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Table of ContentsStatement by Directors....................................................................................................................................108
Statement of Financial Performance ................................................................................................................109
Statement of Financial Position........................................................................................................................110
Statement of Cash Flows ................................................................................................................................111
Schedule of Commitments ..............................................................................................................................112
Schedule of Contingencies..............................................................................................................................113
Notes to and Forming Part of the Financial Statements...................................................................................114
1. Statement of Significant Accounting Policies ............................................................................................114
2. Expenses and Revenues ..........................................................................................................................123
9. Non Financial Assets ................................................................................................................................127
17. Remuneration of Directors........................................................................................................................136
18. Related Party Disclosures.........................................................................................................................137
19. Remuneration of Officers..........................................................................................................................139
20. Remuneration of Auditors.........................................................................................................................140
23. Reporting by Outcomes ...........................................................................................................................142
ABC Annual Report Financial Statements
ANNUAL REPORT 2001-2002
PAGE 107[FINANCIAL STATEMENTS]
Australian Broadcasting CorporationIn our opinion, the attached financial statements for the year ended 30 June 2002 give a true and fair view ofthe matters required by the Finance Minister’s Orders made under the Commonwealth Authorities andCompanies Act 1997.
Signed in accordance with a resolution of the directors.
DONALD McDONALD AO RUSSELL BALDINGChairman Managing Director
12 August 2002 12 August 2002
Statement by Directors
ANNUAL REPORT 2001-2002
PAGE 108 [FINANCIAL STATEMENTS]
Consolidated ABC
2002 2001 2002 2001Notes $’000 $’000 $’000 $’000
Revenues from ordinary activitiesRevenues from government 4 755 740 668 540 710 565 622 921Sales of goods and services 5D 123 749 116 968 104 381 95 452Interest 5A 7 879 12 193 6 984 11 059Proceeds from disposal of assets 5B 816 787 756 778Net foreign exchange gain 5C — 1 276 — 1 276Other 5E 43 398 12 338 36 351 5 008Total revenues from ordinary activities(excluding borrowing costs expense) 931 582 812 102 859 037 736 494
Net credit (debit) to asset revaluation reserve — (38 483) — (38 483)
Total revenues, expenses and valuation adjustmentsrecognised directly in equity — (38 483) — (38 483)
Total changes in equity other than those resultingfrom transactions with owners as owners beforecapital use charge 79 352 (23 140) 77 752 (22 927)
The above statement should be read in conjunction with the accompanying notes.
NOTE * Net surplus attributable to theCorporation before capital use charge 79 352 15 343 77 752 15 556Capital use provided for or paid (59 441) (56 179) (59 441) (56 179)Contribution to accumulated results 19 911 (40 836) 18 311 (40 623)
Statement of Financial Performancefor the year ended 30 June 2002
Net increase in cash held 1 128 11 167 1 232 820Cash at beginning of reporting period 29 592 18 425 4 887 4 067Cash at end of reporting period 8A 30 720 29 592 6 119 4 887
The above statement should be read in conjunction with the accompanying notes.
Statement of Cash Flowsfor the year ended 30 June 2002
All net commitmentsOne year or less 159 659 119 042 155 481 112 661From one to five years 227 713 156 190 222 653 155 520Over five years 840 291 11 907 839 381 11 907Net commitments 1 227 663 287 139 1 217 515 280 088
Operating lease commitmentsOne year or less 16 490 14 155 15 867 13 800From one to five years 20 694 17 447 19 123 17 312Over five years 1 083 42 173 42Net operating lease commitments 38 267 31 644 35 163 31 154
The above schedule should be read in conjunction with the accompanying notes.
NB: Commitments are GST inclusive where relevant.
1. Outstanding contractual commitments for capital works primarily associated with building works in Sydney and Perth.
2. Outstanding contractual commitments for capital works primarily associated with the purchase of infrastructure, plant andequipment.
3. Operating leases included are effectively non-cancellable and comprise:
Nature of Lease General description of leasing arrangement
Motor vehicles – business and senior executive Fully maintained operating lease; lease periods 24/36 months and/or40 000/60 000km; no contingent rentals exist; there are no renewal orpurchase options available to the Corporation.
PC leasing Corporation entered into supply agreement in 1999; 3 year lease on thespecific equipment covering hardware, operating system and maintenanceof hardware; lease of equipment is for 3 years; equipment returned at end oflease; Corporation has option to extend lease with one month notice.
Property leases – office and business premises Lease payments subject to increment increase in accordance with CPI orother agreed increment; initial period of lease ranges from 1 year to 10years; Corporation has options to extend in accordance with lease.
4. Other commitments as at 30 June 2002 are covered by an agreement and are associated with the provision of transmissionservices and satellite services, purchase of programs and program rights.
Schedule of Commitmentsas at 30 June 2002
ANNUAL REPORT 2001-2002
PAGE 112 [FINANCIAL STATEMENTS]
Schedule of Unquantifiable ContingenciesIn the normal course of activities claims for damages have been lodged at the date of this report against theCorporation and certain of its officers. The Corporation has disclaimed liability and is actively defending theseactions. It is not possible to estimate the amounts of any eventual payments which may be required inrelation to these claims.
Contingent LossesThe Corporation has provided guarantees and indemnity to the Reserve Bank of Australia for $1 541 688(2001 $1 950 711) in support of 8 (2001 10) Bank Guarantees required in the day to day operations of theCorporation.
Schedule of Contingenciesas at 30 June 2002
ANNUAL REPORT 2001-2002
PAGE 113[FINANCIAL STATEMENTS]
The above schedule should be read in conjunction with the accompanying notes.
1. Statement of Significant Accounting PoliciesThe principal accounting policies adopted in preparing the financial statements of the Australian BroadcastingCorporation (the ‘Corporation’ or ‘ABC’) and the consolidated financial statements of the Corporation, itscontrolled entities and the entities it controlled from time to time during the period, are stated to assist in ageneral understanding of these financial statements. These policies have been applied consistently by allentities in the economic entity.
