Notes To The Financial Statements For The Year Ended 30 June 2009
1. Summary of Significant Accounting Policies
(a) General Information
The financial report is for NTSCORP as an individual entity, incorporated and domiciled in Australia. NTSCORP is a company limited by guarantee.
(b) Basis of Preparation
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.
The financial report has been prepared on an accruals basis and is based on historical costs modified, where applicable, by the measurement at fair value of selected non current assets, financial assets and financial liabilities.
(c) Revenue and Other Income
Revenue from the sale of services is recognised upon the delivery of services to clients.
Grant revenue is recognised in the income statement when it is received unless there are conditions attached to its use. In those circumstances it is recognised in the balance sheet as a liability until such conditions are met or the services are provided.Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
All revenue is stated net of the amount of goods and services tax (GST).
(d) Income Taxes
NTSCORP is for income tax purposes, a public benevolent institution. Its income therefore is exempt from income tax under Subdivision 50 B of the Income Tax Assessment Act 1997.
(e) Plant and Equipment
Each class of plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. 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 company 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.
Depreciation
The depreciable amount of all fixed assets including capitalised leased assets is depreciated on a straight line basis over the asset’s useful life to the company commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.
(f) Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to the company, are classified as finance leases.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are amortised on a straight line basis over their estimated useful lives where it is likely that the company will obtain ownership of the asset or over the term of the lease.
Lease payments for operating leases, where substantially all of the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.
Lease incentives under operating leases are recognised as a liability and amortised on a straight line basis over the life of the lease term.
(g) Financial Instruments
Recognition and Initial Measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instruments. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.
Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non cash assets or liabilities assumed is recognised in profit or loss.
Classification and Subsequent Measurement
Loans and Receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.
Financial Liabilities
Non derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.
Fair Value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.
Impairment
At each reporting date, the company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement.
(h) Impairment of Assets
At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.
Where the future economic benefits of the asset are not primarily dependent upon the asset’s ability to generate net cash inflows and when the entity would, if deprived by the asset, replace its remaining future economic benefits, value in use is the depreciated replacement cost of an asset.
Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash generating unit to which the asset belongs.
(i) Unexpended Grants
The company receives grant monies to fund projects either for contracted periods of time or for specific projects irrespective of the period of time to complete those projects. It is the policy of the company to treat grant monies as unexpended grants in the balance sheet where the company is contractually obliged to provide the services in a subsequent financial period to when the grant is received or in the case of a specific project grant where the project has not been completed.
(j) Employee Benefits
Provision is made for the company’s liability for employee benefits for wages and salaries including non monetary benefits, leave loading, annual leave, long service leave and accumulating sick leave arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on costs. Employee benefits payable later than one year have been measured at present value of the estimated future cash outflows to be made for those benefits. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity that match as closely as possible the estimated future cash flows.
Contributions are made by the company to an employee superannuation fund and are charged as expenses when incurred.
(k) Provisions
Provisions are recognised when the company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
(l) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the income statement in the period in which they are incurred.
(m) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short term borrowings in current liabilities on the balance sheet.
(n) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.
(o) Comparatives
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.
(p) Critical Accounting Estimates and Judgments
The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and based on current trends and economic data, obtained both externally and within the company.
Key Estimates - Impairment
The company assesses impairment at each reporting date by evaluating conditions specific to the company that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value in use calculations performed in assessing recoverable amounts incorporate a number of key estimates.
Key Judgments - Provision for Impairment of Receivables
Provision for impairment of receivables is maintained at a level considered adequate to provide for potentially uncollectible receivables. The level of allowance is based on past collection experience and other factors that may affect collectability. An evaluation of the receivables, designed to identify potential charges to the allowance, is performed on a continuous basis throughout the year. The amount and timing of recorded expenses for any period would therefore differ based on the judgments or estimates made.
2. Economic Dependence
NTSCORP is dependent on the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) for the majority of its revenue used to operate the business.
