Disclosure of maturity information in financial statements (RMG 122)

Audience

This guide applies to officers in Commonwealth reporting entities with responsibility for preparing financial statements under the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR).

Key points

The financial statements of Commonwealth reporting entities are to be prepared in accordance with the FRR and the Australian Accounting Standards.

This guide provides:

This guide replaces Disclosure of maturity information in financial statements (RMG 122), released April 2019.

Resources

1. Introduction

  1. Financial statements are a means by which a Commonwealth entity’s management, or governing body, discharges its financial accountability. Australian Government’s accountability is also supported by the preparation and audit of the Commonwealth Consolidated Financial Statements (CFS), which presents the consolidated whole-of-government financial results, inclusive of all Australian Government controlled entities.
  2. The framework for preparing Commonwealth entity financial statements, and the CFS, includes standards and requirements that support the integrity and consistency of financial information, as established in the:
  3. The disclosure of maturity information (ie the expected realisation dates of assets and liabilities) in financial statements, is useful for assessing entity liquidity and solvency.

2. Authority to disclose maturity information

  1. Section 34B of the FRR requires the disclosure of maturity information, in a note in the financial statements, showing total assets and total liabilities broken down to amounts expected to be recovered or settled within 12 months, and other amounts.

FRR extract:

34B Aggregate assets and liabilities

A reporting entity must disclose the following in a note in the financial statements for a reporting period:

  1. the total of:
    1. any amounts expected to be recovered from assets within 12 months after the end of the reporting period; and
    2. cash;
  2. the total of any other amounts recoverable from assets;
  3. the total of any amounts expected to be settled for liabilities within 12 months after the end of the reporting period;
  4. the total of any amounts that are expected to be settled for liabilities more than 12 months after the end of the reporting period.
  1. Under paragraph 60 of AASB 101, entities are required to present current and non-current assets and liabilities as separate classifications, except when presentation based on liquidity is reliable and more relevant. When that exception applies, an entity is to present all assets and liabilities in order of liquidity.
  2. Under paragraph 61 of AASB 101, for each asset and liability line item expected to be recovered or settled, entities are required to disclose the amount expected to be received or paid after more than 12 months, where maturity is expected:
    • within 12 months after the reporting period
    • more than 12 months after the reporting period.
  3. The requirements at section 34B of the FRR are consistent with those in paragraph 61 of AASB 101. However, the requirements at paragraph 61 may differ from the current/non-current distinction included at paragraph 60 of AASB 101.

2.1 Maturity disclosure requirement by tiers of the AAS

  1. AASB 1053 Application of Tiers of Australian Accounting Standards (AASB 1053) sets two requirement tiers for preparing general purpose financial statements:
    • Tier 1: Australian Accounting Standards
    • Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements.
  2. Section 18 of the FRR specifies that Commonwealth entities must apply Tier 2, as a minimum. A subset of entities, listed at section 18 of the FRR, must apply Tier 1 for some or all disclosure. The CFS is prepared in accordance with Tier 1 requirements.
  3. Paragraph 61 of AASB 101 is a Tier 1 reporting requirement (ie applicable to Tier 1 entities and the CFS) which requires the disclosure in financial statements of amounts expected to be received or paid after more than 12 months. As such, a maturity analysis for asset and liability line items is required in:
    • Tier 1 entity financial statements
    • information provided by both Tier 1 and Tier 2 entities through CBMS and in the Supplementary Reporting Pack, issued annually to entities by Finance, for CFS purposes.
  4. Following is a summary of maturity information required under AASB 101, by AAS tiers.
Summary of maturity information required under AASB 101, by AAS tiers

Tier 1 entities—disclose maturity information in financial statements for each asset and liability line item that combines amounts expected to be recovered or settled ‘within 12 months’ and ‘more than 12 months’ after the reporting period.

Tier 2 entities—are not required to disclose maturity information in financial statements for individual line items (as described above for Tier 1) but are required to make such information available to Finance for preparation of the CFS.

  1. Both AAS tiers are required to apply section 34B of the FRR, to disclose the total assets and liabilities level ‘within 12 months’ or ‘more than 12 months’ as a note in their financial statements.

3. Practical examples of maturity disclosure

  1. Following are examples of the application of section 34B of the FRR against typical balance sheet items. It is important that entities:
    • consider their individual circumstances against paragraphs 61 and 65 of AASB 101 for any restrictions or exceptions that may apply
    • apply professional judgement to ensure financial statements present fairly the entity’s financial position, financial performance and cash flows.

3.1  Appropriations receivable

  1. Appropriations receivable would reasonably be reported as an asset that is expected to be recovered ‘within 12 months’ because the amount is generally immediately available to entities on an at-call basis.

3.2  Trade and other receivables

  1. Maturity disclosure of trade and other receivables is dependent on the terms of the receivable. For example:
    • A receivable with 30-day trade terms would reasonably be expected to be settled ‘within 12 months’.
    • A loan that does not require principal or interest repayment for two years would be disclosed as ‘more than 12 months’ (also see Loans).