1.1 Basis of AccountingThe financial statements are required by clause 1 (b) of Schedule 1 to the Commonwealth Authorities andCompanies Act 1997 and are a general purpose financial report.
The statements have been prepared in accordance with:
• Schedule 1 of the Commonwealth Authorities and Companies (Financial Statements 2001-2002) Ordersmade by the Finance Minister for the preparation of Financial Statements in relation to financial years endingon or after 30 June 2002;
• Australian Accounting Standards and Accounting Interpretations issued by Australian Accounting StandardsBoard;
• other authoritative pronouncements of the Board; and
• Consensus Views of the Urgent Issues Group.
The statements have been prepared having regard to:
• Statements of Accounting Concepts; and
• the Explanatory Notes to Schedule 1 of the Commonwealth Authorities and Companies (FinancialStatements 2001-2002) Orders issued by the Department of Finance and Administration; and
• Finance Briefs issued by that Department.
The Corporation and Consolidated Statements of Financial Performance and Financial Position have beenprepared on an accrual basis and are in accordance with historical cost convention, except for certain assetswhich, as noted, are at valuation. Except where stated, no allowance is made for the effect of changing priceson the results or on the financial position.
Assets and liabilities are recognized in the Corporation and Consolidated Statements of Financial Position whenand only when it is probable that future economic benefits will flow and the amounts of the assets or liabilitiescan be reliably measured. Assets and liabilities arising under agreements equally proportionately unperformedare however not recognized unless required by an Accounting Standard. Liabilities and assets which areunrecognized are reported in the Schedule of Commitments and the Schedule of Contingencies.
Revenues and expenses are recognized in the Corporation and Consolidated Statements of FinancialPerformance when and only when the flow or consumption or loss of economic benefits has occurred and canbe reliably measured.
1.2 RoundingAmounts are rounded to the nearest $1 000 except in relation to :
• remuneration of directors
• remuneration of officers (other than directors)
• remuneration of auditors
• trust funds
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002
ANNUAL REPORT 2001-2002
PAGE 114 [FINANCIAL STATEMENTS]
1. Statement of Significant Accounting Policies (cont.)1.3 Principles of ConsolidationThe consolidated financial statements are those of the economic entity, comprising the financial statements ofthe Australian Broadcasting Corporation, its controlled entities from the date control commences until the datecontrol ceases.
Investment in controlled entities are carried in the Australian Broadcasting Corporation’s financial statements atthe lower of cost or recoverable amount.
Controlled entities have annual reporting periods ending 31 December. Accounts of the controlled entities areprepared for the period 1 July 2001 to 30 June 2002 for consolidation using accounting policies which areconsistent with those of the Corporation.
Control exists where the Australian Broadcasting Corporation has the capacity to dominate the decision makingin relation to the financial and operating policies of another entity so the controlled entity operates to achievethe objectives of the Australian Broadcasting Corporation.
The controlled entities of the Corporation include seven independent orchestral companies as detailed innote 22. The companies have been incorporated under the Corporation Act 2001 and are each governedby an independent Board of Directors. Each company is audited annually by the Auditor General.
The effects of all transactions and balances between the entities are eliminated in full. Details of controlledentities are contained in note 22.
Financial statements of subsidiaries not considered to be a going concern have been prepared on a liquidationbasis. No adjustments were necessary in relation to the recoverability and classification of the recorded assetsof those subsidiaries.
1.4 TaxationThe Australian Broadcasting Corporation and its primary controlled entities are not subject to income taxpursuant to Section 71 of the Australian Broadcasting Corporation Act 1983.
Music Choice Australia Pty Ltd and The News Channel Pty Limited, whilst subject to income tax, have beeninactive for the year ended 30 June 2000, 30 June 2001 and 30 June 2002.
The Corporation and controlled entities are subject to fringe benefits tax, payroll tax and goods andservices tax.
Goods and Services TaxRevenues, expenses and assets are recognised net of the amount of goods and services tax (GST) exceptwhere the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, theGST is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the Australian Taxation Office (ATO), is included as acurrent asset in the Statement of Financial Position.
Cashflows are included in the Statement of Cash Flows on a gross basis. The GST components arising frominvesting and financing activities which are recoverable from, or payable to the ATO are classified as operatingcashflows.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 115[FINANCIAL STATEMENTS]
1. Statement of Significant Accounting Policies (cont.)1.5 Foreign Currency TransactionsRevenues and expenditures denominated in foreign currencies are converted to Australian currency at theexchange rates prevailing at the date of the transaction, or at the hedged rate.
Exchange gains and losses and hedging costs arising on contracts entered into as hedges of specific revenueor expense transactions are deferred until the date of such transactions at which time they are included in thedetermination of such revenues or expenses.
Open hedge contracts relating to all other revenue and expenditure transactions are converted at the applicableexchange rate at balance date with exchange gains or losses being included in the Statement of FinancialPerformance.
All foreign currency balances are converted to Australian currency at the exchange rate prevailing at balancedate, except for liabilities brought to account at contract rates, which are subject to currency swap contractsfor which an Australian dollar currency repayment schedule has been adopted. Monetary assets and liabilities ofoverseas branches and amounts payable to or by the Corporation in foreign currencies are translated intoAustralian currency at the applicable exchange rate at balance date. Non-monetary items of overseas branchesare translated at exchange rates current at the transaction date.
1.6 DerivativesDerivative financial instruments are used by the Corporation to manage financial risks and are not entered intofor trading purposes. The classes of derivative financial contracts used are interest rate swaps, forward foreignexchange contracts and foreign exchange.
Derivative financial instruments designated as hedges are accounted for on the same basis as the underlyingexposure.
A. Interest rate swaps and forward rate agreementsInterest rate swaps and forward rate agreements are entered into for the purpose of managing theCorporation’s interest rate position. Gains or losses on interest rate swaps are included in the measurement ofinterest payments on the transactions to which they relate. Premiums or discounts are amortised through theStatement of Financial Performance each year over the life of the swap.