NTSCORP is funded to perform the functions of a NTRB pursuant to the Native Titles Act 1993. It is dependent on the continuing provision of these funds for its existence and ability to carry out its normal activities. The funding conditions of NTSCORP are laid down by the Native Titles Act and subject to the General Terms and Conditions Relating to Native Title Program Funding Agreements.
At the date of this report, the Board of Directors has no reason to believe that FaHCSIA will not continue to support NTSCORP.
3. Revenue
4. Expenses
5. Cash and Cash Equivalents
Cash at bank earns interest at floating rates based on daily deposit rates. Short-term deposits are made for varying periods of between one day and 3 months, depending on the company’s cash requirements. These deposits earn interest at market rates.
The company’s exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in Note 18.
6. Trade and Other Receivables
The company’s exposure to credit risk and impairment losses related to trade debtors and other receivables is disclosed in Note 18.
7. Plant and Equipment
Leased motor vehicles are under finance lease and hire purchase agreements. The leased equipment secures the obligations under the leases, refer to Note 12.
Leasehold improvements have not been amortised as the new premises are still under construction as at 30 June 2009. NTSCORP is anticipating moving to the new premises in March 2010.
Movements in Carrying Amounts
Movement in the carrying amount for each class of property, plant and equipment between the beginning and the end of the current financial year:
8. Other Financial Assets
The company’s exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in Note 18.
9. Trade and Other Payables
Unexpended grants represent funds received for the fit-out of the new premises $356,000 (2008: 176,000) and the acquisition of other assets $81,271 (2008: Nil). Rental bond guarantee is secured by the rental bond term deposit.
The company’s exposure to liquidity risks related to trade creditors and other payables is disclosed in Note 18.
10. Borrowings
Finance lease obligations are secured by the underlying leased assets.
11. Provisions
Provision for Employee Benefits
A provision has been recognised for employee entitlements relating to annual leave, sick leave, leave loading and long service leave for employees. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based upon historical data. The measurement and recognition criteria for employee benefits have been included in Note 1 (j) to this report.
12. Capital and Leasing Commitments
For more information
about the company’s exposure to interest rate and liquidity risk, refer to Note 18.
13. Capital Management
The Executive Team of the entity in consultation with the Board of Directors control the capital of the entity in order to maintain a conservative debt to equity ratio and to ensure that the entity can fund its operations and continue as a going concern.
The entity’s debt and capital includes financial liabilities, supported by financial assets.
There are no externally imposed capital requirements.
The Board of Directors effectively manage the entity’s capital by assessing the entity’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels.
There have been no changes in the strategy adopted by management to control the capital of the entity since the prior year. This strategy is to ensure that there is sufficient cash to meet trade and other payables and borrowings.
14. Members’ Guarantee
The company is limited by guarantee. If the company is wound up, the Constitution states that each member is required to contribute a maximum of $10 each towards any outstanding obligations of the company. At 30 June 2009 the number of members was 8 (2008: 8).
15. Related Parties and Related Party Transactions
(a) Directors
Directors of the company in office during the year are disclosed in the directors’ report that accompanies these financial statements.
(b) Directors’ Compensation
The directors act in an honorary capacity and receive no compensation for their services. Travel expenses incurred by the directors in fulfilling their role are however, reimbursed.
(c) Key Management Personnel (KMP) Compensations
Those persons having authority for planning, directing and controlling the company’s activities, directly or indirectly, are:
16. Segment Reporting
NTSCORP provides professional services to assist Aboriginal people in New South Wales and the Australian Capital Territory to exercise their legal rights under the Native Title Act 1993. NTSCORP operates out of the head office in Redfern, Sydney and its regional offices in Coffs Harbour and Dubbo. Due to staff shortage, the Dubbo office closed on 30 November 2008.
17. Cash Flow Information
Reconciliation of Cash Flow from Operations with Net Surplus (Deficit)
18. Financial Risk Management
The company’s financial instruments consist mainly of deposits with banks, short term investment, and finance lease liabilities.
