3. Summary of Accounting Policies (continued)
Government funding - capital
Funds are received from government departments in accordance with contracts to undertake capital works programs on behalf
of the department. In accordance with AASB 1004 “Contributions”, this income is recognised upfront once control of the funds
or the commitment to receive funds has been satisfied.
Government Brokered Programs
Funds are received from Government Brokered Programs by KU for the allocation to recipients who provide a variety of early
childhood education and care programs in the community. The funds received and allocated are recognised in the Statement
of Profit or Loss and Other Comprehensive Income in accordance with AASB 118 “Revenue”. Cash flows are included in the
Statement of Cash Flows on a gross basis.
Unit trust distributions and interest revenue
Unit trust distributions from investments are recognised when the unit holder’s right to receive payment has been established.
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial assets to that
asset’s net carrying amount.
i) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits. Cash equivalents are short- term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value.
j) Term deposits
Term deposits comprise investment deposits held with banks with short to medium term maturity periods. The investments are
measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying
the effective interest rate.
k) Trade and other receivables
Trade receivables, which comprise amounts due from services provided, are recognised and carried at original invoice amount
less an allowance for uncollectible amounts. Normal terms of settlement are 7 days. The carrying amount of the receivable is
deemed to reflect fair value.
An allowance for doubtful debts is made when there is objective evidence that the Company will not be able to collect the debts.
Bad debts are written off when identified.
l) Income tax
The Company is exempt from income tax under s50-5 of the Income Tax Assessment Act, as it is an income tax exempt charitable
entity. As a consequence, there is no income tax attributable to the operating result.
m) General funds and reserves
General Funds
The general funds represent the retained earnings of the Company that are not designated for particular purposes.
Fundraising Reserve
The fundraising reserve arises from the accumulated surpluses generated as a result of the efforts of parents and staff to allow
services to purchase toys and equipment, to assist the service to expand and develop to meet local needs and to allow parents
to share in the life of the service and to make a concrete contribution to their children’s lives.
Program Reserve
The Program reserve arises from surpluses on the programs that have been allocated to the Company for future liabilities that
may arise which the Company will be accountable for.
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