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ROYAL AUSTRALASIAN COLLEGE OF SURGEONS

A.B.N. 29 004 167 766

FINANCIAL REPORT

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004

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REPORT FROM THE HONORARY TREASURER TO FELLOWS The Annual Financial Report for the year ended 31 December 2004 is presented together with the Auditor’s Report to the College for 2004. During 2004, the College Statement of Financial Performance records total revenue of $44,538k compared to $20,720k in 2003. Total expenditure was $37,637k compared with $18,073k. This resulted in a surplus of $6,902k. In order to evaluate the significance of these figures a number of one off factors must be taken into account. • The booking of project revenue and expenditure has now been brought into line with Accounting Standard AASB

1004. Previously, only the surplus at the completion of a project was recognised as revenue and was accounted for in the financial year in which the project was completed. This is now recognised progressively throughout the life of the project. All revenue and expenditure from projects which were operational during 2004 is now brought to account in 2004.

• A number of “one off” adjustments including sponsorship, building grants and additional bequest funds offset by the write off of the cost of the demolished Great Hall have had a significant impact.

• The College holds in trust certain funds in the names of specialist societies and other bodies. They are invested

along with the other College funds and the return is booked to the specific fund with a guaranteed minimum return of bank interest. These funds have in the past been reflected in the Statement of Financial Performance. As the College has no control over these funds they are now reflected in the Statement of Financial Position. In addition, the College has a number of separate bequest funds held in trust which have been incorporated in the Statement of Financial Position.

• The Investment Committee achieved a return on the College investment portfolio of 32.8% as compared to the budget expectation of 10.5% resulting in $3,041k in excess of investment revenue earned in 2003.

The College has three distinct areas of revenue and expenditure:

RACS ‘core’ operational revenue which consists predominantly of subscriptions, training and examination fees, conference registrations, investment revenue and bank interest from committed funds. This revenue amounted to $19,173k in 2004 compared to $18,714k in 2003 excluding revenue from College Projects. This increase is principally due to the increased numbers of Fellows and Trainees and the success of the College portfolio. The staff payroll is still the dominant expense. The total payroll expense for core operational activities was $6,913k compared to $6,091k in 2003. Other key costs in the core areas of activity were $1,144k for printing, stationary and photocopying, $2,154k for travel and accommodation, $1,122k for venue hire and $1,733 for depreciation. Project revenue and other one off items. Revenue of $16,458k and expenditure of $16,022k from projects has been booked in 2004. In regard to one off items these include on the revenue side sponsorship and donations for the East Wing of $1,882k, donations for new bequests of $869k, additional net revenue due to the change in the accounting policy for College Projects of $436k, revenue from the transfer of bequest monies held in trust into the College Accounts of $421k. The impact on revenue due to these changes was $19,624k and on expenditure $17,061k. On the expenditure side these included the write off of costs associated with the demolition of the Great Hall of $266k and $773k due to the change in the accounting policy for funds held by the College on behalf of Specialist Groups and Societies. Investment Reserve revenue, which is the return on the investment portfolio for uncommitted funds held for future College activities as determined by Council, amounted to $1,936k compared to $624k in 2003.

In summary, the surplus for 2004 includes one off items of $5,604k while expenditure on operational activities was in line with budget. The Statement of Financial Position shows that College Funds have increased by 25% to $35,331k. Key increases were in investments of $8,765k, current receivables of $3,176k including the NSW Government contribution to ECHTEC invoiced but not yet received and in fixed assets of $1,039k. These were offset by an increase in liabilities

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COUNCILLORS REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 The Councillors of the Royal Australasian College of Surgeons submit herewith the Annual Financial Report of the College for the year ended 31 December 2004. In order to comply with the provisions of the Corporations Act 2001, the Councillors report as follows: 1. The names and particulars of the Office Bearers and the Councillors in office during or since the end of the

financial year are: Number of meetings attended Council Executive

President Anne Kolbe 3 7 Vice President Peter William Harold Woodruff 3 8 Censor-in-Chief Patricia Margaret Davidson 3 8 Honorary Treasurer Andrew Darcy Sutherland 3 7 Elected Members of Council:

Robert Neville Atkinson 2 - Ross Douglas Blair 3 6 Ian Donald Civil 3 - Stephen Arthur Deane 3 6 Patrick Arthur Dewan 1 - Ian Carnegie Dickinson 2 3 Ian Ronald Gough 3 4 Robert Nicholas Linacre 3 1 Guy John Maddern 3 4 Russel William Stitz 3 8 Bruce Philip Waxman 3 -

Co-Opted Members of Council:

Robert John Black 3 - Mark Gordon Edwards 3 - John Campbell Graham 3 - Anthony Eric Hardy 2 - Glenn Anthony John McCulloch 3 4 Hugh Charles Ormsby Martin 3 - Keith Louis Anthony Mutimer 3 - John Michael Quinn 3 - Stephen Graham Stening 3 - Ivan John Thompson 3 -

The above Councillors held office during the full year and continue beyond. Others with lesser periods of service were • Peter Lewis Malycha (resigned May 2004) 1 - • Richard Hugh West (resigned May 2004) 1 - • Jenepher Ann Martin (elected May 2004) 2 - • Errol John Maguire (coopted June 2004) 2 - During the year three Council Meetings and eight Executive Committee Meetings were held and the number of meetings attended by each Councillor is noted above.