The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows:
Financial Risk Exposures and Management
The main risks the company is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk.
(a) Liquidity risk
Liquidity risk arises from the possibility that the company might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The company manages liquidity risk by monitoring forecast cash flows.
The maturity analysis of the company’s finance lease liabilities is disclosed in Note 12.
(b) Credit risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance sheet date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.
The company does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the company.
The movement in the allowance for impairment of trade and other receivables during the year is disclosed in Note 6.
(c) Market risk
Market price risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices will affect the company’s income or the value of the holdings of financial instruments. The company is only exposed to fluctuations in interest rates as it does not have any financial instruments denominated in foreign currency or any financial instruments based on market values.
Interest Rate Risk
Interest rate risk refers to the risk that the value of financial instruments or cash flows associated with the instrument will fluctuate due to changes in market interest rates. The company is exposed to interest rate fluctuations on its cash at bank and short-term deposits. It does not have a material risk in relation to its interest bearing liabilities.
The company actively monitors interest rates for cash at bank and deposits to maximise interest income.
The following table summarises the interest rate profile of the company’s interest bearing financial instruments:
Sensitivity Analysis
A change of 100 basis points or one percent in interest rates at the reporting date would, with all other variables held constant, have increased or decreased the company’s surplus and funds by the amounts shown below. The one percent assumption has been determined to be a reasonably possible movement in interest rates over a 12 month period based on information from various financial institutions, review of movements over the last two years, and economic forecaster’s expectations.
Fair Values
The carrying amounts of cash and cash equivalents, receivables, payables and lease liabilities represent their net fair values, as determined in accordance with the accounting policies disclosed in Note 1 to the financial statements.
19. Contingent Liabilities and Contingent Assets
The Company is expecting to move to new premises in March 2010, accordingly, make good expenses have to be incurred in the future to restore the current premises. No make good provision was recorded in the books as the directors do not have any best estimate available as at the date of this report.
20. Comparative Figures
Reclassified to conform with current year
Certain comparative figures have been reclassified to conform with the current year’s financial statements presentation in accordance with AASB 101: Presentation of Financial Statements.
21. New Accounting Standards for Application in Future Periods
The AASB has issued new, revised and amended standards and interpretations that have mandatory application dates for future reporting periods. The company has decided against early adoption of these standards. A discussion of those future requirements and their impact to the company is as follows:
- AASB 101:
Presentation of Financial Statements, AASB 2007-8: Amendments to Australian Accounting Standard arising from AASB 101, and AASB 2007-10: Further Amendments to Australian Accounting Standard arising from AASB 101 (all applicable to annual reporting periods commencing from 1 January 2009). The revised AASB 101 and amendments supersede the previous AASB 101 and redefines the composition of financial statements including the inclusion of a statement of comprehensive income. There will be no measurement or recognition impact on the company. If an entity has made a prior period adjustment or reclassification, a third balance sheet as at the beginning of the comparative period will be required. - AASB 123:
Borrowing Costs and AASB 2007-6: Amendments to Australian Accounting Standards arising from AASB 123 [AASB1, AASB 101, AASB 107, AASB 111, AASB 116 and AASB 138 and interpretations 1 and 12] (applicable for annual reporting periods commencing from 1 January 2009). The revised AASB 123 has removed the option to expense all borrowing costs and will therefore require the capitalisation of all borrowing costs directly attributable to the acquisition construction or production of a qualifying asset. Management has determined that there will be no effect on the company as a policy of capitalising qualifying borrowing costs has been maintained by the company.
22. Events After the Balance Sheet Date
No matters or circumstances have arisen since the end of the financial year which significantly or may significantly affect the operations of the company, the results of those operations or the state of affairs of the company in subsequent financial years.
23. Company Details
Registered office
The registered office of the company is:
NTSCORP Limited
Suites 9 & 15
245 Chalmers Street
Redfern NSW 2016
