Legislative Assembly for the ACT: 2003 Week 6 Hansard (19 June) . . Page.. 2185 ..
(1) The accrued superannuation liability represents a significant obligation of the ACT to make payments to the Commonwealth in respect of superannuation arising from ACT Government employment.
Prior to 1999, the full impact of the actuarial reviews was reported in the Statement of Financial Performance. This resulted in significant fluctuations in the operating result each time an actuarial review was undertaken. As a result, the ACT adopted a hybrid approach in 1999 where the full movement in the liability was taken to the Statement of Financial Position and amortised over a period based on the expected average working lives of employees participating in the superannuation process (12 years).
Advice on this accounting treatment was sought from Ernst & Young, who concluded that "this treatment of the liability is not inconsistent with the Australian Accounting Standards".
(2) This has resulted in the major fluctuations from annual actuarial reviews being removed from the operating result of the ACT Superannuation Unit and the Whole of Government financial statements.
This treatment is a "smoothing technique"in accounting for the annual actuarial gains and losses in the superannuation liabilities of the ACT Government. The fluctuations in the actuarially assessed liabilities in the past have been substantial, with unrealised gains of approximately $100m in 1998, $210m in 1999, offset with unrealised losses in 2000, 2001 and 2002 of $40m, $40m and $18m.
The 2001-02 financial result of the Superannuation Unit was qualified by the Auditor-General, after reviewing the past acceptance of this treatment (the Superannuation Unit receiving unqualified audit opinions for the 1999-2000 and 2000-2001 financial reports). In their opinion, the reserve cannot be considered as a liability of the Territory and is therefore, not compliant with Australian Accounting Standards. This has arisen due to the current reserve position being an unrealised gain - the amortisation of this reserve therefore offsets annual superannuation expenses. The current reserve therefore over-states liabilities and under-states superannuation expenses.
By removing this accounting treatment and thus clearing the reserve, the Budget would reap a one-off gain (unrealised gain reserve). Though, over the following years superannuation expenses would increase substantially as the amortisation is off-setting these expenses at-present. Also, the Budget would again be subject to the substantial fluctuations in the liabilities from the annual actuarial reviews.
(3) There is currently a lack of an Australian Accounting Standard which addresses accounting for employer superannuation liabilities. Without an Australian accounting standard it can be expected that a range of views will exist regarding the appropriate treatment.
International Accounting Standard IAS 19 Employee Benefits allows a "corridor approach"for recognising superannuation liabilities. Under this approach a tolerance limit is set and only movements outside of the corridor are recorded. The effect of using the corridor approach is a "smoothing"of movements in liabilities - a similar result to the treatment adopted by the ACT.
But accounting policies relating to superannuation should comply with the requirements of the Australian Accounting Standards and Concepts before an International Accounting Standard can be used.