Part 6: Appendices

Federal Court of Australia Annual Report 2015-2016

Appendix 1 - Independent Auditor's report

To the Attorney-General

I have audited the accompanying annual financial statements of the Federal Court of Australia for the year ended 30 June 2016, which comprise:

• Statement by the Accountable Authority and Chief Financial Officer;
• Statement of Comprehensive Income;
• Statement of Financial Position;
• Statement of Changes in Equity;
• Cash Flow Statement;
• Administered Schedule of Comprehensive Income;
• Administered Schedule of Assets and Liabilities;
• Administered Reconciliation Schedule;
• Administered Cash Flow Statement; and
• Notes comprising a Summary of Significant Accounting Policies and other explanatory information

Opinion

In my opinion, the financial statements of the Federal Court of Australia:

(a) comply with Australian Accounting Standard and the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015; and
(b) present fairly the financial position of the Federal Court of Australia as at 30 June 2016 and its financial performance and cash flows for the year then ended.

Accountable Authority's Responsibility for the Financial Statements

The Registrar of the Federal Court of Australia is responsible under Public Governance, Performance and Accountability Act 2013 for the preparation and fair presentation of annual financial statements that comply with Australian Accounting Standards and the rules made under that Act and is also responsible for such internal control as the Registrar determines is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud of error.

Auditor's Responsibility

My responsibility is to express an opinion on the financial statements based on my audit. I have conducted my audit in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. These auditing standards require that I comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

GPO Box 707 Canberra ACT 2601
19 National Circuit BARTON ACT
Phone (02) 6203 7300 Fax (02) 6203 7777

An audit involves performing procedure to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments: the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Accountable Authority of the entity, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Independence

In conducting my audit, I have followed the independence requirements of the Australian National Audit Office, which incorporate the requirements of the Australian accounting profession.

Australian National Audit Office
Colin Bienke
Senior Director
Delegate of the Auditor-General
Canberra
1 September 2016

Statement by the Accountable Authority and Chief Financial Officer

The corporate services functions of the Family Court and Federal Circuit Court merged with the Federal Court to form a single administrative entity from 1 July 2016 pursuant to the Courts Administration Legislation Amendment Act 2016. The Department of Finance has authorised the Registrar and the Chief Financial Officer of the Federal Court to prepare the 2016 Family Court and Federal Circuit Court financial statements.

In our opinion, the attached financial statements for the year ended 30 June 2016 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41 (2) of the PGPA Act.

From 1 July 2016, the debts and obligations of the Family Court and Federal Circuit Court will be met and paid by the Federal Court.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the Federal Court will be able to pay these debts as and when they fall due.

Statement of comprehensive income

for the period ended 30 June 2016

The above statement should be read in conjunction with the accompanying notes.

Budget variances commentary
Statement of comprehensive income for not-for-profit reporting entities

Write-down and impairment of assets

These items were not budgeted for in the original budget.

Own-source revenue

Revenue from rendering of services was lower than budgeted, due to less revenue being received to perform international aid functions than originally expected at budget. This also led to lower than expected expenditure on suppliers.

Statement of financial position

as at 30 June 2016

Budget variances commentary
Statement of financial position for not-for-profit reporting entities

Trade and other receivables
Receivables are higher due to an increase in the amount of capital appropriation receivable as the capital budget was underspent in 2015-16. Capital appropriation has been carried forward to be expended in connection with the amalgamation with the Family Court and Federal Circuit Court on 1 July 2016.

Employee provisions
Employee provisions are higher than budgeted due to the transfer of Corporate Services Staff from the Family Court and Federal Circuit Court of Australia in anticipation of the amalgamation with those Courts on 1 July 2016.

Those staff's accrued liabilities were recognised as at the transfer date of 30 June, along with a corresponding recognition of an equivalent account receivable from the Family Court and Federal Circuit Court.

Non-financial assets
Non-financial assets are lower than budgeted as the full capital budget was not spent in 2015-16. Capital has been carried forward to be expended in connection with the amalgamation with the Family Court and Federal Circuit Court on 1 July 2016.

Interest bearing liabilities
Interest bearing liabilities are lower than expected as less finance leases for IT equipment were entered into than was expected at the time of the budget.

Other payables
Other payables are higher due to the effect of accrued redundancy payments as at 30 June 2016.

Statement of changes in equity

for the period ended 30 June 2016

The above statement should be read in conjunction with the accompanying notes.

