1.1 Objectives of the National Industrial Chemicals and Assessment Scheme

The National Industrial Chemicals Notification and Assessment Scheme (NICNAS) contributes to Outcome 1 improved health and environment outcomes as a result of national availability of risk assessment information to support promotion of the safe and sustainable use of industrial chemicals.

NICNAS aids in the protection of workers, the public and the environment from the harmful effects of industrial chemicals. NICNAS operates under the Commonwealth legislation known as the Industrial Chemicals (Notification and Assessment) Act 1989. The Scheme aims to ensure the safe use of chemicals and their potential occupational health and safety (OHS), public health and environment risk widely available to workers, the public, industry and other state, territory and federal government agencies.

NICNAS assesses industrial chemicals that are new to Australia for their health and environmental effects before they are used or released to the environment. NICNAS also assesses those chemicals that are already in use in Australia (known as existing chemicals) on a priority basis in response to specific concerns about potential health or environmental effects.

1.2 Basis of Accounting

The financial statements are required by section 49 of the Financial Management and Accountability Act 1997 and are a general-purpose financial report.

The statements have been prepared in accordance with:

o Finance Ministers Orders (or FMOs, being the Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2005));

o Australian Accounting Standards issued by the Australian Accounting Standards Board that apply for the reporting period; and

o Interpretations issued by the AASB and Urgent Issues Group that apply for the reporting period.

This is the first financial report to be prepared under Australian Equivalents to International Financial Reporting Standards (AEIFRS). The impacts of adopting AEIFRS are disclosed in Note 2.

The NICNAS Income Statement and Balance Sheet have been prepared on an accrual basis and are in accordance with the historical cost convention, except for certain assets and liabilities, which as noted, are at fair value or amortised cost. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The financial report is presented in Australian dollars and values are rounded to the nearest thousand dollars unless disclosure of the full amount is specifically required.

Assets and liabilities are recognised in the Balance Sheet when and only when it is probable that future economic benefits will flow and the amounts of the assets or liabilities can be reliably measured. Assets and liabilities arising under agreements equally proportionately unperformed are, however, not recognised unless required by an Accounting Standard. Liabilities and assets that are unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies (other than unquantifiable or remote contingencies, which are reported at Note 12).

Revenues and expenses are recognised in the Income Statement when and only when the flow or consumption of loss of economic benefits has occurred and can be reliably measured.

1.3 Significant Accounting Judgments and Estimates

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next accounting period.

1.4 Statement of Compliance

The financial report complies with Australian Accounting Standards, which include Australian Equivalents to International Financial Reporting Standards (AEIFRS).

Australian Accounting Standards require NICNAS to disclose Australian Accounting Standards that have not been applied, for standards that have been issued by are no yet effective.

The AASB has issued amendments to existing standards, these amendments are denoted by year and then number, for example 2005-1 indicated amendment 1 issued in 2005.

The table below illustrates standards and amendments that will become effective for NICNAS in the future. The expected impact on the financial report of adoption of these standards is based on NICNASs initial assessment at this date, but may change.

Title

Standard affected

Application date*

Nature of impending change

Impact expected on financial report

2005-10

AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 and AASB 1038

1 Jan 2007

Amended requirements subsequent to the issuing of AASB 7.

No expected impact.

2006-1

AASB7 Financial Instruments: Disclosures

1 Jan 2007

Revise the disclosure requirements for financial instruments from AASB132 requirements.

No expected impact.

* Application date is for annual reporting periods beginning on or after the date shown

1.5 Revenue

The revenues described in this Note are revenues relating to the core operating business of NICNAS.

Revenues from government

An appropriation has been made to NICNAS towards compliance activities and the costs associated with the Government Business activities, and to provide interest supplementation following changes to whole-of-government agency banking arrangements.

Revenue from fees and charges

NICNAS collects its revenue primarily through registration charges and new chemical assessment fees from industrial chemicals industry. These charges are set so as to fully recover the operating costs associated with regulating the industry and reflect the NICNAS risk-based approach to regulation.

Other Revenues

Revenue from the sale of goods and services is recognised upon the delivery of the goods or services to customers.

Revenue from disposal of non-current assets is recognised when control of the asset has passed to the buyer.

Resources received free of charge

Services received free of charge are recognised as revenue 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.

Contributions of assets at no cost of acquisition or nominal consideration are recognised at their fair value when the asset qualifies for recognition, unless received from another government agency as a consequence of a restructuring of administrative arrangements.

1.6 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 value plus transactions costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and revenues 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 agencys accounts immediately prior to the restructuring.

1.7 Property, Plant and Equipment

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the Balance Sheet, except for purchases costing less than $2,000. Leasehold improvements to properties with values of $10,000 or greater are capitalised. Internally developed software and purchased software with values of $100,000 or greater are capitalised. Any purchases under these thresholds are expensed in the year of acquisition (other than where they form part of a group of similar items that are significant in total).

Revaluations

All property, plant and equipment held by NICNAS were valued under the fair value valuation methodology as at 1 July 2004. All valuations were conducted by Aon Valuation Services.

The fair value on each individual asset was determined by using the market value approach where reliable market values could be ascertained, or the depreciated replacement cost methodology.