B. Forward exchange contractsForward exchange contracts are used to hedge specific and regular occurring foreign exchange payments.Contracts are revalued at year end and the gain or loss is included in the Statement of Financial Performance.
C. Foreign exchange optionsForeign exchange options are used to hedge specific foreign currency payments. Premiums paid on foreignexchange options are amortised to the Statement of Financial Performance over the life of the contract.
1.7 BorrowingsBorrowings are recorded at the amount of the net proceeds received and carried at amortised cost until theliabilities are fully settled. Interest on the instruments is recognised as an expense on an effective yield basis.Borrowings are Commonwealth Government guaranteed.
All borrowing costs are expensed as incurred except to the extent that they are directly attributable to qualifyingassets, in which case they are capitalised. The amount capitalised in a reporting period does not exceed thecosts incurred in that period.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 116 [FINANCIAL STATEMENTS]
1. Statement of Significant Accounting Policies (cont.)1.8 CashCash includes notes and coins held, and any deposits held at call with a bank or financial institution.
1.9 ReceivablesReceivables are carried at nominal amounts due less provision for doubtful debts.
Trade debtors are normally settled within 30 days unless otherwise agreed and are carried at amounts due.
The Corporation makes a specific provision for doubtful debts by conducting a detailed review of materialdebtors, making an assessment of the probability of recovery of those debts and taking into account past baddebts experience.
1.10 Bills of Exchange and Promissory NotesPremiums or discounts are amortised through the Statement of Financial Performance each year from the dateof purchase so that investments attain their redemption value by maturity date and income is recognised on aneffective yield basis.
Any profits or losses arising from the disposal prior to maturity are taken to the Statement of FinancialPerformance in the period in which they are realised. These assets are intended to be held to maturity and arecarried at cost or cost adjusted for discounts and premiums.
1.11 Trade CreditorsCreditors are recognised at their nominal amounts, being the amounts at which the liabilities will be settled.Liabilities are recognised to the extent that the goods and services have been received (and irrespective ofhaving been invoiced).
Settlement is on normal commercial terms.
1.12 Reporting by Outcomes and SegmentsA comparison of Budget and Actual figures by outcomes specified in the Appropriation Acts relevant to theCorporation is presented in note 23. Any intra-government costs included in the figure ‘net cost to Budgetoutcomes’ are eliminated in calculating the actual budget outcome for the Government overall.
The Corporation principally provides a national television and radio service within the broadcasting industry. It istherefore considered for segmental reporting to operate predominantly in one industry and in one geographicalarea, Australia.
1.13 Revenue RecognitionThe revenues described in this note are revenues relating to the core operating activities of the Corporation.
Revenue from the sale of goods and services is recognised at fair value of the consideration received net of theamount of the goods and services tax upon the delivery of goods and services to customers.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to thefinancial assets.
Credit sales are on normal commercial terms.
Revenue from disposal of non-current assets is recognised when control of the asset has passed to the buyer.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 117[FINANCIAL STATEMENTS]
1. Statement of Significant Accounting Policies (cont.)1.13 Revenue Recognition (cont.)External contributions earned in respect of the production of television programs are reflected in the Statementof Financial Performance once the program has been broadcast (refer note 1.19).
Subsidies, grants, sponsorships and donations are recognised on receipt unless paid to the Corporation forspecific purpose where recognition of revenue will be recognised in accordance with the agreement.
Recognition of appropriations from the Government is discussed in note 1.22.
Core OperationsAll material revenue described in this note are revenues relating to the core operating activities of theCorporation and controlled entities. Details of revenue amounts are given in notes 4 and 5.
1.14 Employee EntitlementsLeaveThe liability for employee entitlements includes provision for annual leave and long service leave. No provisionhas been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future yearsby employees of the Corporation and the economic entity is estimated to be less than the annual entitlementfor sick leave.
The liability for annual leave reflects the value of total annual leave entitlements of all employees at 30 June2002 and is recognised at its nominal amount.
The non-current portion of the liability for long service leave is recognised and measured at the present valueof the estimated future cash flows to be made in respect of all employees at 30 June 2002. In determining thepresent value of the liability, attrition rates and pay increases through promotion and inflation have been takeninto account.
On-costs relating to annual and long service leave have been included in the provision.
Separation and RedundanciesProvision is made for separation and redundancy payments in cases where positions have been formallyidentified as excess to requirements, the existence of an excess has been publicly communicated, and areliable estimate of the amount payable can be determined.
SuperannuationEmployees contribute to the Commonwealth Superannuation Scheme and the Public Sector SuperannuationScheme. Employer contributions amounting to $15 902 071 (2000/2001: $28 080 557) for the Corporation and$18 420 445 (2000/2001: $31 595 741) for the economic entity in relation to these schemes have beenexpensed in these financial statements.
No liability is shown for superannuation in the Statement of Financial Position as the employer contributions fullyextinguish the accruing liability which is assumed by the Commonwealth.
Employer Superannuation Productivity Benefit contributions totalled $7 954 690 (2000/2001: $7 381 108) forthe Corporation and $8 858 496 (2000/2001: $8 383 419) for the economic entity.
1.15 Repairs and MaintenanceMaintenance, repair expenses and minor renewals which do not constitute an upgrading or enhancement ofequipment are expensed as incurred.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 118 [FINANCIAL STATEMENTS]
1. Statement of Significant Accounting Policies (cont.)1.16 Acquisition of AssetsAssets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fairvalue of assets transferred in exchange and liabilities undertaken.
Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and revenues at theirfair value at the date of acquisition.
1.17 Property (Land and Buildings), Infrastructure, Plant and EquipmentAsset Recognition ThresholdPurchases of property, plant and equipment costing $2 000 or more are recognised initially at cost in theStatement of Financial Position. Purchases costing less than $2 000 are expensed in the year of acquisition(except where they form part of a project or group of similar items which are significant in total).
