Financial Report Volume 2

Transcription

1 Financial Report Volume 2

2

3 Annual Report UNSW s Financial Results UNSW Annual Report 1

4 Contents UNSW Annual Report Volume 2 03 Council Report 09 Statement by Members of Council 10 Independent Auditor s Report 12 Financial Report 13 Income statement 14 Statement of comprehensive income 15 Statement of financial position 16 Statement of changes in equity 17 Statement of cash flows 18 Notes to the financial statements 105 Supplementary Information 109 Statutory Report 110 Privacy and Access to Information 110 GIPAA Access Applications 113 Disclosure Requirements 114 Statistical Information on EEO Target Groups 2 UNSW Annual Report

5 Council Report 31 December The members of The University of New South Wales Council present their report on the consolidated entity consisting of UNSW Australia (The University of New South Wales), referred to as UNSW and the entities it controlled at the end of or during the year ended 31 December. UNSW is governed by a Council led by the Chancellor under the University of New South Wales Act 1989 ( The Act ). The Act was amended during 2012 to adopt new governance provisions under The Universities Governing Bodies Act Members The following persons were the Council members of UNSW at 31 December : Ex-Officio Council Members Mr David M. Gonski AC Professor Ian Jacobs Professor Prem Ramburuth Ministerial Appointments Mr Brian Long Ms Jillian S. Segal AM Elected Council Members Mr Aaron Magner Scientia Professor John Piggott Ms Jantapond (Emma) Purinatunawut Professor Kristy Muir Mr Michael Murdocca Members Appointed by Council Dr Jennifer Alexander Ms Maxine Brenner Mr Nicholas Carney Mr Matthew Grounds Mr Warwick Negus Former Members Professor Dorottya Fabian 1 Mr Ben Heenan 1 Ms Emma Lovell 1 1 Professor Dorottya Fabian, Mr Ben Heenan and Ms Emma Lovell were Council members from the beginning of the year and completed their terms of office on 30 June. UNSW Annual Report 3

6 Council Report 31 December Meetings of Council and Committees The number of meetings of the members of The University of New South Wales Council and each committee held during the year ended 31 December, and the numbers of meetings attended by each member were: Member Council Meetings A B Ex-Officio Council Members Mr David M. Gonski AC 6 6 Professor Ian Jacobs 6 6 Professor Prem Ramburuth 6 6 Ministerial Appointments Mr Brian Long 3 6 Ms Jillian S. Segal AM 6 6 Elected Council Members Mr Michael Murdocca Professor Kristy Muir Ms Jantapond (Emma) Purinatunawut Mr Aaron Magner 6 6 Scientia Professor John Piggott 6 6 Members Appointed by Council Dr Jennifer Alexander 5 6 Ms Maxine Brenner 2 6 Mr Nicholas Carney 5 6 Mr Matthew Grounds 5 6 Mr Warwick Negus 6 6 Former Member Professor Dorottya Fabian Mr Ben Heenan Ms Emma Lovell A = Number of meetings attended as a member. B = Number of meetings held during the time the member held office during the year. 1 Term ended 30 June 2 Term began 1 July 4 UNSW Annual Report

