Financial Overview
Defence's Financial Position
Defence had net assets of $46.2b as at 30 June 2003. This comprised $51.4b in total assets less $5.2b in liabilities. The net asset position was $330m higher than the projected result as published in the Portfolio Budget Statements 2003-04. Table 1.8 provides details.
Explanation of Major Variations
The following section provides an overview of the major variation in assets and liabilities.
Assets (+$1,099m)
Assets were $1,099m higher than planned. The main factors are discussed below.
- Receivables - In total, receivables were $67m less than projected. The appropriation receivable was $164m higher than planned (see Table 1.10). Other receivables were some $230m less than projected due to the progressive collection of debts from capital projects, overseas debtors including the United Nations and the foreign exchange rate fluctuation impact on the 'advance Foreign Military Sales' account in the United States. Defence has also undertaken a rigorous quality assurance of the receivables balance which has resulted in the write-back of a number of receivables.
- Land and buildings - The land and buildings balance was $933m higher than planned due to revaluations of assets held and the reclassification of Defence Housing Authority houses under finance lease ($373m).
- Specialist military equipment - The net decrease of $118m was due largely to the accelerated depreciation on APG-65 radars from the F/A-18 aircraft to reflect their revised withdrawal date.
- Infrastructure, plant and equipment - Infrastructure, plant and equipment was $26m lower than the projected result. The main movements were due to the reclassification of Defence Housing Authority houses under finance lease from the infrastructure balance to land and buildings ($373m), offset by increases due to new acquisitions and revaluations of existing assets.
- Inventories - The increase in inventory holdings of $150m partly related to inventory first found including $203m for the taking on of inventories recorded on the Army's 'Q' Store system to the Standard Defence Supply System offset by inventory write down (-$250m), and an increase in the provision for obsolescence ($67m). Other additions related to the replenishment of inventory used in current operations and initiatives to replenish inventory holdings through additional logistics funding.
- Other - The increase of $154m was due primarily to an increase in non-capital prepayments ($145m) relating to explosive ordnance and munitions production, software licences and a range of other support contracts.
Liabilities (+$769m)
Liabilities were $769m higher than planned. The main factors are discussed below.
- Employee and other provisions - Accrued entitlements were $592m higher than planned due mainly to increases in the workers' compensation provision, including the recognition of common law asbestos-related liabilities, which is based on an actuarial assessment. Salary increases also affected accrued leave entitlements.
- Supplier payables - The increase of $166m was due mainly to an increase in trade creditors ($178m), including a payment of $105m for the airborne early warning and control project, and to the high level of activity towards the end of the financial year, both in terms of current operations and exercise commitments occurring late in the financial year.
Trends in Defence Assets and Liabilities
Chart 1.2 shows the actual movement of major categories of assets and liabilities since 1999-2000, including the 2002-03 result.