RevaluationsLand, buildings, infrastructure, plant and equipment are revalued progressively in accordance with the ‘deprival’method of valuation in successive three-year cycles, so that no asset has a value greater than three years old.
• Freehold land, buildings on freehold land and leasehold improvements were independently valued during the2000/2001 financial year.
• All plant and equipment, furniture and fittings and information technology assets on hand (not underoperating leases), and any assets under finance leases, were independently valued during the 2000/2001financial year.
• All libraries and archives were independently valued during the 2000/2001 financial year.
Assets in each class acquired after the commencement of a progressive revaluation cycle are not captured bythe progressive revaluation then in progress.
In accordance with the deprival methodology, land is measured at its current market buying price. Propertyother than land, plant and equipment are measured at their depreciated replacement cost. Where assets areheld which would not be replaced or are surplus to requirements, measurement is at net realisable value.At 30 June 2002, the Corporation and the economic entity had no assets in this situation.
All valuations are independent or at director’s valuations.
Capital Works in ProgressThe cost of assets constructed or internally generated by the consolidated entity, other than goodwill, includethe cost of materials and direct labour. Directly attribute overheads and other incident costs are also capitalisedto the asset. Borrowing costs are capitalised to quantifying assets.
In respect of internally contracted assets, depreciation to charge, from the time the asset is completed and heldready for use.
Recoverable Amount TestSchedule 1 requires the application of the recoverable amount test to the Corporation’s non-current assets inaccordance with AAS 10 Recoverable Amount of Non-Current Assets. The carrying amounts of these non-current assets have been reviewed to determine whether they are in excess of their recoverable amounts. Inassessing recoverable amounts, the relevant cash flows, including the expected cash inflows from futureappropriations by the Parliament, have been discounted to their present value.
No write-down to recoverable amount has been made in 2001-2002.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 119[FINANCIAL STATEMENTS]
1. Statement of Significant Accounting Policies (cont.)1.17 Property (Land and Buildings), Infrastructure, Plant and Equipment (cont.)Depreciation and AmortisationDepreciable property, plant and equipment assets are written off to their estimated residual values over theirestimated useful lives to the Corporation using, in all cases, the straight line method of depreciation. Leaseholdimprovements are amortised on a straight line basis over the lesser of the estimated useful life of theimprovements or the unexpired period of the lease.
Depreciation/amortisation rates (useful lives) and methods are reviewed at each balance date and necessaryadjustments are recognised in the current, or current and future reporting periods, as appropriate. Residualvalues are re-estimated for a change in prices only when assets are revalued.
Depreciation and amortisation rates applying to each class of depreciable asset are based on the followinguseful lives:
2002 2001
Buildings on freehold land 50 years 50 yearsLeasehold land, buildings and improvements Lease term Lease termPlant and equipment 6 – 15 years 6 – 15 years
The aggregate amount of depreciation allocated for each class of asset during the reporting period is disclosedin note 6C.
1.18 IntangiblesThe carrying amount of each non-current intangible asset is reviewed to determine whether it is in excess of theasset’s recoverable amount. If an excess exists as at the reporting date, the asset is written down to itsrecoverable amount immediately. In assessing recoverable amounts, the relevant cash flows, including theexpected cash inflows from future appropriations by the Parliament, have been discounted to their presentvalue.
No write-down to recoverable amount has been made in 2001-2002.
Software is stated at deemed cost from 1 July 2001 as required by Finance Minister’s Orders. The cost hasbeen deemed to be the amounts which assets carried at 30 June 2001, in compliance with AASB 1041.
A director’s valuation of the Bananas in Pyjamas intellectual property rights has been done on a discountedcash flow basis during the 2001-2002 financial year.
Intangible assets are amortised on a straight-line basis over their anticipated useful lives.
Useful lives are:
2002 2001
Copyright 5 years 5 yearsSoftware 3 – 5 years 3 – 5 years
The aggregate amount of amortisation allocated for intangible assets during the reporting period is disclosed innote 6C.
1.19 InventoriesInventories held for resale are valued at the lower of cost or net realisable value. Inventories not held for resaleare valued at cost, unless they are no longer required, in which case they are valued at net realisable value.Television programs are produced for domestic transmission and include direct salaries and expenses. Fixedproduction overheads are expensed in the period in which they are incurred.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 120 [FINANCIAL STATEMENTS]
1. Statement of Significant Accounting Policies (cont.)1.19 Inventories (cont.)Produced ProgramsThe cost of produced television program inventory is amortised as follows:
• News, Current Affairs and Live Programs – 100% on first screening.
• Children’s, Education and Movies – Straight line over three years.
• All other programs not covered above – 90% first screening and 10% second screening or in third year.
• Programs not shown within three years of completion or purchase to be amortised 100% in year three.
• Alternative Amortisation Schedule – Management may determine an alternative amortisation schedule forexceptional programs in any of the above categories for which the stated policy is considered inappropriate.
The costs of programs produced for news, current affairs and radio are expensed as incurred. Such programsare normally broadcast soon after production, stock on hand at any time being minimal.
Purchased ProgramsPurchase program inventory is amortised in accordance with policy noted above or over the rights period ofthe contract (whichever is lesser).
Subsequent sales of residual rights are recognised in the period in which they occur.
Merchandise InventoryThe provision for obsolete retail stock is based on stock on hand over twelve months old and which mayrequire discounting or disposal. Items in engineering and general stores which have not been issued for threeyears are provided for as obsolete.
1.20 Capital Usage ChargeA capital usage charge of 11% (2000/2001 12%) is imposed by the Commonwealth on the net assets of theCorporation. The charge is adjusted to take account of asset gifts and revaluation increments during thefinancial year.
1.21 LeasesA distinction is made between finance leases which effectively transfer from the lessor to the lesseesubstantially all the risks and benefits incidental to ownership of leased non-current assets and operatingleases under which the lessor effectively retains substantially all such risks and benefits.