Accounting policy

Equity Injections
Amounts appropriated which are designated as 'equity injections' for a year (less any formal reductions) and Departmental Capital Budgets (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.

Cash flow statement

for the period ended 30 June 2016

he above statement should be read in conjunction with the accompanying notes.

Budget variances commentary
Cash flow statement for not-for-profit reporting entities

Cash used and received for operating activities
Cash used and received for operating activities was higher than budget as the effect of transferring section 74 receipts to the Official Public Account and then re-drawing it was not accounted for in the budget.

Cash used for investing activities
Cash used for the purchase of assets was lower than budgeted for. Capital funding provided for the amalgamation of corporate services with the Family Court and Federal Circuit Court will mostly be spent in future years.

This also accounts for the reduced amount of cash received for financing activities in relation to appropriation received.

Administered schedule of comprehensive income

for the period ended 30 June 2016

The above schedule should be read in conjunction with the accompanying notes.

Budget variances commentary
Administered schedule of comprehensive income

Expenses
Write-down and impairment of asset expenses were not budgeted for, as none were expected.

Revenue
Fines were not budgeted for, as the amount received from fines is based on the results of individual cases and is therefore not predictable.

Administered schedule of assets and liabilities

for the period ended 30 June 2016

The above schedule should be read in conjunction with the accompanying notes.

Budget variances commentary
Administered schedule of assets and liabilities

Payables
The variance in other payables is due to an arrangement being reached with the Family Court and Federal Circuit Courts (FCFCC) to receive funds on their behalf and not remit them to the FCFCC pending the amalgamation of the administration of the Courts on 1 July 2016.

Net Assets/liabilities
The negative net asset position also arises from the arrangements with the FCFCC. Cash amounts that have been received on behalf of the FCFCC and are therefore recorded as a liability, have been remitted to the Government and are therefore not recorded as an administered asset of the Court.

After the amalgamation occurred on 1 July 2016, the payable amount was offset against the corresponding receivable amount carried forward by the FCFCC leading to the combined entity having a positive net asset position.

Administered reconciliation schedule

for the period ended 30 June 2016

The above schedule should be read in conjunction with the accompanying notes.

Accounting policy

Administered cash transfers to and from the Official Public Account
Revenue collected by the entity for use by the Government rather than the entity 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 the entity on behalf of the Government and reported as such in the schedule of administered cash flows and in the administered reconciliation schedule.

Administered reconciliation variance

Transfers to OPA
The variance in the transfer to OPA between the current year and the previous year is due to the fact that the Federal Court remitted a large amount of funds to the OPA on behalf of the Federal Circuit Court, instead of paying those funds to the Federal Circuit Court.

Administered cash flow statement

for the period ended 30 June 2016

This schedule should be read in conjunction with the accompanying notes.

Cash flow variance
The variance in the cash received between the current year and the previous year is due to the fact that the Federal Court remitted a large amount of funds to the OPA on behalf of the Family Court and Federal Circuit Court (FCFCC), instead of remitting those funds to the FCFCC.

Overview

Objectives of the Court

The Federal Court of Australia (the Court) is an Australian Government controlled entity. The Court is a not for profit entity.

The objectives of the Court are to:

• decide disputes according to law promptly, courteously and effectively; and in so doing to interpret the statutory law and develop the general law of the Commonwealth, so as to fulfil the role of a court exercising the judicial power of the Commonwealth under the Constitution;
• provide an effective registry service to the community; and
• manage the resources allotted by Parliament efficiently.

The Court is structured to meet one outcome:

To apply and uphold the rule of law to deliver remedies and enforce rights and in so doing, contribute to the social and economic development and well-being of all Australians.

The Court's activities contributing toward this outcome are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, revenue and expenses controlled or incurred by the Court in its own right. Administered activities involve the management or oversight by the Court, on behalf of the Government, of items controlled or incurred by the Government.

The Court conducts the following administered activity on behalf of the Government: The collection of fees and fines.

The continued existence of the Court in its present form and with its present programs is dependent on Government policy and on continuing appropriations by Parliament for the Court's administration and programs.

Basis of preparation of the financial statements

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements and notes have been prepared in accordance with:

• Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) for reporting periods ending on or after 1 July 2015; 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 are 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.

New accounting standards

Adoption of new Australian accounting standard requirements

No accounting standard has been adopted earlier than the application date as stated in the standard. Of the new standards, amendments to standards and interpretations issued prior to the sign-off date that are applicable to the current period, none have a material impact on the Court.

