Chapter One - Overview > Financial Overview > page 3 of 16
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Financial Overview

Operating Performance

Explanation of Major Variations

The variation in Defence's overall operating performance of -$853m included an increase in revenue of $498m, and an increase in expenses of $1,358m.

Revenue (+$498m)

Overall, revenue exceeded budget by $498m comprising:

  • Revenue from Government (-$59m) - Revenue from Government decreased due to a correction in the accounting treatment of appropriation revenue provided in 2004-05 to reimburse Defence for costs incurred in 2003-04 (-$66m). This was partly offset by the recognition of resources received free of charge for services provided by the Australian National Audit Office (+$7m).
  • Revenue from Sale of Assets (-$7m) - The result was lower than projected due to:
    • deferrals, into 2005-06, of a number of properties in the Property Sales Program, including Ermington, Maribyrnong and the Fremantle Oil Fuel Installation ( $71m);
    • an overestimate of the proceeds from the sale of other property, plant and equipment (-$7m);
    • revenue received from the sale of housing for which Defence owes an annuity to the Defence Housing Authority (+$35m); and
    • higher than anticipated sale proceeds from a number of properties in the Property Sales Program, including Wacol and Bandiana (+$36m).
  • Net Foreign Exchange Gains (+$21m) - Net variations due to the timing difference between when invoices for transactions in foreign currencies are entered in the financial system for payment and the date they are paid.
  • Assets and Inventories Now Recognised (+$407m) - This increase is primarily due to extensive stocktaking and asset revaluation activities undertaken during the year (including a 100 per cent revaluation of Defence land and buildings within Australia by the Australian Valuation Office) which identified a number of assets not previously recognised on Defence's balance sheet, including:
    • land and buildings, including at RAAF bases Townsville and Williamtown, Holsworthy, Robertson Barracks and HMAS Stirling (+$247m);
    • inventory due to continued stocktake adjustments, and positive price adjustments to records (+$195m);
    • other Infrastructure Plant and Equipment, including at Holsworthy, Shoal Bay Receiving Station, HMAS Stirling and RAAF base Edinburgh (+$166m);
    • a number of assets, including artefacts and memorabilia that are, or may be of, national historical or cultural significance (+$21m); and
    • lower than anticipated Specialist Military Equipment as a result of the continuing remediation work, which reflects increased controls on purchasing and accounting for Specialist Military Equipment as Defence continues to improve its stocktaking activities (-$222m)
  • Other Revenue (+$135m) - This increase was due to a number of factors including:
    • prior year adjustments, including the correction, based on audit advice, of the treatment of certain explosive ordinance expenses which should have been treated as prepayments (+$83m);
    • settlement of damages including in relation to Collins-class Submarines and tactical air defence radar systems (+$36m);
    • an actuarial gain due to Defence's asbestos related disease exposure liability being revised down during 2004-05 (+$14m); and
    • higher than anticipated miscellaneous revenues (+$2m).

cont/...

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