Operating lease payments are expensed on a basis which is representative of the pattern of benefits derivedfrom the leased assets. The net present value of future net outlays in respect of surplus space under non-cancellable lease agreements is expensed in the period in which the space becomes surplus.
Lease incentives taking the form of ‘free’ leasehold improvements and rent holidays are recognised as liabilities.These liabilities are reduced by allocating lease payments between rental expense and reduction of the liability.
1.22 AppropriationsFrom 1 July 1999, the Commonwealth Budget has been prepared under an accruals framework. Under thisframework, Parliament appropriates monies to the Corporation as revenue appropriations, as loanappropriations and as equity injections.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 121[FINANCIAL STATEMENTS]
1. Statement of Significant Accounting Policies (cont.)1.22 Appropriations (cont.)Revenue AppropriationsRevenues from Government are revenues of the core operating activities of the Corporation.
Appropriations for outputs are recognised as revenue to the extent they have been received into theCorporation’s bank account or are entitled to be received by the Corporation at year end.
Transactions by the Commonwealth as OwnerAppropriations to the Corporation designated as ‘capital equity injections’ are recognised directly in equity, tothe extent that the appropriation has been received into the Corporation’s bank account or are entitled to bereceived by the Corporation at year end.
1.23 GrantsThe Corporation receives grant monies from time to time.
Most grant agreements require the Corporation to perform services or provide facilities, or to meet eligibilitycriteria. A liability in respect of unearned revenues is recognised to the extent the services or facilities have notbeen provided or eligibility criteria have not been met.
1.24 InsuranceThe Corporation has insured for risk through the governments insurable risk managed fund called Comcover.Workers compensation is insured through Comcare.
1.25 Changes in Accounting PolicyChanges in accounting policy have been identified in this note under their appropriate headings.
1.26 Comparative FiguresWhere applicable, prior year comparative figures have been restated to reflect the current year’s presentation inthe financial statements.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
Revenues from independent sourcesCo-production contributions 5D 1 654 2 897 1 654 1 902 Concert sales and subsidies 5D 18 870 19 916 — — Net gain on foreign exchange – non speculative 5C — 1 276 — 1 276 Proceeds from disposal of non-current assets 5B 816 787 756 778 Interest and bill discounts 5A 7 879 12 193 6 984 11 059 Insurance Settlement 5E 11 454 — 11 454 — Merchandising 5D 59 035 50 788 58 948 50 746 Program sales 5D 7 265 6 493 7 180 6 407 Rent and hire of facilities 5D 8 988 11 015 8 664 10 590 Royalties 5D 27 072 24 385 27 070 24 333 Sponsorships and donations 5E 5 753 6 165 — — Subsidies and grants 5E 20 537 3 145 19 945 3 145 Technology sales 5D 865 1 474 865 1 474Incidental 5E 5 654 3 028 4 952 1 863Total revenues from independent sources 175 842 143 562 148 472 113 573Total revenues from Government 4A, B, C 755 740 668 540 710 565 622 921Total revenues from ordinary activities 931 582 812 102 859 037 736 494Net operating surplus/deficit from ordinary activities 79 352 15 343 77 752 15 556
3. Economic DependencyThe ABC was established in 1932 as the Australian Broadcasting Commission. Since 1983 it has operatedunder the provisions of the Australian Broadcasting Corporation Act.
The Corporation and its controlled entities are dependent upon direct and indirect appropriations of monies byParliament. In excess of 81% of normal activities are funded in this manner, and without these appropriationsthe Corporation and its controlled entities would be unable to meet their obligations. (Refer to note 4 for detailsof revenues from Government).
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
4C Funding from Commonwealth/State Governments forOrchestral SubsidiariesDepartment of Communications, Information Technology and the Arts 36 009 36 246 — — Other 9 166 9 373 — —
45 175 45 619 — —
Total revenues from Government 755 740 668 540 710 565 622 921
(a) Appropriations from the Government include $59 260 000 (2001 $61 569 000) in respect of capital use charge funding.This amount was repaid to the Government on 3 June 2002.
5. Revenue from Independent SourcesConsolidated ABC
The Corporation and its controlled entities contribute to the Commonwealth Superannuation Scheme (CSS) and the Public SectorSuperannuation (PSS) which provide retirement, death and disability benefits to employees. Contributions to the schemes are at arate calculated to cover existing and emerging obligations. Current contribution rates are nil% (2001 18.6%) of salary (CSS)and 9.4% (2001 11.5%) of salary (PSS). An additional 3% (2001 3%) is contributed for employer productivity benefits.
Total land and buildings excluding capital works in progress 329 975 338 618 329 710 338 287Capital works in progress at cost (b) 98 004 42 671 98 004 42 671Total land and buildings 427 979 381 289 427 714 380 958
(a) The revaluations were in accordance with the revaluation policy stated at note 1, and were completed by independent valuersEdward Rushton Australia Pty Ltd. and McGee Bowen Pty Ltd.
(b) This amount includes borrowing costs which have been capitalised of $2 619 553 (2001 $204 387).
101 762 57 145 98 105 54 582Infrastructure, plant and equipmentexcluding capital works in progress 204 831 187 001 201 174 184 438Capital works in progress at cost 46 958 67 902 46 958 67 902Total infrastructure, plant and equipment 251 789 254 903 248 132 252 340
(a) The revaluations were in accordance with the revaluation policy stated at note 1, and were completed by independent valuersEdward Rushton Australia Pty Ltd. and McGee Bowen Pty Ltd.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
6 637 8 850 6 637 8 850Total intangible assets excluding capital works in progress 18 079 14 118 18 079 14 118Capital works in progress at cost — 3 505 — 3 505Total intangibles assets 18 079 17 623 18 079 17 623
(a) Software carrying value at 1 July 2001 deemed to be cost.(b) The revaluations were in accordance with the revaluation policy stated at note 1, and were completed by independent valuers
Edward Rushton Australia Pty Ltd. and McGee Bowen Pty Ltd.