3.3  Property, plant and equipment

  1. Property, plant and equipment (PPE) would reasonably be reported as an asset to be recovered in ‘more than 12 months’. Where a PPE asset is expected to be sold or disposed of within 12 months (eg under AASB 5 Non-current Assets Held for Sale and Discontinued Operations), that asset is to be reported as ‘within 12 months’, with remaining PPE assets reported as ‘more than 12 months’.

3.4  Loans

  1. Loans taken with a repayment term over a number of years would ordinarily be separated into amounts due within 12 months and more than 12 months based on contractual repayments of principal and interest. For example:

If an entity takes a new loan for a five-year term, with equal yearly principal and interest repayments, the loan would be treated and disclosed as:

  • four-fifths of the loan amount being due for repayment in more than 12 months
  • one-fifth of the loan amount being expected to be settled within 12 months.

3.5  Employee provisions

  1. Maturity information for employee entitlements is to be included in amounts presented in accordance with section 34B of the FRR—this may differ to the accounting treatment, for measurement purposes under AASB 119 Employee Benefits(AASB 119). For:
  • annual leave — entities are required to calculate the portion of the provision not expected to be settled within 12 months. While it may be reasonable to expect the majority of this provision would be settled within 12 months, entities need to review trends in leave provision, to determine the appropriate split of the total amount.
  • long service leave (LSL) — under section 34B of the FRR, LSL is to be broken down to ‘within 12 months’ or ‘more than 12 months’. For employees that:
    • have not met the ten years of service requirement, the LSL entitlement is to be disclosed as ‘more than 12 months’ (ie these employee provisions are not be expected to be settled in 12 months)
    • have satisfied the ten years of service requirement, entities are to use professional judgement, based on historical employee records or actuarial assessments, to disaggregate the reported balance between ‘within 12 months’ or ‘more than 12 months’
    • can, in limited circumstances, access LSL entitlements before reaching ten years of service, entities are not expected (for practical purposes) to adjust their calculations with respect to such amounts.
  1. Table 1.1 shows the different treatment of employee provisions under section 34B of the FRR and AASB 119.

1.1: Employee entitlements treatments

Item

FRR section 34B*

AASB 119 Employee Benefits

 

≤ 12 months

> 12 months

 

Annual leave

100% (*)

0%

Short-term employee benefit

Long service leave with less than ten years’ service

0%

100%(*)

Long-term employee benefit

Long service leave with more than ten years’ service (vesting entitlement)

Minority of amount

Majority of amount

Long-term employee benefit

*The percentage split of amounts by maturity will depend on entity level analysis.

  1. Also note LSL classification under:
    • AASB 119 as ‘long-term employee benefit’ for employee provisions
    • AASB 124 Related Party Disclosures (AASB 124) as ‘other long-term benefits’ for the key management personnel remuneration disclosure note.
  2. The calculation methodology used must be subject to the same assurance processes used for other information in entity financial statements and consistently applied from year to year. Any significant judgements made, or estimate uncertainty, may need to be disclosed in accordance with paragraphs 122 and 125 of AASB 101.

3.6  Prepayments disclosure (asset or liability)

  1. Prepayments disclosure (for an asset or liability) is dependent on the terms of the obligation, for example:
    • A service that is expected to be provided within the next 12 months would be disclosed as ‘within 12 months’
    • A service to be provided across the next 24 months would likely be disclosed across ‘within 12 months’ and ‘more than 12 months’.

3.7  Application against asset and liability items

  1. Table 1.2 provides examples of asset and liability items and when these are commonly expected to be recovered/settled.

Table 1.2: Examples of maturity disclosures (illustrative only)

Item

≤ 12 months

> 12
months

ASSETS

 

 

Financial assets

 

 

Cash and cash equivalents

X

 

Trade and other receivables

X

X

Equity accounted investments

 

X

Other investments

X

X

Non-financial assets

 

 

Land

 

X

Buildings

 

X

Heritage and cultural

 

X

Plant and equipment

 

X

Computer software

 

X

Other intangibles

 

X

Investment property

 

X

Inventories

X

X

Tax assets

X

X

Assets held for sale

X

 

LIABILITIES

 

 

Payables

 

 

Suppliers

X

 

Subsidies

X

 

Personal benefits

X

 

Grants

X

X

Dividends

X

 

Interest bearing liabilities

 

 

Loans

X

X

Leases

X

X

Deposits

X

X

Other interest bearing liabilities

 

 

Provisions

X

X

Employee provisions

X

X

Competitive neutrality liabilities

X

X

4. Accounting policy changes

  1. The requirements outlined in the FRR (and this guide) represent accounting policy decisions. If entities are required to change their accounting policy, they will be subject to the provisions of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors (AASB 108).
  2. Under paragraph 19(b) of AASB 108, a voluntary change in the accounting policy shall be applied retrospectively as required except to the extent that, under paragraph 23 of AASB 108, it is impracticable to determine the effects.

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