7 Council Report 31 December Meetings of Committees AUDIT FINANCE NOMINATIONS & REMUNERATION RISK HONORARY DEGREES A B A B A B A B A B Ex-Officio Council Members Mr David M. Gonski AC Professor Ian Jacobs Professor Prem Ramburuth Ministerial Appointments Mr Brian Long 5 5 Ms Jillian S. Segal AM Elected Council Members Mr Michael Murdocca # 1 2 Professor Kristy Muir# 1 2 Ms Emma Purinatunawut # 0 0 Mr Aaron Magner 5 5 Scientia Professor John Piggott Members Appointed by Council Dr Jennifer Alexander 3 4 Ms Maxine Brenner 1 2 Mr Nicholas Carney 3 4 Mr Matthew Grounds 1 5 Mr Warwick Negus Former Member Mr Ben Heenan ## Professor Dorottya Fabian ## 1 2 Ms Emma Lovell ## 2 2 External Committee Members Mr Daniel Gauchat* 4 4 Mr Bruce Moore* 4 5 Mr George Sutton* 3 4 Mr Michael Wright* 5 5 Academic Board Nominees Professor Louise Chappell* 2 2 Emeritus Professor Richard Henry AM* 2 2 A = Number of meetings attended as a member. B = Number of meetings held during the time the member held office during the year. * Not a member of Council. # Term commenced 1 July. ## Term ended 30 June. 1 The Chancellor is ex officio a member of all Council committees and has the right but not the obligation to attend all meetings. 2 The Vice-Chancellor is ex officio a member of all Council committees except the Audit Committee and has the right but not the obligation to attend all meetings. 3 The Deputy Chancellor is ex officio a member of all Council committees and has the right but not the obligation to attend all meetings. UNSW Annual Report 5

8 Council Report 31 December Principal Activities During the year, the principal continuing activities of the consolidated entity consisted of: The provision of education and research facilities of university standard; The encouragement of the dissemination, advancement, development and application of knowledge informed by free inquiry; The provision of courses of study or instruction across a range of fields, and the carrying out of research, to meet the needs of the community; The participation in public discourse; The conferring of degrees, including those of Bachelor, Master and Doctorate; The provision of teaching and learning that engage with advanced knowledge and inquiry; The development of governance, procedural rules, admission policies, financial arrangements and quality assurance processes that are underpinned by the values and goals of UNSW s core activities, and that are sufficient to ensure the integrity of all UNSW programs. Review of Operations The operating result using the agreed Group of Eight methodology is a profit of $53m. The operating result is driven by the university s core activities of teaching and research. Consequently, funding from non-core operating activities and those restricted for specific purposes are excluded as these funds are not available to support the university s day-to-day operations. $ 000 $ 000 Total revenue and income 1,911,942 1,761,317 Employee costs (1,003,663) (964,009) Other expenses (761,931) (719,804) Accounting result 146,348 77,504 Restricted for specific purposes: Philanthropic funds (30,977) (17,668) Capital grants (9,513) (6,720) Specific purpose grants (23,796) (24,382) Non-core operating: Investment funds (29,431) (30,509) Operating result 52,631 (1,775) 6 UNSW Annual Report

9 Council Report 31 December The consolidated group s operating result for has increased by $54m compared to, driven by growth in course fee revenue from international students. Net assets increased by $234m in due primarily to the net accounting result for the period of $146m and revaluation gains on property, plant and equipment of $74m. Significant Changes in the State of Affairs There were no significant changes in the State of Affairs of UNSW or any of its subsidiaries during the year and up to the date of this report. Matters Subsequent to the End of the Financial Year There were no significant matters subsequent to the end of the financial year that require disclosure. Likely Developments and Expected Results of Operations The University is currently in the implementation phase of the UNSW 2025 Strategic Plan, which will influence future priorities and directions. Environmental regulations The significant environmental regulations to which UNSW is subject are as follows: -- Environment Protection and Biodiversity Conservation Act 1999 (Cth) -- Environmental Planning and Assessment Act 1979 (NSW) -- Environmentally Hazardous Chemicals Act 1985 (NSW) -- Heritage Act 1977 (NSW) -- National Greenhouse and Energy Reporting Act 2007 (Cth) -- Native Vegetation Act 2003 (NSW) -- Noxious Weeds Act 1993 (NSW) -- Ozone Protection Act 1989 (NSW) -- Protection of the Environment Operations (POEO) Act 1997 (NSW) -- Threatened Species Conservation Act 1995 (NSW) -- Waste Avoidance and Resource Recovery Act 2001 (NSW) -- Water Management Act 2000 (NSW) -- Water Management Amendment Act 2010 (NSW) -- National Environment Protection Measures (Implementation) Act 1998 (Cth) UNSW has not been issued with any environmental licenses although some of the activities, in particular research activities, involving hazardous materials and dangerous goods, as well as construction activities and grounds maintenance, involve risks that have the potential to cause material environmental harm. Appropriate and proportionate emphasis is given to identifying, controlling and minimising these risks within UNSW s environmental management system and the University s risk management framework. UNSW Annual Report 7

