1.1 Objectives of the Fair Work Commission
The Fair Work Commission (previously Fair Work Australia) was established by the Fair Work Act 2009 and commenced operations on 1 July 2009. The Fair Work Commission was one of two institutions established to administer the provisions of the Fair Work Act 2009 and to provide a balanced framework for cooperative and productive workplace relations that promote economic prosperity and social inclusion.
The Fair Work Commission is an Australian Government controlled entity.
The Fair Work Commission is structured to meet the following outcome:
Outcome 1: Simple, fair and flexible workplace relations for employees and employers through the exercise of powers to set and vary minimum wages and modern awards, facilitate collective bargaining, approve agreements and deal with disputes.
The continued existence of the Fair Work Commission in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for the Fair Work Commission’s administration and programs.
The Fair Work Commission activities contributing toward the outcome are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by the Fair Work Commission in its own right. Administered activities involve the management or oversight by the Fair Work Commission, on behalf of the Government, of items controlled or incurred by the Government.
The Fair Work Commission’s departmental activities are identified under one program:
- Program 1: Dispute resolution, minimum wages, orders and approval of agreements.
The Fair Work Commission conducts the following administered activities on behalf of the Government:
- the collection of fees for the lodgement of termination of employment applications; and
- direct payment of pensions to beneficiaries of the Judges’ Pension Scheme under the Judges Pension Act 1968 drawn down from the Department of Finance.
The Fair Work Commission also supports the functions of the Road Safety Remuneration Tribunal, and the cost and activities of the Tribunal are represented in the accounts of the Fair Work Commission.
The Fair Work Commission consists of a President, Vice Presidents, Senior Deputy Presidents, Deputy Presidents, Commissioners, Expert Panel members and Road Safety Remuneration Tribunal industry members. The Fair Work Commission also has a General Manager and administrative staff who exercise powers and functions under the Fair Work Act 2009.
The Fair Work Commission has the power to vary awards, make minimum wage orders, approve agreements, resolve workplace and other disputes, deal with workplace bullying applications, regulate registered organisations, determine unfair dismissal claims and make orders in relation to such things as good faith bargaining and industrial action. The Road Safety Remuneration Tribunal’s functions are to make road safety remuneration orders, provide dispute resolution to the road transport industry, approval of road transport collective agreements and to provide research into pay and conditions that could affect safety in the road transport industry.
1.2 Basis of Preparation of the Financial Statements
The Financial Statements are general purpose financial statements and are required by section 49 of the Financial Management and Accountability Act 1997.
The Financial Statements have been prepared in accordance with:
- Finance Minister’s Orders (FMO’s) for reporting periods ending on or after 1 July 2011; and
- Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.
The Financial Statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.
The Financial Statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.
Unless an alternative treatment is specifically required by an accounting standard or the FMOs, assets and liabilities are recognised in the Statement of Financial Position when and only when it is probable that future economic benefits will flow to the entity or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under executory contracts are not recognised unless required by an accounting standard. Liabilities and assets that are unrecognised are reported in the schedule of commitments or the schedule of contingencies.
Unless alternative treatment is specifically required by an accounting standard, income and expenses are recognised in the Statement of Comprehensive Income when and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured.
Administered revenues, expenses, assets and liabilities and cash flows reported in the Schedule of Administered Items and related notes are accounted for on the same basis and using the same policies as for departmental items, except where otherwise stated at Note 1.20.
1.3 Significant Accounting Judgements and Estimates
In the process of applying the accounting policies listed in this note, the Fair Work Commission has made a judgement that has the most significant impact on the amounts recorded in the financial statements: the fair value of leasehold improvements has been taken to be the market value of similar leasehold improvements as determined by an independent valuer.
No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period.
1.4 New Australian Accounting Standards
Adoption of New Australian Accounting Standard Requirements
No accounting standard has been adopted earlier than the application date stated in the standard.
New standards, amendments to standards or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a financial impact, and are not expected to have a future financial impact on the Fair Work Commission.
Future Australian Accounting Standards Requirements
New standards, amendments to standards or interpretations that were issued prior to the sign-off date and are applicable to the future reporting period are not expected to have a future financial impact on the Fair Work Commission, with the exception of AASB 1055 Budgetary Reporting, which is expected to affect disclosure requirements in future reporting periods.
Revenue from the sale of goods is recognised when:
- the risks and rewards of ownership have been transferred to the buyer;
- Fair Work Commission retains no managerial involvement or effective control over the goods;
- the revenue and transaction costs incurred can be reliably measured; and
- it is probable that the economic benefits associated with the transaction will flow to Fair Work Commission.
Fair Work Commission received rental income from the sub-leasing of space within the Sydney office and Level 9 Melbourne office during the 2013/14 financial year. Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:
- the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and
- the probable economic benefits associated with the transaction will flow to Fair Work Commission.
