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2002-03 Financial Statements

Department of Defence
Notes To And Forming Part Of The Financial Statements
for the year ended 30 June 2003
2002-03 2001-02
$'000 $'000
Note 7: Non-Financial Assets
Note 7A: Land and Buildings
Land
at cost 4,240 7,202
at 2000-02 valuation (deprival) 1,622,598 2,370,582
at 2003-06 valuation (fair value) 888,922 -
  2,515,760 2,377,784
Less provision for land decontamination (68,369) (71,320)
  2,447,391 2,306,464
Work in progress - at cost 6,804 9,112
Total land 2,454,195 2,315,576
Buildings
at cost 310,823 337,905
Accumulated depreciation (19,014) (12,168)
  291,809 325,737
Work in progress - at cost 549,766 418,307
at 2000-02 valuation (deprival) 5,862,582 8,319,228
Accumulated depreciation (1,910,292) (2,653,747)
  3,952,290 5,665,481
at 2003-06 valuation (fair value) 2,452,871 -
Accumulated depreciation (721,574) -
  1,731,297 -
Buildings held under finance lease 372,939 379,514
Accumulated depreciation (69,429) (50,076)
  303,510 329,438
Total buildings 6,828,672 6,738,963
Total Land and Buildings (non-current) 9,282,868 9,054,538
Note 7B: Specialist Military Equipment
Specialist military equipment
at cost 45,313,506 41,229,485
Accumulated depreciation (21,339,856) (18,929,182)
  23,973,650 22,300,303
Work in progress - at cost 7,409,624 8,356,587
Total Specialist Military Equipment (non-current) 31,383,274 30,656,890
Note 7C: Infrastructure, Plant and Equipment
Plant and Equipment
at cost 1,404,426 1,324,540
Accumulated depreciation (699,432) (650,611)
  704,772 673,929
at 2000-02 valuation (deprival) 3,795,075 5,357,521
Accumulated depreciation (1,368,186) (1,744,760)
  2,426,889 3,612,761
at 2003-06 valuation (fair value) 1,749,558 -
Accumulated depreciation (472,111) -
  1,277,447 -
Plant held under finance lease 974 974
Accumulated depreciation (896) (841)
  78 133
Work in progress 339,544 230,952
Total Infrastructure, Plant and Equipment (non-current) 4,748,730 4,517,776

All revaluations are independent and are conducted in accordance with the revaluation policy stated at Note 1.15. In 2002-03, the revaluations were conducted by an independent valuer, the Australian Valuation Office (AVO).

Revaluations increments of $487,302,177 for land (2002: increment: $170,922,120), $289,302,113 for buildings on land (2002: increment: $432,691,725) and increments of $225,826,497 (2002: increment $462,606,520) for other plant and equipment were made to the asset revaluation reserve.

Note 7D: Intangibles
Computer Software 112,049 104,269
Accumulated amortisation (52,868) (38,175)
  59,181 66,094
Computer software work in progress 37,484 9,214
Intangibles internally developed software 129,632 130,158
Accumulated amortisation (53,985) (46,891)
  75,647 83,267
Other work in progress 1,397 5,786
Total Intangibles 173,709 164,360
Note 7E: Heritage and cultural assets
at cost 19,047 18,897
Accumulated depreciation - -
  19,047 18,897
Total Heritage and Cultural Assets (non-current) 19,407 18,897

Note 7F: Analysis of Property, Plant, Equipment and Intangibles

Table A: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles
Item Land Buildings Specialist Military Equipment (SME) Other Infrastructure, Plant and Equipment (owned and leased) Heritage and Cultural Assets Computer Software Intangibles Internally Developed Software Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 1 July 2002
Gross Book value 2,315,576 9,075,439 49,586,072 7,299,265 18,897 113,483 135,944 68,544,675
Accumulated depreciation/amortisation - (2,665,915) (18,929,182) (2,452,051) - (38,176) (46,891) (24,132,215)
Net book value 2,315,576 6,409,524 30,656,890 4,847,214 18,897 75,307 89,053 44,412,460
 
Additions:
by purchase 2,046 281,209 2,717,717 421,821 150 30,638 3,408 3,456,988
by finance lease - 28,607 - - - - - 28,607
 
Net revaluation increment/decrement 487,302 289,302 - 225,826 - - - 1,002,431
Reclassifications (351) 319,357 (91,981) (227,207) - 4,989 (4,807) -
Depreciation/Amortisation expense - (313,668) (2,190,785) (337,012) - (14,456) (7,495) (2,863,416)
Recoverable amount write downs/ups 2,951 (10,962) (108,351) (192,644) - (184) (3,518) (312,708)
Other movements  
 
Assets recognised for the first time 25 9,034 586,049 67,389 - 352 403 663,253
Other adjustments - - (129,587) (9,871) - 19 - (139,439)
 
