Accounting Policy Guides

The following accounting policy Resource Management Guides (RMGs) are designed to support and be read in conjunction with:

These RMGs: 

  • clarify and provide guidance on specific accounting and financial reporting policies
  • provide explanations and examples relating to the interpretation and application of AASs and/or FRR. 

Unless otherwise stated, the following RMGs apply until they are either amended or withdrawn:

The following FinanceBrief and Accounting Guidance Note are still in effect. They will be replaced by RMGs in the near future.

RMG 109 - Accounting for internally developed software 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that internally develop software for internal use. 

Key Points

  • Purpose: To provide guidance on what costs can be capitalised for internally developed software intended for internal use.
  • Scope: Focuses on software that is internally developed for internal use (not for the purpose of selling, nor software that is externally developed). 

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RMG 110 - Accounting for operating lease expenses and incentives 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that are involved with operating leases as the lessee, including those that are in receipt of lease incentives provided as an inducement to enter into an operating lease. 

Key Points

  • Purpose: To provide guidance on the accounting for operating lease expenses by the lessee, including the treatment of fixed rental increases, contingent rent, and also lease incentives.
  • Scope: Lessors and finance leases are excluded from the scope. However, in many instances the same principles might apply to lessors of operating leases, but would need to be considered from the lessor’s perspective (e.g. decreases in cash to the lessee are increases to the lessor; expenses to the lessee are revenue to the lessor; reductions of rental expense to the lessee are reductions of rental income to the lessor). 

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RMG 111 - Accounting for non-current assets held for sale 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that have non-current assets that are to be sold. 

Key Points

  • Purpose: To provide guidance on the accounting for non-current assets that are held for sale under AASB 5 Non-current Assets Held for Sale and Discontinued Operations.
  • Scope: AASB 5 excludes from its scope the restructuring of administrative arrangements and administered activities of a government department and the transfer of assets and liabilities between government departments. 

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RMG 112 - Identification of general insurance contracts for accounting purposes 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that enter into contracts which transfer insurance risk, irrespective of whether the entity conducts an “insurance business”. 

Key Points

  • Purpose: To provide guidance on applying AASB 1023 General Insurance Contracts in the identification of general insurance contracts in relation to agreements entered into by Australian Government entities.
  • Scope: Only applies in identifying ‘general insurance contracts’ under AASB 1023. Additionally, AASB 1023 applies even if the entity does not conduct an ‘insurance business’. 

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RMG 113 - Accounting for subsequent expenditure on property, plant and equipment 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities with expenditure on property, plant and equipment within the scope of AASB 116. 

Key Points

  • Purpose: To provide guidance on the accounting (capitalise or expense) for expenditure on property, plant and equipment after initial recognition, generally referred to as subsequent expenditure.
  • Scope: Focuses on the subsequent expenditure, not the acquisition, of an AASB 116 asset. 

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RMG 114 - Accounting for decommissioning, restoration and similar provisions (‘make good’) 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that have obligations to dismantle, remove and restore items of property, plant and equipment. 

Key Points

  • Purpose: To provide guidance on the accounting and disclosure requirements for initial recognition of make good provisions and subsequent accounting, including the unwinding of the discount and changes made to the provision.
  • Scope: Whilst the focus is on accounting for make good provisions, limited guidance is also provided on accounting for the related asset as support. In principle, the discounting guidance can also apply to other AASB 137 provisions. 

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RMG 115 - Accounting for concessional loans 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that issue concessional loans. 

Key Points

  • Purpose: To provide guidance on accounting for concessional loans, including discounting using the effective interest method and the unwinding of the discount.
  • Scope: Commonwealth entities who issue concessional loans. In principle, the ‘market based loan’ components of this guide can also apply to other financial instruments measured at amortised cost using the effective interest method. 

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RMG 116 - Accounting for the Paid Parental Leave scheme by Commonwealth employers 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities in their administration of the entity’s employer obligations. 

Key Points

  • Purpose: To provide guidance on accounting for receipts and payments associated with the Paid Parental Leave scheme. 

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RMG 117 - Classifying leases with a land component for accounting purposes 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that have a lease agreement which includes a land component. 

Key Points

  • Purpose: To provide guidance on lease classification for both lessors and lessees in accordance with AASB 117 where the lease includes a land component.
  • Scope: Applies irrespective of whether the entity is the lessee or the lessor whenever the lease includes a land component. 

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RMG 118 - Accounting for machinery of government changes

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that have had machinery of government (MoG) changes. 

Key Points

  • The process for determining asset and liability transfers is separate from the transfer of appropriation but for convenience, is dealt with in one Resource Management Guide.
  • Policy:
    • Assets and liabilities should transfer according to whichever entity has responsibility for them. The timing of change of responsibility is broadly aligned to change of control, based on legal requirements, and will vary from item to item.
    • Transfers of appropriation amounts for the purpose of PGPA Act section 75 need to be agreed between entities and apply from the date specified in the instrument.
  • Purpose: To provide advice as to when changes arising from MoG changes, should be recorded in entities’ accounts and records.
  • Scope: Limited to financial management implications. Excludes other procedural matters arising from changing or abolishing entities’ functions.

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RMG 121 - Accounting for land under roads

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that have land under roads per AASB 1051.

Key Points

  • Policy: Land under roads acquired on or after 1 July 2008 is required to be recognised where the criteria in this guide is met.
  • Purpose: To convey to the above entities the accounting treatment of land under roads in accordance with AASB 1051 Land Under Roads.

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RMG 123 - Deeming or designating transfers of assets and liabilities as 'contributions by owners' (equity)

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that are in the process of transferring assets and/or liabilities to/from another Commonwealth entity.

Key Points

  • Policy: Outside of Machinery of Government (MoG) transfers, where a Government decision requires the non-reciprocal transfer of assets/liabilities between wholly-owned government entities, this Guide provides a basis for certain transfers to be accounted for as contributions by owners.
  • Purpose: To direct the above entities as to when it is appropriate to have transfers of assets and liabilities deemed or designated ‘contributions by owners’ (equity) in accordance with Interpretation 1038 Contributions by owners made to wholly-owned public sector entities and/or AASB 1004 Contributions.
  • Scope: Transfers within a formal MoG process are excluded from this Guide. Accounting for MoG transfers is covered by Part H of the Commonwealth Entities Financial Statements Guide.

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RMG 124 - Accounting for social benefit payments 

Audience

This Guide applies to: CFOs and CFO Units in all Commonwealth entities that report social benefits payments in their financial statements. 

Key Points

  • Purpose: To provide guidance on accounting for social benefits payments provided by Government to eligible individuals or households.
  • Scope: This guide does not apply to benefits:
    • the Government provides to the community for which there are no eligibility requirements, such as public goods;
    • payments that might have similar characteristics to social benefits but are really compensation or remuneration – e.g. insurance contracts, employee benefits, compensation provisions; or
    • paid through the tax system, such as tax offsets. 

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Contact for information on this page: accountingpolicy@finance.gov.au

Last updated: 14 July 2015