Results of 2018 Audits: Universities

Tabled: 30 May 2019

Appendix C. Preparedness for new accounting standards

Our assessment of the readiness of individual universities for the new accounting standards is detailed in Figures C1 and C2.

Figure C1
Readiness of universities for accounting standards AASB 15 and 1058 as at March 2019

 

Part of Group of Eight

 

Criteria – AASB 15 and AASB 1058

The University of Melbourne

Monash University

Deakin University

Federation University Australia

La Trobe University

RMIT University

Swinburne University of Technology

Victoria University

Planning

Developed a detailed plan for complying with the new standards

✘*

Plan shared with and approved by the audit committee

Assessment approach and outcomes

Assessed all relevant financial statement line items affected, including a:

  • review of various types of contracts within each material revenue stream (for AASB15 and 1058)

  • representative sample or adequate coverage of the affected revenue stream

The assessment of contractual terms was sufficiently detailed to arrive at a reasonable conclusion with regards to treatment in accordance with the standards

Arrived at a conclusion as to the treatment of relevant financial statement line items

Engagement with audit

Engaged timely (prior to 31 December 2018) discussion with the auditors regarding the transition and implementation of the new standard, including providing the auditors with:

               
  • their proposed treatment for review

  • sufficient evidence, including examples of contracts and agreement, to support the proposed treatments

Implementation

Designed processes and systems to enable compliance with its proposed treatment

Able to quantify an estimate of the impact to their financial statements from the changes to accounting policy arising out of the new standards

✘***

Disclosed these estimates in their 31 December 2018 financial statements

✔***

✘**

✔***

Significance

Commonwealth research grants for the year ended 31 December 2018 ($ million)

472.9

365.7

53.6

4.7

52.1

50.5

33.4

12.8

Total revenue for the year ended 31 December 2018 ($ million)

2 731.0

2 715.6

1 235.2

330.9

802.9

1 439.6

734.0

453.9

Significance of Commonwealth research grants as a percentage of total revenue

17.3%

13.5%

4.3%

1.4%

6.5%

3.5%

4.6%

2.8%

Note: Figures have been adjusted for the two universities with qualified audit opinions.
Note: * Deakin University had developed a high-level plan which did not include assignment of key responsibilities or a timeline for implementation.
Note: ** Monash University was able to quantify an estimate but was not sufficiently confident in the estimate due to the variability in private research contracts.
Note: *** These universities disclosed that the impact to their financial statements will not be material based on the conclusion that the accounting treatment will not change significantly. We have not been provided with sufficient evidence to support this conclusion.
Source: VAGO.

 

Figure C2
Readiness of universities for accounting standard AASB 16 as at March 2019

 

Part of Group of Eight

 

Criteria – AASB 16

The University of Melbourne

Monash University

Deakin University

Federation University Australia

La Trobe University

RMIT University

Swinburne University of Technology

Victoria University

Planning

Developed a detailed plan for complying with the new standards

Plan shared with and approved by the audit committee

#

Assessment approach and outcomes

Performed assessment of all relevant financial statement line items affected including a:

  • review of all existing lease arrangements, including peppercorn leases

The assessment was sufficiently detailed to arrive at a reasonable conclusion with regards to treatment in accordance with the standards.

#

Arrived at a conclusion as to the treatment of relevant financial statement line items

Engagement with audit

Well-engaged in timely (prior to 31 December 2018) discussion with the auditors regarding the transition and implementation of the new standard, including providing the auditors with:

               
  • their proposed treatment for review

✔*

✔*

  • sufficient evidence, including examples of contracts and agreement, to support the proposed treatments

✔*

✔*

Implementation

Designed processes and systems to enable compliance with its proposed treatment

Able to quantify an estimate of the impact to their financial statements from the changes to accounting policy arising out of the new standards

Disclosed these estimates in their 31 December 2018 financial statements

✘**

✔***

Significance

Total operating lease commitments as at 31 December 2018 ($ million)

52.7

712.8

63.7

12.8

35.4

68.2

14.9

85.2

Total property, plant and equipment (PPE) as at 31 December 2018 ($ million)

4 581.9

3 256.9

1 699.9

408.3

1 377.6

2 790.0

901.2

853.1

Significance of operating lease commitments as a percentage of total PPE

1.2%

21.9%

3.7%

3.1%

2.6%

2.4%

1.7%

10.0%

Note: # We have not completed our review of the assessments performed by Federation University Australia and have not concluded as to whether they have gone into sufficient detail.
Note: * These universities were ready to discuss and provide the required information, however we have not engaged with them due to other priorities at the time.
Note: ** Monash University was able to quantify an estimate, but elected not to disclose it as the need to use assumptions around future interest rates in the underlying calculations made the estimate insufficiently reliable in their view.
Note: *** Federation University Australia disclosed that the impact to their financial statements will not be material.
Source: VAGO.

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