risk. Derivative Financial Instruments, are recorded in the Statement of Financial Position as payables where the gross amount payable is in excess of the gross amount receivable and there is an intention by both parties to settle the transaction on a net basis. Derivative Financial Instrument Receivables are the obverse of this.
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| (g) |
Dividends
The Corporation is subject to the payment of dividends to the Tasmanian Government as provided in its Ministerial Charter and Part 11 Division 2 of the Government Business Enterprises Act 1995. The Ministerial Charter, currently requires that a dividend of 100% of Profit After Tax be declared.
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| (h) |
Employee Benefits
Employee entitlements for salary accruals, superannuation, annual and long service leave outstanding at balance date have been calculated in accordance with AASB 1028, “Employee Benefits”. The Corporation provides for leave in respect of all employees, based on the present value of the estimated future cash outflow to be made resulting from employees’ services up to the balance date, and having regard to the probability that employees as a group will remain in the entity’s employ for the period of time necessary to qualify for long service leave.
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| (i) |
Income Tax
The Corporation is liable to pay tax equivalents to the Tasmanian Government as provided in Part 10 of the Government Business Enterprises Act 1995. The Government has issued an instruction requiring TASCORP to account for tax based on its accounting profits rather than in accordance with the Income Tax Assessment Act. As no timing differences arise from the new taxation regime, no amounts have been set aside to the deferred income tax or future income tax benefit accounts.
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| (j) |
Investments, Advances and Borrowings
Investments, advances and borrowings are shown in the Statement of Financial Position at face value adjusted for unamortised discount or premium, unrealised exchange rate gains or losses and includes accrued interest applicable to each item. Discount and premiums are amortised over the life of the related instrument on the basis of yield at purchase, with the amortisation being expensed as interest. Investments are, in the normal course of business, held to maturity. Purchases and sales are made from time to time for portfolio management purposes. Any permanent diminution in the market value of an investment is taken to the Statement of Financial Performance. The accounting policy regarding unrealised exchange rate gains and losses is shown in note 1(l).
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| (k) |
Rounding
All amounts are in thousands of dollars unless otherwise stated.
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| (l) |
Translation of Foreign Currency Transactions
The Corporation has borrowings and investments denominated in foreign currencies. It is the Corporation’s policy to fully hedge the currency exposure at the time of such borrowings and investments by entering into cross currency swaps and forward foreign exchange contracts. Any unrealised gains or losses on these borrowings and investments are therefore fully matched.Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables at balance date are translated at exchange rates at balance date. Exchange gains and losses and hedging costs arising on forward foreign exchange contracts entered into as hedges of specific commitments are deferred and included in the determination of the amounts at which the transactions are brought to account. All exchange gains and losses relating to other hedge transactions are brought to account in the Statement of Financial Performance in the same period as the exchange differences on the items covered by the hedge transactions. Costs on such contracts are amortised over the life of the hedge contract. |
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