10 Council Report 31 December Insurance of officers UNSW obtains commercial insurance to indemnify persons who serve on UNSW Boards and Committees and on Boards and Committees of all entities in the Group. Coverage also extends to UNSW appointees who serve on the Boards of other entities, as designated representatives of UNSW, and who are not otherwise indemnified. This insurance provides funds to defend each officer and Board appointee of UNSW against claims from third parties which result from actual or alleged wrong acts, as permitted by law. The premium for this commercial insurance is paid for by UNSW, and UNSW self-insures all claims expenses which fall below the policy deductible or for liabilities which are excluded or not covered by the commercial insurance contract. Proceedings on behalf of UNSW There are no material proceedings against or on behalf of UNSW or its controlled entities. This report is made in accordance with a resolution of the members of UNSW. Mr David M. Gonski AC Chancellor, 18 April UNSW Annual Report

11 Statement by Members of Council Pursuant to Section 41C (1B), (1C) and (1D) of the Public Finance and Audit Act 1983 (as amended) and clause 7 of the Public Finance and Audit Regulation, we state that: 1. The financial report exhibits a true and fair view of the financial position as at 31 December and the financial performance for the year then ended for the University and Controlled Entities; and 2. The financial report for the year ended 31 December has been prepared in accordance with: (a) the provisions of the Public Finance and Audit Act 1983, Public Finance and Audit Act Regulation 2010 and the Commonwealth Department of Education Financial Statement Guidelines for Australian Higher Education Providers for the Reporting Period; and (b) Australian Accounting Standards, Australian Accounting Standards Board Interpretations and other mandatory professional reporting requirements. 3. As at the date of the statement, we are not aware of any circumstances that would render any particulars included in the financial report to be misleading or inaccurate. As required by the Financial Statement Guidelines for Australian Higher Education Providers for the Reporting Period issued by the Commonwealth Department of Education and Training, we also certify to the best of our knowledge and belief that all the Australian Government Financial Assistance expended by the University during the year ended 31 December was expended for the purposes for which it was intended and that The University of New South Wales has complied with applicable legislation, contracts, agreements and program guidelines in making that expenditure. Signed in accordance with a resolution of Council. Professor Ian Jacobs President and Vice-Chancellor Mr David M. Gonski AC Chancellor 18 April 2017 UNSW Annual Report 9

12 Independent Auditor s Report 10 UNSW Annual Report

13 From Last Year UNSW Annual Report 11

14 Financial Report 12 UNSW Annual Report

15 Income statement For the year ended 31 December Note Income from continuing operations Australian Government financial assistance Australian Government grants 2(f) 703, , , ,850 HELP - Australian Government payments 2(b) 204, , , ,548 State and local government financial assistance 3 33,679 26,303 33,679 26,303 HECS-HELP - Student payments 30,328 31,197 30,328 31,197 Fees and charges 4 758, , , ,857 Investment revenue 5 34,837 37,822 32,779 36,864 Royalties, trademarks and licences 6,987 6,752 3,428 4,701 Consultancy and contracts 6 68,845 67,135 62,114 60,246 Other revenue 7 50,102 36,890 94,136 69,906 Gains on disposal of assets 4, , Share of profit or loss on investments accounted for using the equity method 17 (9,913) 2, Other investment income 5 9,804 6,569 9,164 5,521 Other income 7 16,561 13,790 13,051 11,769 Total income from continuing operations 1,911,942 1,761,317 1,819,468 1,671,811 Expenses from continuing operations Employee related expenses 8 1,007, , , ,447 Depreciation and amortisation 9 156, , , ,546 Repairs and maintenance 10 35,460 34,361 34,212 32,968 Borrowing costs 11 2,440 2,485 2,440 2,483 Impairment of assets 12 3,490 14,967 2,438 13,287 Loss on disposal of assets Deferred superannuation expense 8 (3,635) 4,570 (3,635) 4,570 Other expenses , , , ,337 Total expenses from continuing operations 1,765,594 1,683,821 1,666,555 1,597,008 Net result before income tax 146,348 77, ,913 74,803 Income tax (expense)/benefit Net result after income tax for the period 146,348 77, ,913 74,803 Net result from continuing operations after income tax for the period attributable to members of The University of New South Wales 146,348 77, ,913 74,803 The above income statement should be read in conjunction with the accompanying notes. UNSW Annual Report 13