Disposals
From disposal of entities or operations (including restructuring) - - - - - - - -
Other disposals (353,353) (183,731) (56,678) (46,787) - - - (640,549)
 
As at 30 June 2003
Gross book value 2,454,195 9,548,980 52,723,130 7,289,355 19,047 149,533 131,029 72,315,269
Accumulated depreciation - (2,720,308) (21,339,856) (2,540,625) - (52,868) (53,985) (26,707,642)
Net book value1 2,454,195 6,828,673 31,383,274 4,748,730 19,047 96,665 77,044 45,607,627
Note
  1. Repairable items with a written down value of $2,545m (2001-02 :$2,770m) comprise 8 per cent of the total specialist military equipment written down value of $31,383m (2001-02 $30,657). Uncertainty exists in elements of the repairable items account with a value approximating $550m. A data quality program has been in place over the past two years to address this issue and while considerable progress has been made in the identification and correction of errors, further years are required to fully address this issue.
Table B: Assets at Valuation
Item Land Buildings Specialist Military Equipment (SME) Other Infrastructure Plant and Equipment Heritage and Cultural Assets Computer Software Intangibles Internally Developed Software Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 30 June 2003
Gross value 2,511,520 8,315,451 - 5,544,633 - - - 16,371,604
Accumulated depreciation/amortisation - (2,631,866) - (1,840,297) - - - (4,472,163)
Provision for land decontamination (68,369) - - - - - - (68,369)
Net Book Value 2,443,151 5,683,586 - 3,704,335 - - - 11,831,072
As at 30 June 2002
Gross value 2,370,582 8,319,228 - 5,357,521 - - - 16,047,331
Accumulated depreciation/amortisation - (2,653,747) - (1,744,760) - - - (4,398,507)
Provision for land decontamination (71,320) - - - - - - (71,320)
Net Book Value 2,299,262 5,665,481 - 3,612,761 - - - 11,577,504


Table C: Property, Plant, Equipment and Intangibles held under Finance Lease
Item Land Buildings Specialist Military Equipment (SME) Other Infrastructure, Plant and Equipment Heritage and Cultural Assets Computer Software Intangibles Internally Developed Software Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 30 June 2003
Gross value - 372,939 - 974 - - - 373,913
Accumulated depreciation/amortisation - (69,429) - (896) - - - (70.325)
Net Book Value - 303,511 - 78 - - - 303,589
As at 30 June 2002
Gross value - 379,514 - 974 - - - 380,488
Accumulated Depreciation/Amortisation - (50,076) - (841) - - - (50,917)
Net Book Value - 329,438 - 133 - - - 329,571


Table D: Property, Plant, Equipment and Intangibles under Construction
Item Land Buildings Specialist Military Equipment (SME) Other Infrastructure, Plant and Equipment Heritage and Cultural Assets Computer Software Intangibles Internally Developed Software Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 30 June 2003
Gross value 6,804 549,766 7,409,624 339,544 - 37,484 1,397 8,344,619
As at 30 June 2002
Gross value 9,112 418,307 8,356,587 230,952 - 9,214 5,786 9,029,958


2002-03 2001-02
$'000 $'000
Note 7G: Inventories
Inventories not held for sale 4,339,612 4,128,057
Less provision for obsolescence (507,269) (507,269)
Total inventories 3,832,343 3,620,788
Inventories is represented by:
Current 567,317 409,920
Non Current 3,772,295 3,718,137
Total gross inventories 4,339,612 4,128,057
Less provision for obsolescence (507,269) (507,269)
Total Inventories 3,832,343 3,620,788
As disclosed in accounting policy Note 1.17, inventory is valued at weighted average cost. Defence has inventory on hand acquired over the past 35 years. As in prior years:
  • invoices and related purchasing documentation are not available to confirm the accuracy of the cost price data for some general stores purchases including those made prior to 1993 and for explosive ordnance acquired prior to 1996; and
  • pricing details were generally not separately identified for explosive ordnance inventory acquired as part of assets under construction contracts delivered between 1997 and 2000.
For these reasons, some uncertainty exists in the pricing of inventory. This uncertainty will reduce progressively as aged items are consumed or become obsolete. The book value (after provision for obsolescence) of the general stores inventory subject to this uncertainty is in the order of $610m. The book value of explosive ordnance subject to uncertainty is $1.2b.As part of developing a longer term resolution of this problem, Defence has further developed a systems review process that results in a lower untested net level of uncertainty. Further analysis will be undertaken in 2003-04 as a cost effective means of reducing the uncertainty.
Note 7H: Other Non Financial Assets
Capital prepayments 419,939 410,467
Non capital prepayments 298,609 153,957
Total other non-financial assets 718,549 564,424
Other non-financial assets are represented by:
Current 405,178 526,510
Non-current 313,371 37,914
Total 718,549 564,424