Future Australian Accounting Standard requirements

The following new/revised accounting standards and interpretations were issued by the Australian Accounting Standards Board prior to the signing of the statement by the accountable authority and chief financial officer, which are expected to have a material impact on the Court's financial statements for future reporting periods.

All other new and amending standards and interpretations that were issued prior to the sign-off date and are applicable to future reporting periods are not expected to have a material impact on the entity's financial statements.

Taxation

The Court is exempt from all forms of taxation except fringe benefits tax (FBT) and 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 Australia Taxation Office; and
• for receivables and payables.

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, administered items are accounted for on the same basis and using the same policies as the Court, including the application of Australian Accounting Standards.

Events after the reporting period

On 1 July 2016, the corporate services functions of the Family Court and Federal Circuit Court merged into a single administrative entity with the Federal Court pursuant to the Courts Administration Legislation Amendment Act 2016. All assets ($56,531,000), liabilities ($46,783,000) and commitments ($38,829,000) of the Family Court and Federal Circuit Court were transferred to the Federal Court. The Federal Court administrative entity continues to be subject to the PGPA Act.

Notes to the financial statements

for the period ended 30 June 2016

1. Financial performance

This section analyses the financial performance of the Federal Court of Australia for the year ended 2016.

1.1 Expenses

Accounting Policy
Accounting policies for employee related expenses is contained in Section 6: People and relationships.

1.1 B: Suppliers

Leasing commitments

Accounting Policy
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 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.

1.1C: Finance costs

Accounting Policy
All borrowing costs are expensed as incurred.

1.1D: Write-down and impairment of assets

1.2 Own-source revenue and gains

Accounting Policy
Revenue from the sale of goods is recognised when:

1. the risks and rewards of ownership have been transferred to the buyer;
2. the entity retains no managerial involvement or effective control over the goods;

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.

Gains

Accounting Policy
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 these resources is recognised as an expense.

The major resources received free of charge are free use of property in the Commonwealth Law Courts Buildings and the Law Courts Building, Queens Square. Services provided by the Australian National Audit Office are also included here.

Liabilities assumed by other agencies refers to the notional cost of Judicial pensions.

Accounting Policy
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 the entity 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.

2. Income and expenses administered on behalf of government

2.1 Administered – expenses

2.2 Administered - income

Accounting Policy
All administered revenues are revenues relating to the course of ordinary activities performed by the Court on behalf of the Australian Government. As such, administered appropriations are not revenues of the Court.

Fees are charged for services provided by the Court to litigants under the Federal Court and Federal Circuit Court Regulation 2012.

Revenue from fees is recognised at the time the services are performed. The services are performed at the same time as, or within two days of, the fees becoming due and payable. It is recognised at its nominal amount due less any impairment allowance. Collectability of debts is reviewed at the end of the reporting period. Impairment allowances are made when collectability of the debt is judged to be less, rather than more, likely. Revenue from fines is recognised in the period in which the invoice for the fine is raised.

3. Financial position

This section analyses the Court's assets used to conduct its operations and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.

Financial assets

Accounting Policy
Cash is recognised at its nominal amount. Cash and cash equivalents includes:

1. cash on hand;
2. 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; and
3. cash held in special accounts is not recognised in the balance sheet, as it is not available for use by the Court.

Credit terms for goods and services were within 30 days (2015: 30 days).

Accounting Policy
Receivables
Trade receivables and other receivables that have fixed or determinable payments and that are not quoted in an active market are classified as 'Receivables'.

Reconciliation of the Impairment Allowance

Movements in relation to 2016

Movements in relation to 2015

Accounting Policy
Financial assets are assessed for impairment at the end of each reporting period.

3.2 Non-financial assets

3.2A: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles

Reconciliation of the opening and closing balances of property, plant and equipment for 2016

¹ The carrying amount of computer software included $0.929m purchased software and $2.354m internally generated software.

No indicators of impairment were found for property, plant and equipment and intangibles

Revaluations of non-financial assets
All revaluations were conducted in accordance with the revaluation policy stated. On 30 June 2014, an independent valuer conducted the revaluations and management conducted a review of the underlying drivers of the independent valuation.

Contractual commitments for the acquisition of property, plant, equipment and intangible assets
Commitments for capital purchases for property, plant and equipment were $0.435m. (2015: $0.582m). Other plant and equipment commitments for purchases of IT equipment were for $0.477m (2015: $0.335m).

Reconciliation of the opening and closing balances of property, plant and equipment for 2015

Accounting Policy
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.