The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.
Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at end of the reporting period. Allowances are made when collectability of the debt is no longer probable.
Interest revenue is recognised using the effective interest method as set out in AASB 139 Financial Instruments: Recognition and Measurement.
Revenue from Government
Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when Fair Work Commission gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts.
Resources Received Free of Charge
Resources received free of charge are recognised as gains when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense.
Resources received free of charge are recorded as either revenue or gains depending on their nature.
Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government entity as a consequence of a restructuring of administrative arrangements. (refer to Note 1.7)
Sale of Assets
Gains from disposal of assets are recognised when control of the asset has passed to the buyer.
1.7 Transactions with the Government as Owner
Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budget (DCBs) are recognised directly in contributed equity in that year.
Restructuring of Administrative Arrangements
Net assets received from or relinquished to another Government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.
1.8 Employee Benefits
Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of the end of reporting period are measured at their nominal amounts.
The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.
Other long-term employee benefits are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.
The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of Fair Work Commission is estimated to be less than the annual entitlement for sick leave.
Members of the Fair Work Commission who were Presidential members under the Workplace Relations Act 1996 and the President of the Fair Work Commission, accrue 6 months long leave after 5 years of service as a presidential member. In recognition of the nature of presidential members’ tenure, a provision is accrued from the first year of service.
The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including Fair Work Commission’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.
The liability for long service leave has been determined by use of the Australian Government Actuary’s shorthand method using the Standard Commonwealth sector probability profile. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.
Separation and Redundancies
Provision is made for separation and redundancy benefit payments. Fair Work Commission recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.
The majority of staff and members of Fair Work Commission are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the PSS Accumulation Plan (PSSap).
The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.
The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. The liability is reported in the Department of Finance’s administered schedules and notes.
Fair Work Commission makes employer contributions to the employee’s superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. Fair Work Commission accounts for the contributions as if they were contributions to defined contribution plans.
The liability for superannuation recognised as at 30 June 2014 represents outstanding contributions for the final fortnight of the year.
Members of the Fair Work Commission who were Presidential members under the Workplace Relations Act 1996 and the President of the Fair Work Commission are eligible for pensions under the Judges’ Pension Scheme (JPS) pursuant to the Judges’ Pensions Act 1968. The JPS is an unfunded defined benefit scheme that is governed by the rules set out in the Act.
The Fair Work Commission does not contribute towards the cost of the benefit during such member’s term of service. Liability and expenses associated with the JPS are recorded as part of the Department of Finance’s financial statements. The Department of Finance has given the Fair Work Commission drawing rights for this financial year in relation to the special appropriation made under the Judges’ Pensions Act 1968. The Fair Work Commission makes pension payments directly to beneficiaries of the scheme (refer to Note 20 Table E).
A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits.
Where an asset is acquired by means of a finance lease, the asset is capitalised at either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability is recognised at the same time and for the same amount.
The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.
Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.
1.10 Borrowing Costs
All borrowing costs are expensed as incurred.
1.11 Fair Value Measurement
Fair Work Commission reviewed all fair value methodologies in light of the new principles in AASB 13. No adjustments were made to methodologies to take into account the more exit-oriented approach to fair value under AASB 13, as well as the availability of more observable data for certain assets (e.g. plant and equipment). Such adjustments – in themselves - did not result in a material impact on the values for the affected Property Plant and Equipment classes.
Determination of Fair Value Hierarchy Level sets out the process for identifying the fair value inputs and corresponding fair value hierarchy levels.
- To calculate a fair value pursuant to AASB 13, information must be obtained, and/or assumptions made, about a range of factors, including but not limited to:
- the characteristics e.g. the condition and location of the asset;
- which market a sale of that asset would take place in;
- who would buy the asset and what they would take into account;
- what is the highest and best use for the asset; and
- which costs are to be taken into account (e.g. transaction costs are not to be included, as per AASB 13).
The data used for the fair value calculation must reflect the information and assumptions that market participants would use when pricing the asset, not necessarily how an agency currently uses, or intends to use, the asset.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the following fair value hierarchy, based on the data and assumptions used in the most recent specific appraisals:
- level 1 – represents fair value measurements that reflect unadjusted quoted market prices in active markets for identical assets and liabilities;
- level 2 – represents fair value measurements that are substantially derived from inputs (other than quoted prices included within level 1) that are observable, either directly or indirectly; and
- level 3 – represents fair value measurements that are substantially derived from unobservable inputs .
Changes in level 2 and 3 fair values are analysed at the end of each reporting period in conjunction with an independent valuer. As part of this discussion the team presents a report that explains the reason for the fair value movements. As this is the first reporting period no transfers were recorded.
Cash is recognised at its nominal amount. Cash and cash equivalents includes:
- cash on hand;
- demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value;
- cash held by outsiders; and
- cash in special accounts.