16 Statement of comprehensive income For the year ended 31 December Note Net result after income tax for the period 146,348 77, ,913 74,803 Items that may be reclassified to profit or loss Net gains/(losses) on revaluation of available-for-sale financial assets 28(a) 9,244 (18,557) 8,752 (17,773) Exchange differences on translation of foreign operations 28(a) (7) Total 9,237 (18,449) 8,752 (17,773) Items that will not be reclassified to profit or loss Net gains on revaluation of property, plant and equipment 28(a) 73,794 61,487 73,794 61,487 Net actuarial gains/(losses) on defined benefit superannuation plans 28(b) 4,298 (7,165) 4,298 (7,159) Total 78,092 54,322 78,092 54,328 Total other comprehensive income for the year, net of tax 87,329 35,873 86,844 36,555 Total comprehensive income for the year 233, , , ,358 Total comprehensive income attributable to members of The University of New South Wales 233, , , ,358 The above statement of comprehensive income should be read in conjunction with the accompanying notes. 14 UNSW Annual Report

17 Statement of financial position As at 31 December Note Assets Current assets Cash and cash equivalents , , , ,933 Receivables , , , ,265 Inventories 1,095 1, Other financial assets 18 1,350 24,057 1,331 24,057 Total current assets 564, , , ,255 Non-current assets Receivables 16 1,259,897 1,305,437 1,259,816 1,305,383 Investments accounted for using the equity method 17 8,447 16, Other financial assets , , , ,635 Property, plant and equipment 20 2,277,266 2,157,448 2,269,324 2,150,321 Investment properties 19 8,867 8,851 8,867 8,851 Intangible assets 22 65,305 67,190 62,057 64,243 Total non-current assets 4,081,326 4,004,591 4,057,463 3,974,433 Total assets 4,646,073 4,417,601 4,547,909 4,322,688 Liabilities Current liabilities Trade and other payables , , ,048 93,827 Borrowings Provisions , , , ,409 Other financial liabilities Other liabilities , ,885 61,514 51,541 Total current liabilities 592, , , ,974 Non-current liabilities Borrowings 24 37,431 38,341 37,431 38,341 Provisions 25 1,370,922 1,452,799 1,369,316 1,450,255 Other financial liabilities Other liabilities 27 16,063 19,298 16,063 19,298 Total non-current liabilities 1,424,437 1,510,448 1,422,831 1,507,904 Total liabilities 2,016,529 2,021,734 1,936,342 1,950,878 Net assets 2,629,544 2,395,867 2,611,567 2,371,810 Equity Reserves , , , ,400 Retained earnings 28 1,800,751 1,644,533 1,791,193 1,628,410 Total equity 2,629,544 2,395,867 2,611,567 2,371,810 The above statement of financial position should be read in conjunction with the accompanying notes. 4 UNSW Annual Report 15

