Technical accounting policy and guidance

The following accounting policy guidance are designed to support and be read in conjunction with the Commonwealth entities financial statements guide, Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) and Australian Accounting Standards (AASs).

Guidance documents

Purpose of these guidance documents purpose are to: 

• 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Unless otherwise stated, the following guidance applies until they are either amended or withdrawn:

• RMG 109 - Accounting for internally developed software
• RMG 110 - AASB 16 - Leases Implementation Guide
• RMG 111 - Accounting for non-current assets held for sale
• RMG 112 - Identification of general insurance contracts for accounting purposes
• RMG 113 - Accounting for subsequent expenditure on property, plant and equipment
• RMG 114 - Accounting for decommissioning, restoration and similar provisions to make good
• RMG 115 - Accounting for concessional loans
• RMG 118 - Accounting for machinery of government changes
• RMG 119 - Reporting requirements following machinery of government changes
• RMG 122 - Disclosure of maturity information in financial statements 
• RMG 123 - Deeming or designating transfers of assets and liabilities as 'contributions by owners' (equity)
• RMG 125 - Commonwealth entities financial statements guide
• RMG 419 - Guide to classifying payments to other levels of government for specific purposes and Commonwealth own-purpose expense

Position papers

These position papers review the accounting, reporting and disclosure requirements under relevant accounting standards and provide the Department of Finance’s (Finance) position on the interpretations on accounting standards.

Unless otherwise stated, the following position papers apply until they are amended, superseded or withdrawn:

• Implementation options for AASB 16 Leases - Please note this position paper has been superseded by RMG 110 - AASB 16 - Leases Implementation Guide
• Implementation options for AASB 9 Financial Instruments
• Implementation options for AASB 1058 Income of Not-for-Profit Entities in conjunction with AASB 15 Revenue from Contracts with Customers
• AASB 16 Measurement of ROU Assets

Presentation notes

These notes are from presentations previously provided by Finance on financial reporting matters.

• AASB 16 Leases tech training - February 2019
• AASB 1058 & AASB 15 Revenue Tech Training - March 2019
• AASB 16 implementation update - CFO forum December 2018
• Accounting standards updates - CFO forum August 2018
• AASB 1058 CFO forum - March 2018
• AASB 9 Financial Instruments workshop - March 2018
• AASB 9 Financial Instruments - 13 December 2017
• AASB 124 Related Party Disclosures - March 2017

Resource Details

The Frequently Asked Questions (FAQ) are about accounting and financial reporting issues relating to the impact of the COVID-19 situation. This FAQ document is focussed on the issues relevant to most Commonwealth entities. It may be updated if any other issues emerge or further useful guidance becomes available.

RMG 109 - Accounting for internally developed software 

This guide provides guidance on what costs should be capitalised for internally developed software intended for internal use, not for the purpose of selling, nor software that is externally developed.

RMG 110 - AASB 16 - Leases Implementation Guide

This guide provides the Department of Finance's major policy decisions regarding the application of AASB 16, which removes the distinction between operating and finance leases for lessees and requires the recognition of a right-of-use asset and lease liability on the balance sheet.

Please note consistency in accounting treatment of leases amongst Commonwealth entities is necessary for the preparation of the Consolidated Financial Statements.
 

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

This guide provides 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.

Please note 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.

RMG 112 - Identification of general insurance contracts for accounting purposes 

This guide provides 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.

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

This guide provides guidance on asset recognition criteria and accounting treatment for expenditure on property, plant and equipment after initial recognition, referred to as subsequent expenditure.

RMG 114 - Accounting for decommissioning, restoration and similar provisions to make good 

This guide provides guidance on the accounting and disclosure requirements for the initial recognition of make good provisions and subsequent accounting, including the unwinding of the discount and changes made to the provision.

The guide also provides limited guidance is also provided on accounting for the related asset as support. In principle, the discounting guidance can also apply to other provisions under AASB 137 Provisions, Contingent Liabilities and Contingent Assets.

RMG 115 - Accounting for concessional loans

This guide provides guidance on accounting for concessional loans, including discounting using the effective interest method and the unwinding of the discount. 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.

RMG 118 - Accounting for machinery of government changes

This guide provides information on accounting requirements and financial management implications to assist Commonwealth entities in implementing machinery of government changes.

This guide excludes other procedural matters arising from changing or abolishing entities’ functions. For guidance on reporting requirements following machinery of government changes, please refer to RMG 119.

RMG 119 - Reporting requirements following machinery of government changes

This guide provides guidance on reporting requirements for an entity’s annual report, performance report and annual financial statements following a machinery of government change in accordance with Division 4 of the Public Governance, Performance and Accountability Rule 2014.

For guidance on accounting requirements for implementing machinery of government changes, please refer to RMG 118.

RMG 122 - Disclosure of maturity information in financial statements

This guide provides advice on the classification of assets and liabilities to assist entities in complying with section 34B of the Financial Reporting Rule when preparing financial statements and the Supplementary Reporting Pack for Consolidated Financial Statements.

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

This guide provides guidance to direct 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. Transfers within a formal MoG process are excluded from this guide. Accounting for MoG transfers is covered by Part 8 of the Commonwealth Entities Financial Statements guide.

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.

RMG 125 – Commonwealth entities financial statements guide

This guide provides information relevant to the preparation of annual financial statements such as definitions, rounding and materiality policies. It includes information relevant to the specific requirements of the FRR, including disclosure of individual remuneration for senior executives of reporting entities and other additional disclosures not covered by AAS. For consistency, explains accounting treatment mandated by the FRR where AAS allows a choice (e.g. use of the valuation method for material property, plant and equipment and administered disclosures).
The Department of Finance has also produced the Primary Reporting and Information Management Aid to assist entities to prepare financial statements.

RMG 419 -Guide to classifying payments to other levels of government for specific purposes and Commonwealth own-purpose expenses

This guide outlines the process to determine whether payments made to other levels of government are recognised as Commonwealth Own Purpose Expenditure (COPE) or Specific Purpose Payments (SPP).

Position Paper - AASB 16 Measurement of ROU Assets

This paper provides the Department of Finance’s (Finance’s) position on whether Right of Use (ROU) lease assets are required to be measured at fair value under AASB 16 Leases and related Australian Accounting Standards.

Position Paper - Implementation options for AASB 9 Financial Instruments

This paper reviews the transition options under AASB 9 and the ongoing application of the standard. Options have been selected based on their compliance with AASB 1049 Whole of Government and General Government Sector Financial Reporting (AASB 1049), the need for consistency across Commonwealth entities, and an assessment of the costs of implementing particular options for preparers against their benefits to financial statement users.

Position Paper - Implementation options for AASB 1058 Income of Not-for-Profit Entities in conjunction with AASB 15 Revenue from Contracts with Customers

This paper reviews the transition options under both AASB 1058 and AASB 15, and the ongoing application of these standards. In compliance with AASB 1049 Whole of Government and General Government Sector Financial Reporting, the selected options will ensure consistent adoption of the relevant accounting standards are selected across not-for-profit Commonwealth entities. Finance’s position is largely based on consideration of the costs for financial statement preparers to implement a particular option compared to its benefits to financial statement users.