Under both deprival and fair value, assets which would not be replaced, or are surplus to requirements, are measured at their net realisable value.

Following initial recognition at cost, valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not materially with 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.

Depreciation/Amortisation

Depreciable property, plant and equipment are written off to their estimated residual values over their useful lives to NICNAS using, in all cases, the straight line method of depreciation. Leasehold improvements are amortised on the straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease.

Depreciation/amortisation 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 assets are based on the following useful lives:

2006

2005

Leasehold improvements

Lease term

Lease term

Plant and equipment

5 to 20 years

5 to 20 years

The aggregate amount of depreciation and amortisation allocated for each class of assets during the reporting period is disclosed in Note 5C.

Impairment

All assets were assessed for impairment at 30 June 2006. Where indications of impairment exist, the assets recoverable amount is estimated and an impairment adjustment made if the assets 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 assets ability to generate future cash flows, and the asset would be replaced if NICNAS were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

No indicators of impairment were found for assets at fair value.

1.8 Intangibles

NICNASs intangibles comprise internally developed software for internal use. These assets are carried at cost.

Software is amortised on a straight line basis over its anticipated useful life. The useful lives of NICNASs software is 3 to 10 years. (2004-05: 3 to 10 years).

All software assets were assessed for indications of impairment as at 30 June 2006. The impact of impairment to NICNAS was not material.

1.9 Inventories

Inventories not held for resale are valued at cost, unless they are no longer required, in which case they are valued at the net realisable value.

1.10 Employee Benefits

Benefits

As required by the Finance Ministers Orders, NICNAS has early adopted AASB 119 Employee Benefits as issued in December 2004.

Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled.

Liabilities for wages and salaries (including non-monetary benefits), annual leave and sick leave are measured at their nominal amounts. Other employee benefits expected to be settled within 12 months of the reporting date are also measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

All other employee benefit liabilities are measured as the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.

Leave

The liability for employee benefits includes provisions 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 NICNAS is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees remuneration, including the NICNAS 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 reference to the work carried out by the Australian Government Actuary as at 30 June 2004. 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 payments in circumstances where NICNAS has formally identified positions as excess to requirements and a reliable estimate of the amount of the payments can be determined and has informed those employee affected that it will carry out the terminations.

Superannuation

Employees of NICNAS are members of the Commonwealth Superannuation Scheme (CSS) and the Public Sector Superannuation Scheme (PSS).

The CSS and PSS are defined benefit schemes for the Commonwealth. 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.

NICNAS makes employer contributions to the Australian Government at rates determined by an actuary to be sufficient to meet the cost to the Government of the superannuation entitlements of the Agencys employees.

From 1 July 2005, new employees are eligible to join the PSSap scheme.

The liability for superannuation recognised as at 30 June 2006 represents outstanding contributions for the period since the last pay period of the year.

Performance pay

Performance pay is payable to certain staff by virtue of the Departments Certified Agreement and Australian Workplace Agreements (AWAs). In accordance with AASB 119 and associated guidance from Finance Brief 21, a provision has been established for performance pay based on the expected total bonus to be paid.

1.11 Contingent Liabilities and Contingent Assets

Contingent Liabilities and Assets are not recognised in the Balance Sheet but are discussed 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 settlement is not probable or the amount cannot be reliably measured. Remote contingencies are part of this disclosure. Where settlement becomes probable, a liability or asset is recognised. A liability or asset is recognised when its existence is confirmed by a future event, settlement becomes probable (virtually certain for assets) or reliable measurement becomes possible.

1.12 Leases

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 non-current 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. NICNAS does not have any finance leases.

Operating lease payments are expensed on a straight line basis which is representative of the pattern of benefits derived from the leased assets.

1.13 Prepayments received

The provision of service is recognised as revenue when the services have been provided. However, for some services, payment is required in advance. Where the moneys for these service, if material, have been received or the service has been invoiced at year-end, but the service that has not been provided, the relevant amount has been disclosed as prepayments received.

1.14 Cash

Cash means notes and coins held and any deposits held at call with a bank or financial institution. Cash is recognised at its nominal amount.

1.15 Financial Risk Management

NICNASs activities expose it to normal commercial financial risk. As a result of the nature of NICNASs business and internal and Australian Government policies, dealing with the management of financial risk, NICNASs exposure to market, credit, liquidity and cash flow and fair value interest rate risk is considered to be low.

1.16 Rounding

Amounts have been rounded to the nearest thousand except in relation to remuneration of executives and auditors.

1.17 Taxation

NICNAS is exempt from all forms of taxation except Fringe Benefits Tax and the Goods and Services Tax.

Revenues, expenses, assets and liabilities are recognised net of GST:

o except where the amount of GST incurred is not recoverable from the Australian Taxation Office; and/or

o except for receivables and payables.

1.18 Comparative Figures

Comparative figures have been adjusted to conform to changes in presentation in these financial statements, where required.

1.19 Bad and Doubtful Debts

Bad debts are written off during the year in which they are identified. A provision is raised for doubtful debts based on a review of all outstanding receivables at year-end, as needed.

1.20 Insurance

NICNAS has insured for risks through the Comcover scheme, administered by the Department of Finance and Administration. Workers compensation is insured through Comcare Australia .