Table A1Reconciliation of the opening and closing balances of property, infrastructure, plant and equipment and intangibles(Consolidated)
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 128 [FINANCIAL STATEMENTS]
Item Land Buildings Total Other infra- Computer Other Total Totalland and structure, software intangibles intangiblesbuildings plant and
Net book value at 30 June 2002 121 329 208 646 329 975 204 831 11 442 6 637 18 079 552 885
Net book value at 1 July 2001 121 033 217 573 338 606 187 001 5 268 8 850 14 118 539 725
Net revaluation increments/decrements in the table above comprise:• For land – net revaluation increments of $nil (2000/2001 increment: $34 169 000)• For buildings on freehold land – net decrement of $nil (2000/2001 decrement $98 961 000)• For other infrastructure, plant and equipment – net increment of $nil (2000/2001 increment of $22 571 000)• For other intangibles – net increment of $nil (2000/2001 net increment of $1 782 000)Asset write-offPlant and equipment values were written down by $10 984 150 to take account of the impairment in expected value of assets in thevicinity of a fire at the Gore Hill site in Sydney. This loss was covered by insurance.
9. Non Financial Assets (cont.)Table A2Reconciliation of the opening and closing balances of property, infrastructure, plant and equipment and intangibles (ABC)
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 129[FINANCIAL STATEMENTS]
Item Land Buildings Total Other infra- Computer Other Total Totalland and structure, software intangibles intangiblesbuildings plant and
Net book value at 30 June 2002 121 329 208 381 329 710 201 174 11 442 6 637 18 079 548 963
Net book value at 1 July 2001 121 033 217 254 338 287 184 438 5 268 8 850 14 118 536 843
Net revaluation increments/decrements in the table above comprise:• For land – net revaluation increments of $nil (2000/2001 increment: $34 169 000)• For buildings on freehold land – net decrement of $nil (2000/2001 decrement $98 961 000)• For other infrastructure, plant and equipment – net increment of $nil (2000/2001 increment of $22 571 000)• For other intangibles – net increment of $nil (2000/2001 net increment of $1 782 000)Asset write-offPlant and equipment values were written down by $10 984 150 to take account of the impairment in expected value of assets in thevicinity of a fire at the Gore Hill site in Sydney. This loss was covered by insurance.
Table BAssets at valuation (Consolidated Only)
Item Land Buildings Total Other infra- Computer Other Total Totalland and structure, software intangibles intangiblesbuildings plant and
(a) Of this amount, $40 million are repayable in Japanese Yen. Currency swap contracts have been undertaken to effectively remove thecurrency risk associated with these loans.
Maturity schedule for loans:Payable within one year 50 165 — 50 000 —Payable in one to five years 109 425 139 000 109 000 139 000Payable in more than five years 51 000 51 000 51 000 51 000Total Loans 210 590 190 000 210 000 190 000
Capital Use Charge (CUC) — — (59 441) (56 179) — — (59 441) (56 179)
Closing balance as at 30 June 89 113 74 513 174 711 156 400 228 708 228 708 492 532 459 621
(a) $nil (2000/2001 $17.1 million) of the ABC’s on-going base funding is included in the equity injection of capital of $14.6 million(2000/2001 $41.3 million). The prior year amount was used to meet debt financing arrangements relating predominately to the purpose built facilities in the Ultimo and Southbank complexes. In 2001-2002 this funding has been appropriated to the ABC as revenue.
14. Cash Flow ReconciliationReconciliation of operating surplus to net cash from operating activities
Consolidated ABC
2002 2001 2002 2001$’000 $’000 $’000 $’000
Net operating surplus from ordinary activities 79 352 15 343 77 752 15 556
Capital use provided (59 441) (56 179) (59 441) (56 179)Depreciation of fixed assets 57 824 51 326 57 200 50 699Amortisation of intangibles 5 444 4 205 5 444 4 205Amortisation of program purchases 106 923 101 652 106 923 101 652Transfer to/from provisions – employee entitlements 4 743 (10 963) 4 092 (11 297)Transfer to/from provisions – doubtful debts 273 ( 69) 270 ( 69)Write down of assets 12 824 4 275 12 824 4 275(Profit)/loss on disposal of property, infrastructure, plant and equipment 140 844 168 826
Changes in assets and liabilitiesIncrease/(decrease) in receivables (5 876) (7 438) (2 912) (7 108)Increase/(decrease) in other current assets (4 785) (5 455) (4 591) (7 024)Increase/(decrease) in inventories (110 581) (109 715) (110 598) (109 720)(Increase)/decrease in payables 62 401 63 621 62 235 62 904(Increase)/decrease in provisions/ liabilities 8 084 7 532 5 672 744Net cash from operating activities 157 325 58 979 155 038 49 464
#The interest rates under these swaps range from the bank bill swap reference rate (BBSW) less 10 basis points and 4.84% onpayables and BBSW and 4.40% on receivables. BBSW rates are reset at 90 days.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 134 [FINANCIAL STATEMENTS]
16. Financial Instruments (Consolidated) (cont.)
B. Net Fair Values of Financial Assets and LiabilitiesThe following methods and assumptions were used to estimate the net fair values.
Cash, receivables, payables and short term borrowingsThe carrying amount approximates the net fair value because of the short term maturity.
InvestmentsThe carrying amount for non traded investments has been assessed by the directors based on the underlyingnet assets, expected cash flows and any particular special circumstances of the investee as approximating netfair values.
Long term borrowings The net fair values of long term borrowings are estimated using discounted cash flow analysis, based oncurrent interest rates for liabilities with similar risk profiles.
Interest rate swaps and cross currency swap agreementsThe net fair values of unrecognised financial instruments reflect the estimated amounts the economic entityexpects to pay or receive to terminate the contracts (net of transaction costs) or to replace the contracts attheir current market rates as at reporting date. This is based on independent market quotations and usingstandard valuation techniques.