18 Statement of changes in equity For the year ended 31 December Retained earnings Reserves Balance at 1 January 1,573, ,551 2,282,490 Net result for the period 77,504-77,504 Net gains on revaluation of property, plant and equipment - 61,487 61,487 Net gains/(losses) on revaluation of available-for-sale financial assets - (18,557) (18,557) Exchange differences on translation of foreign operations Net actuarial gains/(losses) on defined benefit superannuation plans (7,165) - (7,165) Transfers from reserves 255 (255) - Total comprehensive income 70,594 42, ,377 Balance at 31 December 1,644, ,334 2,395,867 Balance at 1 January 1,644, ,334 2,395,867 Net result for the period 146, ,348 Net gains on revaluation of property, plant and equipment - 73,794 73,794 Net gains/(losses) on revaluation of available-for-sale financial assets - 9,244 9,244 Exchange differences on translation of foreign operations - (7) (7) Net actuarial gains/(losses) on defined benefit superannuation plans 4,298-4,298 Transfers from reserves 5,572 (5,572) - Total comprehensive income 156,218 77, ,677 Balance at 31 December 1,800, ,793 2,629,544 Total Retained earnings Reserves Balance at 1 January 1,560, ,941 2,260,452 Net result for the period 74,803-74,803 Net gains on revaluation of property, plant and equipment - 61,487 61,487 Net gains/(losses) on revaluation of available-for-sale financial assets - (17,773) (17,773) Net actuarial gains/(losses) on defined benefit superannuation plans (7,159) - (7,159) Transfers from reserves 255 (255) - Total comprehensive income 67,899 43, ,358 Balance at 31 December 1,628, ,400 2,371,810 Balance at 1 January 1,628, ,400 2,371,810 Net result for the period 152, ,913 Net gains on revaluation of property, plant and equipment - 73,794 73,794 Net gains/(losses) on revaluation of available-for-sale financial assets - 8,752 8,752 Net actuarial gains/(losses) on defined benefit superannuation plans 4,298-4,298 Transfers from reserves 5,572 (5,572) - Total comprehensive income 162,783 76, ,757 Balance at 31 December 1,791, ,374 2,611,567 Total The above statement of changes in equity should be read in conjunction with accompanying notes. 16 UNSW Annual Report

19 Statement of cash flows For the year ended 31 December Note Cash flows from operating activities: Australian Government grants 2(g) 924, , , ,310 OS-HELP (net) 2(g) (113) 408 (113) 408 Superannuation Supplementation 84,403 61,633 84,403 61,633 State and Local Government grants 35,084 25,093 35,084 25,304 HECS-HELP - Student payments 30,222 31,046 30,222 31,046 Receipts from student fees and other customers 907, , , ,508 Payments to suppliers and employees (1,716,940) (1,605,279) (1,589,250) (1,490,064) Contributions to related parties - - (8,431) (7,352) Investment income received 26,114 25,433 25,807 26,047 Contribution from related parties ,493 26,431 Interest received 12,681 10,120 10,929 8,549 Interest and other costs of finance paid (2,440) (2,485) (2,440) (2,483) GST recovered 32,516 29,131 32,058 28,959 Income taxes paid (21) (4) - - Net cash provided by operating activities , , , ,296 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 6, , Proceeds from sale of available-for-sale and other financial assets 165, , , ,448 Payments for property, plant and equipment (191,867) (146,987) (189,398) (141,965) Payments for available-for-sale and other financial assets (136,047) (427,823) (136,047) (427,205) Payments for intangible assets (8,891) (21,425) (5,937) (19,319) Payments for investment properties (248) (601) (248) (601) Net cash used in investing activities (164,607) (130,900) (159,973) (126,448) Cash flows from financing activities: Repayment of borrowings (761) (625) (761) (625) Net cash used in financing activities (761) (625) (761) (625) Net increase/(decrease) in cash and cash equivalents 168, , ,891 90,223 Cash and cash equivalents at the beginning of the financial year 217, , ,933 38,710 Cash and cash equivalents at the end of the financial year , , , ,933 The above statement of cash flows should be read in conjunction with the accompanying notes. UNSW Annual Report 17