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.

Asset Recognition Threshold
Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases of:

• assets other than information technology equipment costing less than $2,000; and
• information technology equipment costing less than $1,500.

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.

Revaluations
Following initial recognition at cost, buildings, infrastructure, plant and equipment were carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets' fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class previously recognised in the surplus/(deficit). Revaluation decrements for a class of assets are recognised directly through the Income Statement except to the extent that they reverse a previous revaluation increment for that class.

Any accumulated depreciation as at the valuation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Depreciation
Depreciable property plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Court 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 and amortisation rates for each class of depreciable asset are based on the following useful lives:

Impairment
All assets were assessed for impairment at 30 June 2016. Where indications of impairment exist, the asset's recoverable amount is estimated and an 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 the Court were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

Computer Software
The Court's intangibles comprise externally and internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment loss.

Software is amortised on a straight line basis over its anticipated useful life of 5 years (2015: 5 years).

All software assets were assessed for indications of impairment at 30 June 2016.

No indicators of impairment were found for other non-financial assets.

3.3 Payables

3.4 Interest bearing liabilities

In 2016, finance leases existed in relation to information technology equipment. The leases were non-cancellable and for fixed terms averaging 3 years, with a maximum of 3 years. The interest rate implicit in the leases averaged 2.13% (2015: 4.22%). The lease assets secured the lease liabilities. The Court guaranteed the residual values of all assets leased.

Accounting Policy
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.

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.

3.5 Other provisions

3.5A: Other Provisions

The Court currently has 1 (2015: 1) agreement for the leasing of premises which have provisions requiring the entity to restore the premises to their original condition at the conclusion of the lease. The Court has made a provision to reflect the present value of this obligation.

4. Assets and liabilities administered on behalf of the government

This section analyses assets used to generate financial performance and the operating liabilities incurred as a result that the Court does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

4.1 Administered – financial assets

Credit terms for goods and services were within 30 days (2015: 30 days).

Accounting Policy
Receivables
Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collection of debts is judged to be less rather than more likely.

Reconciliation of the Impairment Allowance

Movements in relation to 2016

4.2 Administered – payable

5. Funding

This section identifies the Court's funding structure.

5.1 Appropriations

5.1A: Annual Appropriations ('Recoverable GST exclusive')

Annual Appropriations for 2016

1. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1, 3). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.
2. The variance in the expenditure for ordinary annual services is due to timing differences of payments. The underspend of capital appropriation is due to capital projects related to the amalgamation with the Family Court and Federal Circuit Court not taking place until after the amalgamation on 1 July 2016.

Annual Appropriations for 2015

1. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1, 3, 5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.
2. Underspends of appropriation are due to the surplus achieved in operating results and timing differences of payments.

5.1B: Unspent Annual Appropriations ('Recoverable GST exclusive')

5.1C: Special Appropriations ('Recoverable GST exclusive')

5.2 Special accounts

1. Appropriation: Public Governance, Performance and Accountability Act 2013 section 78; Establishing Instrument: FMA Determination 2012/11
   Purpose: To disburse amounts held on trust or otherwise for the benefit of a person other than the Commonwealth.
2. Appropriation: Public Governance, Performance and Accountability Act 2013 section 78; Establishing Instrument: FMA Determination 2004/07

   Purpose: The purposes of the Federal Court of Australia Litigant's Fund Special Account, in relation to which amounts may be debited from the Special Account are:

   1. In accordance with:
      1. An order of the Federal Court of Australia or a Judge of that Court under Rule 2.43 of the Federal Court Rules; or
      2. A direction of a Registrar under that Order; and
   2. In any other case in accordance with the order of the Federal Court of Australia or a Judge of that Court.

5.3 Net cash appropriation arrangements

5.4 Cash flow reconciliation

5.4A: Cash flow reconciliation

5.4B: Administered – cash flow reconciliation

6. People and relationships

This section describes a range of employment and post employment benefits provided to our people and our relationships with other key people.

6.1 Employee provisions

Accounting policy
Liabilities for 'short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts.

Other long-term judge and 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.

Leave
The liability for employee benefits includes provision for annual leave and long service leave.

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 the entity'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 estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and Redundancy
Provision is made for separation and redundancy benefit payments. The entity 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.

Superannuation
The Court's staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

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. This liability is reported in the Department of Finance's administered schedules and notes.