Forward exchange contractsThe net fair values of forward exchange contracts is taken to be the unrealised gain or loss at balance datecalculated by reference to current forward exchange rates for contracts with similar maturity profiles.
C. Credit Risk ExposuresCredit risk represents the loss that would be recognised if counterparties to financial instruments fail to performas contracted.
The economic entity has no significant exposures to any concentrations of credit risk.
Financial AssetsThe economic entity’s maximum exposures to credit risk at reporting date in relation to each class ofrecognised financial assets is the carrying amount, net of provision for doubtful debts, of those assets asindicated in the Statement of Financial Position.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 135[FINANCIAL STATEMENTS]
16. Financial Instruments (Consolidated) (cont.)Items not recognised in the Statement of Financial PositionThe credit risk arising from dealings in financial instruments is controlled by a strict policy of credit approvals,limits and monitoring procedures. The economic entity has no material concentration of credit risk with anysingle counterparty and, as a matter of policy, only transacts with financial institutions that have a high creditrating. Credit exposure of foreign currency and interest rate derivatives is represented by the net fair value of thecontracts, as disclosed.
D. Hedging InstrumentsSpecific HedgesThe net unrecognised loss of $266 710 (2001 unrecognised gain $224 061) on specific hedges of anticipatedforeign currency purchases will be recognised at the date of the underlying transactions.
General HedgesAt balance date, the Corporation held forward exchange contracts to buy United States Dollars (USD), GreatBritish Pounds (GBP) and the Euro (EUR).
The following table sets out the gross value to be received under foreign currency contracts, the weightedaverage contracted exchange rates and the settlement periods of outstanding contracts for the economicentity.
Sell Australian Average ExchangeDollars Rate
2002 2001 2002 2001$’000 $’000
Buy USDLess than 1 year 4 281 3 380 0.5297 0.5642Greater than 1 year — — — —Buy GBPLess than 1 year 1 403 1 082 0.3718 0.3803Buy EURLess than 1 year 263 1 766 0.5982 0.5863
17. Remuneration of DirectorsABC
2002 2001$ $
Remuneration received or due and receivable by directors of the Corporation. 1 831 030 869 351
The number of directors of the Corporation included in these figures are shown below in therelevant remuneration bands: Number Number
Remuneration received or due and receivable by directors of the Corporation and Controlled Entities as detailed in note 22is $3 088 326 (2001 $2 233 754). Directors’ remuneration for 2001 includes the reimbursement of relocation expenses.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 136 [FINANCIAL STATEMENTS]
18. Related Party DisclosuresDirectors of the CorporationThe Directors of the Corporation during the year were:
• Donald McDonald AO (Chairman)
• Jonathan Shier (Managing Director) Terminated 16 November 2001
• Russell Balding (Managing Director) Appointed 29 May 2002 (Acting 8 November 2001)
• Leith Boully
• John Gallagher QC
• Ian Henschke Retired 14 June 2002
• Ramona Koval Appointed 15 June 2002
• Michael Kroger
• Ross McLean
• Maurice Newman AC
• Judith Sloan
The aggregate remuneration of Directors is disclosed in note 17.
Transactions with entities in the wholly owned groupTransactions between related parties are on normal commercial terms and conditions no more favourable thanthose available to other parties unless otherwise stated.
Symphony Australia Holdings Pty LimitedThe company is a wholly owned subsidiary of the Corporation.
During the period the Corporation provided goods and services to Symphony Australia Holdings Pty Limitedon normal terms and conditions totalling $460 982 (2001 $455 659). At year end the Corporation was owed$19 220 (2001 $281 088) in relation to the supply of these goods and services.
At year end the Corporation owed Symphony Australia Holdings Pty Limited an amount of $nil (2001 $18 858)in relation to long service leave for staff at incorporation.
Adelaide Symphony Orchestra Pty LimitedThe company is a wholly owned subsidiary of the Corporation.
During the period the Corporation provided goods and services to Adelaide Symphony Orchestra Pty Limitedon normal terms and conditions totalling $77 033 (2001 $180 114). At year end the Corporation was owed$260 745 (2001 $154 453) in relation to the supply of these goods and services. At year end the Corporationowed Adelaide Symphony Orchestra Holdings Pty Limited an amount of $25 792 (2001 $25 837) in relation tolong service leave for staff at incorporation.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 137[FINANCIAL STATEMENTS]
18. Related Party Disclosures (cont.)Melbourne Symphony Orchestra Pty LimitedThe company is a wholly owned subsidiary of the Corporation.
During the period the Corporation provided goods and services to Melbourne Symphony Orchestra Pty Limitedon normal terms and conditions totalling $183 298 (2001 $178 072). At year end the Corporation is owed$45 273 (2001 $51 181) for these goods and services. At year end the Corporation owed MelbourneSymphony Orchestra Pty Limited an amount of $34 534 (2001 $45 377) in relation to long service leavefor staff at incorporation.
Orchestral Network Australia Pty LimitedThe company was deregistered 18 February 2002. No transaction occurred between related parties.
Queensland Orchestras Pty LimitedThe company is a wholly owned subsidiary of the Corporation.
During the year the Corporation provided goods and services to Queensland Orchestras Pty Limited on normalterms and conditions totalling $42 642 (2001 $50 256). At year end the Corporation was owed $2 984(2001 $52 176) in relation to the supply of these goods and services. At year end the Corporation owedQueensland Orchestras Pty Limited $46 009 (2001 $63 821) for long service leave for staff at incorporation.
Sydney Symphony Orchestra Holdings Pty LimitedThe company is a wholly owned subsidiary of the Corporation.
During the period the Corporation provided goods and services on normal terms and conditions totalling$77 777 (2001 $87 746). At year end Sydney Symphony Orchestra Holdings Pty Limited owed the Corporation$36 681 (2001 $266 604). At year end the Corporation owed Sydney Symphony Orchestra Holdings PtyLimited $128 374 (2001 $186 869) for long service leave for staff at incorporation.