20 31 December Note Contents Page No 1 Summary of significant accounting policies 19 2 Australian Government financial assistance including Australian Government loan programs 32 (HELP) 3 State and Local Government financial assistance 35 4 Fees and charges 36 5 Investment revenue and other investment income 36 6 Consultancy and contracts 37 7 Other revenue and income 37 8 Employee related expenses 38 9 Depreciation and amortisation Repairs and maintenance Borrowing costs Impairment of assets Other expenses Income tax Cash and cash equivalents Receivables Investments accounted for using the equity method Other financial assets Investment properties Property, plant and equipment Public Private Partnerships (PPP) Intangible assets Trade and other payables Borrowings Provisions Other financial liabilities Other liabilities Reserves and retained earnings Key management personnel disclosures Remuneration of auditors Contingencies Commitments Subsidiaries Reconciliation of net result after income tax to net cash provided by operating activities Financial risk management Fair value measurements Defined benefit plans Acquittal of Australian Government financial assistance UNSW Annual Report

21 31 December 1 Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements include separate financial statements for UNSW Sydney (The University of New South Wales), referred to as "UNSW", an individual entity (the "parent entity") and the consolidated entity (the "Group") consisting of UNSW and its controlled entities. (a) Basis of preparation These general purpose financial statements have been prepared on an accrual basis in accordance with the requirements of the Public Finance and Audit Act 1983 and Public Finance and Audit Act Regulations, the Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Higher Education Support Act 2003 (Financial Statement Guidelines) and other State/Australian Government legislative requirements. UNSW is a not-for-profit entity and the financial statements and notes of UNSW have been prepared on that basis. Some of the Australian Accounting Standards requirements for not-for-profit entities are inconsistent with the International Financial Reporting Standards (IFRSs) requirements. Date of authorisation for issue The financial statements were authorised for issue on 18 April 2017 by the Council. Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets at fair value through other comprehensive income, financial assets and liabilities (including derivative instruments) and certain classes of property, plant and equipment. Critical accounting estimates The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below: (i) Superannuation liability - Deferred Government Receivables UNSW contributes to three State superannuation schemes, namely the State Authorities Superannuation Scheme (SASS), the State Superannuation Scheme (SSS) and the State Authorities Non-contributory Superannuation Scheme (SANCS). On 5 December 2014, a Memorandum of Understanding (MOU) was signed between the Commonwealth and NSW Governments providing confirmation of the governments' intention to fund the superannuation liabilities associated with these schemes (including contributions tax and other taxes) subject to the terms set out in the MOU. An amendment to the Other Grants Guidelines (Education) 2012, made under the Higher Education Support Act 2003 (HESA), as well as a grant made under those Guidelines (Grant), enables the Commonwealth to provide funds to UNSW. Accordingly, the liabilities have been recognised in the statement of financial position under provisions with corresponding assets recognised under receivables. The recognition of both the asset and liability does not affect the year end net asset position and net result of UNSW for those schemes, except as otherwise disclosed. The MOU stipulates that UNSW receives funding from governments when assets in the State Super reserve accounts are run down to a one year asset buffer level. Accordingly, a proportion of both the liability and receivable is recognised as current, representing the amounts payable, and therefore receivable, in the next year. The calculation of the liability requires the use of various assumptions. Refer to note 37 for details of various assumptions used in calculating the superannuation liabilities and the corresponding deferred Government receivables. (ii) Employee related provisions and obligations The Group makes provisions in respect of superannuation obligations and additional on-costs on payments made to employees. UNSW Annual Report 19

