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
Item	$'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
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

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
Item	$'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
Item	$'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
Item	$'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