Tasmanian Symphony Orchestra Pty LimitedThe company is a wholly owned subsidiary of the Corporation.
During the year the Corporation provided goods and services to Tasmanian Symphony Orchestra Pty Limitedon normal terms and conditions totalling $107 841 (2001 $98 690). At year end the Corporation was owed$101 606 (2001 $86 642) in relation to the supply of these goods and services. At year end the Corporationowed Tasmanian Symphony Orchestra Pty Limited $nil (2001 $30 199) for long service leave for staff atincorporation.
West Australian Symphony Orchestra Holdings Pty LimitedThe company is a wholly owned subsidiary of the Corporation.
During the period the Corporation provided goods and services to West Australian Symphony OrchestraHoldings Pty Limited on normal terms and conditions totalling $155 240 (2001 $159 452). At year end theCorporation was owed $32 999 (2001 $131 880) in relation to the supply of these goods and services. At yearend the Corporation owed West Australian Symphony Orchestra Holdings Pty Limited an amount of $26 347(2001 $105 148) in relation to long service leave for staff at incorporation.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 138 [FINANCIAL STATEMENTS]
18. Related Party Disclosures (cont.)Music Choice Australia Pty Limited and The News Channel Pty LimitedThe companies are wholly owned subsidiaries of the Corporation that did not trade during the 2001-2002financial year.
AIM West Pty / Equipco Australia Pty Limited / AIM Holdings Australia Pty Limited / ArnbridgePty Limited / Australian Information Media Pty LimitedThese companies were placed into voluntary liquidation during the 1998/1999 financial year and werederegistered on 25 June 2002.
19. Remuneration of OfficersConsolidated ABC
2002 2001 2002 2001$ $ $ $
The aggregate amount of total remuneration of Officers shown is: 3 427 951 2 987 400 3 310 163 3 249 278
The number of officers who received or were due to receive totalremuneration of $100 000 or more:
The officer remuneration includes all officers concerned with or taking part in the management of the Corporation during 2001-2002except the Managing Director. Details in relation to the Managing Director have been incorporated into note 17 – Remuneration ofDirectors.
Consolidated remuneration excludes officers of the principal entity who are Directors in the wholly owned group. Details in relation tothe officers have been incorporated into note 17 – Remuneration of Directors.
Consolidated remuneration includes termination payable of $119 551 (2001 $425 181).
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 139[FINANCIAL STATEMENTS]
20. Remuneration of AuditorsConsolidated ABC
2002 2001 2002 2001$ $ $ $
Remuneration to the Auditor-General for auditing thefinancial statements for reporting period. 275 799 257 000 211 000 203 000
KPMG have been contracted by the Australian National Audit Office to provide audit services on their behalf. Fees for these servicesare included in the above. In addition KPMG have earned $67 585 for advisory services where they have been separately contractedby the ABC.
21. Trust FundsConsolidated ABC
2002 2001 2002 2001$ $ $ $
The Corporation is trustee for foundations Ian Reed Sir Charles Moseswith accumulated funds at 30 June as follows: Foundation Foundation
Balance carried forward from previous year 444 244 446 253 3 190 3 187Receipts during the year 10 780 500 — —Interest received 25 773 23 078 1 3Available for payments 480 797 469 831 3 191 3 190Payments made (2) (25 587) — —Fund closing balance 480 795 444 244 3 191 3 190
Monies were received under formal trust arrangements. These trusts are independently managed in accordance with the terms of thetrusts and the funds are held in authorised trustee investments. These funds are not available for other purposes of the Corporation andare not recognised in the financial statements.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 140 [FINANCIAL STATEMENTS]
22. Controlled EntitiesPlace of Beneficial Beneficial
incorporation percentage percentageheld by held by
Adelaide Symphony Orchestra Pty Limited Australia 100% 100%
Melbourne Symphony Orchestra Pty Limited Australia 100% 100%
Queensland Orchestras Pty Limited Australia 100% 100%
Sydney Symphony Orchestra Holdings Pty Limited Australia 100% 100%
Symphony Australia Holdings Pty Limited Australia 100% 100%
Tasmanian Symphony Orchestra Pty Limited Australia 100% 100%
West Australian Symphony Orchestra Holdings Pty Limited Australia 100% 100%
Music Choice Australia Pty Ltd Australia 100% 100%
The News Channel Pty Limited Australia 100% 100%
Orchestral Network Australia Pty Limited (a) Australia — 100%
AIM Holdings Australia Pty Limited (b) Australia — 100%
AIM West Pty (b) Australia — 100%
Arnbridge Pty Limited (b) Australia — 100%
Australian Information Media Pty Limited (b) Australia — 100%
Equipco Australia Pty Limited (b) Australia — 100%
(a) Entity deregistered 18 February 2002.
(b) Entities deregistered 25 June 2002.
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 141[FINANCIAL STATEMENTS]
23. Reporting by OutcomesThe Corporation is structured to meet three outcomes:
Outcome 1The ABC will create and deliver distinctive programming and services; inform, entertain and educate itsaudiences; and develop cultural and community identity.
Outcome 2The ABC will maintain the scale and quality of analog terrestrial transmission of its national networks, regionalnetworks and Radio Australia programming which existed immediately prior to the privatisation of the NationalTransmission Network (NTN).
Outcome 3The Australian community has access to ABC digital television service in accordance with agreed timetablesand funding.
Note 23A – Total Cost/Contribution of Outcomes
Notes to and Forming Part of the Financial Statementsfor the year ended 30 June 2002 (cont.)
ANNUAL REPORT 2001-2002
PAGE 142 [FINANCIAL STATEMENTS]
Outcome 1 Outcome 2 Outcome 3 Total
Actual Budget Actual Budget Actual Budget Actual Budget$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000