The Court makes employer contributions to the employees' defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The entity accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

Accounting policy
Judges' Pension
Under the Judges' Pension Act 1968, Federal Court Judges are entitled to a non-contributory pension upon retirement after 6 years service. Where entitlements are not available under the Judges Pension Act 1968, entitlements are available under the Superannuation (Productivity Benefit) Act 1988. As the liability for these pension payments is assumed by the Australian Government, the Court has not recognised a liability for unfunded superannuation liability. The Court does, however, recognise an expense and a corresponding revenue item, "Liabilities assumed by other agencies", in respect of the notional amount of the employer contributions to Judges' pensions for the reporting period amounting to $12,959,803 (2014-15: $12,739,899). The contribution rate has been provided by the Australian Government Actuary.

6.2 Senior management personnel remuneration

The total number of senior management personnel that are included in the above table are 15 (2015: 16).

Related Party Disclosures
There have been no related party transactions during the year ended 30 June 2016.

7. Managing uncertainties

This section analyses how the Court manages financial risks within its operating environment.

7.1 Contingent assets and liabilities

The Court had no quantifiable or unquantifiable contingent assets or liabilities at 30 June. (2015: Nil)

7.2 Financial instruments

Accounting Policy
Financial assets
The Court has financial assets only in the nature of cash 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.

Impairment of Financial Assets
Financial assets are assessed for impairment at the end of each reporting period.

Accounting Policy
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'.

Other Financial Liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

Supplier 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).

7.2C: Fair Value of Financial Instruments

7.2D: Credit Risk

The Court is exposed to minimal credit risk. The maximum exposure to credit risk is the risk that arises from potential default of a debtor. This amount is equal to the total amount of trade receivables
(2016: $2,463,000 and 2015: $406,000). The Court has assessed the risk of default on payment and has allocated $7,000 in 2016 (2015: $3,000) to an impairment allowance account.

The Court manages its credit risk by undertaking background and credit checks prior to allowing a debtor relationship. In addition, the Court has policies and procedures that are to be applied by employees who perform debt recovery duties.

The Court holds no collateral to mitigate credit risk.

Credit quality of financial assets not past due or individually determined as impaired

Ageing of financial assets that were past due but not impaired in 2016

Ageing of financial assets that were past due but not impaired in 2015

7.2E: Liquidity risk
Liquidity risk is the risk that the Court will not meet its obligations as they fall due. The Court's financial liabilities are payables, and finance leases. The possibility of the Court not meeting its obligations is highly unlikely as the Court is appropriated funding from the Australian Government and the Court manages its budgeted funds to ensure it has adequate funds to meet payments as they fall due. In addition, the Court has policies in place to ensure timely payments were made when due and has no past experience of default.

Maturities for non-derivative financial liabilities in 2016

Maturities for non-derivative financial liabilities in 2015

7.2F: Market risk

Interest rate risk
Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The only interest-bearing item on the statement of financial position is the 'Finance Lease'. This bears interest at a fixed interest rate and will not fluctuate due to changes in the market interest rate.

7.3 Administered – financial instruments

7.3B: Fair value of financial instruments
The carrying amount of the Court's administered financial assets and liabilities are a fair approximation of the fair value.

7.3C: Credit risk
The administered activities of the Court are not exposed to a high level of credit risk as the majority of financial assets are receivables. The Court has policies and procedures that guide staff who perform debt recovery functions.

Credit quality of financial assets not past due or individually determined as impaired

Ageing of financial assets that were past due but not impaired in 2016

Ageing of financial assets that were past due but not impaired in 2015

7.4 Fair value measurement

The following tables provide an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the statement of financial position do not apply the fair value hierarchy.

The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Accounting policy 
The Court has elected to early adopt AASB2015-7 which provides relief for not-for-profit public sector entities from making certain specified disclosures about the fair value measurement of assets measured at fair value and categorised within Level 3 of the fair value hierarchy.

Valuations are performed regularly so as to ensure that the carrying amount does not materially differ from fair value at the reporting date. The last valuation was done by an external valuer in 2014. The Court reviews the method used by the valuer annually.

7.4A: Fair Value Measurements at the end of the reporting period

The Court's assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of these assets is considered to be the highest and best use.

There have been no transfers between the levels of the hierarchy during the year. The Court deems transfers between levels of the fair value hierarchy to have occurred when advised by an independent valuer of a change in the market for particular items.

8. Other information

8.1 Reporting of outcomes

The Court has one Output and Outcome:
To apply and uphold the rule of law to deliver remedies and enforce rights and in so doing, contribute to the social and economic development and well-being of all Australians.