22 31 December 1 Summary of significant accounting policies (a) (b) (c) Basis of preparation The Group assesses the appropriateness of these provisions at each reporting date by evaluating conditions specific to the Group. The calculation of these provisions requires the use of various assumptions, such as expected rate of return on the funds and superannuation entitlements, and is based on a range of possible outcomes. (iii) Long-term leases of UNSW properties The Group considers the substance of the leasing arrangements and the likelihood of continuance of the leases through exercise of renewal options in order to determine the appropriate accounting treatment of the leased properties. Where at the inception of a lease, management considered that it would be reasonably certain that an option to extend a lease would be exercised, the assumed lease term is inclusive of the additional option period. This assessment impacts management's determination of the accounting treatment of the leased properties. Basis of consolidation The consolidated financial statements incorporate the assets and liabilities of all entities controlled by the parent entity as at 31 December and the results of all controlled entities for the year then ended. Controlled entities are all those entities (including structured entities) over which the Group has control. The Group has control over an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Power over the investee exists when the Group has existing rights that give it current ability to direct the relevant activities of the investee. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Returns are not necessarily monetary and can be only positive, only negative, or both positive and negative. Controlled entities are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of controlled entities by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of controlled entities have been changed where necessary to ensure consistency with the policies adopted by the Group. Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the parent entity's financial statements using the cost method and in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The Group's investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. The Group's share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity's income statement, while in the consolidated financial statements they reduce the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. 20 UNSW Annual Report

23 31 December 1 Summary of significant accounting policies (d) (e) (f) Joint arrangements The interest in a joint venture entity is accounted for in the consolidated financial statements using the equity method and is carried at cost by the parent entity. Under the equity method, the share of the profits or losses of the entity is recognised in the income statement, and the share of movements in reserves is recognised in reserves in the statement of comprehensive income and the statement of changes in equity. Public Private Partnerships (PPP) The Group has PPP with the private sector in relation to the construction and operation of new student accommodation. Each individual PPP is accounted for in accordance with its substance and economic reality, and not merely its legal form. The Group recognises the new buildings that are the subject of the PPP as an emerging asset, incrementally over the lease period. Land leased to the private sector and any other service elements that are part of the PPP, excluding the buildings, are accounted for separately in accordance with the applicable Australian Accounting Standards. The private entity will retain rental revenue during the operating phase and will transfer the student accommodation to UNSW at the end of the concession period. The details of the Group's PPP arrangements are included in note 21. Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the controlled entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Australian dollars, which is the parent entity s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. If gains or losses on non-monetary items are recognised in other comprehensive income, translation gains or losses are also recognised in other comprehensive income. Similarly, if gains or losses on non-monetary items are recognised in the income statement, translation gains or losses are also recognised in profit or loss. (iii) Controlled entities The results and financial position of all the controlled entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and all resulting exchange differences are recognised as a separate component in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings, are taken to other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of foreign entities are treated as assets and liabilities of the foreign entities and translated at the closing rate. UNSW Annual Report 21

24 31 December 1 Summary of significant accounting policies (g) Revenue recognition The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met for each of the Group s activities as described below. Amounts disclosed as revenue are net of returns, duties and taxes paid, and amounts collected on behalf of third parties. (i) Government grants Grants from the government are recognised at their fair value where the Group obtains control of the right to receive the grant, it is probable that economic benefits will flow to the Group and it can be reliably measured. (ii) Student fees and charges Student fees are recognised as revenue in the year in which the service is provided. Student fees received that relate to courses to be held in future periods are treated as income in advance. (iii) Sale of goods Sales revenue comprises revenue earned (net of returns, discounts and allowances) from the supply of products to entities outside the Group. Sales revenue is recognised when significant risks and rewards of ownership are transferred to the customer. (iv) Fees and charges for services Revenue from services rendered is recognised in the period in which the service is provided, having regard to the stage of completion of the service. (v) Investment income Interest income is recognised as it accrues. Dividends are recognised as revenue when the right to receive payment is established. (vi) Other revenue and income Other revenue represents donations, bequests and contributions from external organisations which is recognised when the Group becomes entitled to receive other revenue and it can be reliably measured. Other income includes subscriptions, sponsorships, publishing sales and miscellaneous income not derived from core business and is recognised when it is earned. (h) Income tax The parent entity is exempt from income tax under Commonwealth income taxation legislation. Within the Group, however, there are some entities domiciled in foreign jurisdictions that are not exempt from paying income tax. For those entities not exempt from tax, the income tax expense or benefit for the period is the tax payable on the current period's taxable income, based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted for the jurisdiction where the entity is situated. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. 22 UNSW Annual Report