1.13 Financial Assets
Fair Work Commission classifies its financial assets in the following categories:
- financial assets at fair value through profit or loss;
- held-to-maturity investments;
- available-for-sale financial assets; and
- loans and receivables.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon trade date. Fair Work Commission currently only holds financial assets classified as loans and receivables.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, when appropriate, a shorter period.
Income is recognised on an effective interest rate basis except for financial assets that are recognised at fair value through profit or loss.
Loan and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.
Impairment of financial assets
Financial assets are assessed for impairment at the end of each reporting period.
Financial assets held at amortised cost - if there is objective evidence that an impairment loss has been incurred for loans and receivables held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income.
1.14 Financial Liabilities
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial liabilities are recognised and derecognised upon trade date.
Fair Work Commission currently only holds financial assets classified as other financial liabilities in the form of suppliers and other payables.
Other Financial Liabilities
Suppliers and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).
1.15 Contingent Liabilities and Contingent Assets
Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position but are reported in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset or represent an existing liability or asset in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain, and contingent liabilities are disclosed when settlement is greater than remote (refer to Note 11 and Note 19).
1.16 Acquisition of Assets
Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.
Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.
1.17 Property, Plant and Equipment
Asset Recognition Threshold
Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $2,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).
The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions in property leases taken up by Fair Work Commission where there exists an obligation to restore the property to its original condition. These costs are included in the value of Fair Work Commission’s leasehold improvements with a corresponding provision for the ‘make good’ recognised.
Fair values for each class of asset are determined as shown below:
|Asset Class||Fair value measurement|
|Leasehold improvement||Depreciated replacement cost|
|Property, plant and equipment||Market selling price|
Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amount of assets did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depended upon the volatility of movements in market values for the relevant assets.
Revaluation adjustments were made on a class basis. Any revaluation increment was credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus or deficit. Revaluation decrements for a class of assets were recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class.
Any accumulated depreciation as at the revaluation date was eliminated against the gross carrying amount of the asset and the asset was restated to the revalued amount.
The Last independent revaluation was undertaken as at 30 June 2012
Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful life to Fair Work Commission using, in all cases, the straight line method of depreciation.
Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.
Depreciation rates applying to each class of depreciable asset are based on the following useful lives:
|Leasehold improvements||Lease term||Lease term|
|Property, plant and equipment||3 to 10 years||3 to 10 years|
All assets were assessed for impairment at 30 June 2014. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.
The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if Fair Work Commission were deprived of the asset, its value in use is taken to be its depreciated replacement cost.
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.
Fair Work Commission’s intangibles comprise internally developed and externally purchased computer software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.
Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of Fair Work Commission’s software are 3 to 10 years (2012/13: 3 to 10 years).
All software assets were assessed for indications of impairment as at 30 June 2014.
Fair Work Commission is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).
Revenues, expenses and assets are recognised net of GST except:
- where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
- for receivables and payables.
1.20 Reporting of Administered Activities
Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.
Except where otherwise stated below, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.
Fair Work Commission has been granted authority and drawing rights by the Department of Finance to make pension payments pursuant to the Judges’ Pensions Act 1968 (refer Note 20 Table E).
Administered Cash Transfers to and from Official Public Account
Revenue collected by Fair Work Commission for use by the Government rather than Fair Work Commission is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government. These transfers to and from the OPA are adjustments to the administered cash held by Fair Work Commission on behalf of the Government and reported as such in the Schedule of Administered Cash Flows and in the Administered Reconciliation Schedule.
All administered revenues are revenues relating to course of ordinary activities performed by Fair Work Commission on behalf of the Australian Government. As such, administered appropriations are not revenues of individual entity that oversees distribution or expenditure of funds as directed.
Fair Work Commission receives revenue from fees charged for lodgement of unfair dismissals applications. Administered revenue is recognised when the application fee is processed.
1.21 Commonwealth Expenditure
The Australian Government continues to have regard to developments in case law, including the High Court’s most recent decision on Commonwealth expenditure in Williams v Commonwealth (2014) HCA23, as they contribute to the larger body of law relevant to the development of Commonwealth programs.
In accordance with its general practice, the Government will continue to monitor and assess risk and decide on any appropriate actions to respond to risks of expenditure not being consistent with constitutional or other legal requirements.
Table of contents
- 1.1 Objectives of the Fair Work Commission
- 1.2 Basis of Preparation of the Financial Statements
- 1.3 Significant Accounting Judgements and Estimates
- 1.4 New Australian Accounting Standards
- 1.5 Revenue
- 1.6 Gains
- 1.7 Transactions with the Government as Owner
- 1.8 Employee Benefits
- 1.9 Leases
- 1.10 Borrowing Costs
- 1.11 Fair Value Measurement