25 31 December 1 Summary of significant accounting policies (i) (j) (k) (l) (m) Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the Group as a lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Lease income from operating leases, where the Group is a lessor, is recognised in the income statement on a straight-line basis over the lease term. Impairment of assets Intangible assets that have an indefinite useful life are not subject to depreciation or amortisation and are tested annually for impairment. All other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the income statement for the amount by which the asset's carrying amount exceeds its recoverable amount. An impairment loss on a revalued asset is recognised against the revaluation reserve of that class of asset to the extent that the impairment reverses a previous revaluation surplus. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. In accordance with AASB 136 Impairment of assets in respect of not-for-profit entities, value in use is the depreciated replacement cost of an asset when the future economic benefits of the asset are not primarily dependent on the asset's ability to generate net cash inflows and where the entity would, if deprived of the asset, replace its remaining future economic benefits. In respect of for profit components of the Group, for the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other shortterm, highly liquid investments with original maturities of three months or less from date of purchase that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. Receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less any provision for impairment. Receivables are due for settlement generally no more than 30 days from the date of recognition. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. Subsequent recoveries of amounts previously written off are credited to the income statement. A provision for impaired receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows. The amount of the provision is recognised in the income statement within impairment of assets. Inventories Inventories are measured on weighted average cost basis at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. UNSW Annual Report 23

26 31 December 1 Summary of significant accounting policies (n) Investments and other financial assets The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the near term or if so designated by management. The policy of the Group is to designate a financial asset if the possibility it will be sold in the near term exists and if the asset is subject to frequent changes in fair value. Derivatives are held for trading unless they are designated as hedges. (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. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity. Held-tomaturity investments are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets. Held-to-maturity investments are carried at amortised cost using the effective interest method. (iv) Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities (held through managed funds), are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the Group intends to dispose of the investment within 12 months of the reporting date. Regular purchases and sales of investments are recognised on the trade date, being the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred, and the Group has transferred substantially all the risks and rewards of ownership. (v) Subsequent measurement Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of securities classified as available-for-sale are recognised in other comprehensive income. When securities classified as available-forsale are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are included in the income statement as gains and losses from investment securities. (vi) Fair value The fair values of investments and other financial assets are based on quoted prices in an active market. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques, that maximise the use of relevant data. These include reference to the estimated price in an orderly transaction that would take place between market participants at the measurement date. Other valuation techniques used are the cost approach and the income approach based on the characteristics of the asset and the assumptions made by market participants. 24 UNSW Annual Report

27 31 December 1 Summary of significant accounting policies (n) (o) (p) (q) Investments and other financial assets (vii) Impairment The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into, and are subsequently remeasured to their fair value. Changes in the fair value of derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement. Fair value measurement The fair value of assets and liabilities must be measured for recognition and disclosure purposes. Refer to note 36 for further disclosure. Investment property Investment properties exclude properties held to meet service delivery objectives of UNSW. Investment properties are initially recognised at cost. Costs incurred subsequent to initial acquisition are capitalised when it is probable that future economic benefits in excess of the originally assessed performance of the asset will flow to UNSW. Where an investment property is acquired at no cost or for nominal consideration, its cost shall be deemed to be its fair value, as at the date of acquisition. Subsequent to initial recognition at cost, investment property is carried at fair value, which is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent prices in less active markets or discounted cash flow projections. These valuations are reviewed annually by external independent valuers. Changes in fair values are recorded in the income statement as part of the other income or other expense. Rental revenue from the leasing of investment properties is recognised in the income statement in the periods in which it is receivable, as this represents the pattern of service rendered though the provision of the properties. (r) Property, plant and equipment Land and buildings (including campus land, campus buildings, off-campus properties and leasehold improvements), works of art and rare books are shown at their fair value, based on annual valuations by external independent valuers. Off-campus properties includes Crown Land. Any accumulated depreciation at the date of revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount. All other property, plant and equipment are stated at cost less any accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. UNSW Annual Report 25