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COUNCILLORS REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 2. Councillors’ Qualifications and Experience: ANNE KOLBE MBBS (Hons), FRACS Paediatric Surgeon. PETER WILLIAM HAROLD WOODRUFF MBBS, FRCS, FRACS, FACS, ChM Chairman, Department of Vascular Surgery Princess Alexandra Hospital; Chairman, Naka Pty Ltd; Board of

Australian Council on Healthcare Standards. PATRICIA MARGARET DAVIDSON MD, FRACS, FRCS (Glasgow), FRCP (UK)

Paediatric Surgeons and Professor Faculty of Medicine and Health Sciences, University of Newcastle; Area Director, Kaleidoscope, Hunter Children’s Health Network.

ANDREW DARCY SUTHERLAND MBBS, FRCSC, FRACS, GradDip BA (Adel)

Chief Division of Surgery and Head of Department, Orthopaedic Surgery Women’s & Children’s Hospital Adelaide. ROSS DOUGLAS BLAIR

MBChB, FRACS, FACS Chairman Court Examiners 2003 – Present.

ROBERT NEVILLE ATKINSON RFD MBBS, MA, DCH, FRACS, FAOrthA, MRACMA, Brigadier – Emeritus Consultant in Military Surgery to the ADF; Head of Department of Modbury Public Hospital

(SA), 1985 – present; Chairman RACS State Trauma Committee (SA); Committee Member AMA Road Trauma Committee (SA).

ROBERT JOHN BLACK RFD MBBS, FRACS, FRCS(Ed), FACS Senior Consultant, Department of Otolaryngology Head & Neck Surgery, Mater Hospitals, Brisbane; Associate Professor, Department of Surgery, University of Queensland; Chairman, ENT Tribunal, Q-comp (Worker’s Compensations Regulatory Authority, Queensland); Chairman, ENT Advisory Group, Australian Defence Force; President, Australasian Society of Paediatric Oto-Rhino-Laryngology; Specialty Editor, ANZ Journal of Surgery; Deputy Chairman, Court of Examiners.

IAN DONALD SHEPHERD CIVIL, MBE, OStJ, ED. BSc, MBChB, FRACS, FACS

Director of Trauma Services, Auckland City Hospital; Deputy Chairman, Northern Regional Trust Board; Order of St John (2002 – present); Trustee, Auckland District Health Board Charitable Trust (2003 – present); Associate Editor, International Journal for Injury Care (1999 – present); Colonel-Commandant, RNZAMC (2000 – present); Member, Medical Practitioners Disciplinary Tribunal (1996 – present).

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COUNCILLORS REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004

2. Councillors’ Qualifications and Experience (Continued): STEPHEN ARTHUR DEANE MBBS, FRACS, FRCSC, FACS

Professor of Surgery, South Western Clinical School UNSW; Medical Director, Division of Surgery, Liverpool Hospital, Liverpool NSW; President ANZ Chapter, American College of Surgeons 2000 – Present; Member Board of Governors, American College of Surgeons 1999 – Present. PATRICK ARTHUR DEWAN PhD, MD, MS, MMedSc, FRCS, FRACS Chairman, Kind Cuts for Kids Foundation; Head, Paediatric Surgery, Sunshine Hospital; Chairman, VSC Quality and Safety Subcommittee; Chairman, Skills Lab Committee. IAN CARNEGIE DICKINSON MBBS, FRACS, FAOrthA Senior Orthopaedic Surgeon, Princess Alexandra Hospital; Director, Australian Orthopaedic Association; Trustee, Qld Orthopaedic Research Trust; Associate Professor of Surgery, University of Queensland. MARK GORDON EDWARDS BSc, MBBS, FRCS, FRACS Senior Cardiothoracic Surgeon, Royal Perth Hospital; Member Medical Advisory Committee, Mount Private Hospital; Senior Thoracic Surgeon, Hollywood Private Hospital; member Electoral Committee, Royal Perth Hospital; Secretary, Cardiothoracic Board of Studies RACS. IAN RONALD GOUGH MBBS, MD(Qld), MRCP(UK), FRCS(Ed), FRACS, FACS Clinical Professor of Surgery University of Queensland; President Societe Internationale de Chirurgie (Australian Chapter); Head of Endocrine Surgery, Royal Brisbane and Womens’ Hospitals. JOHN CAMPBELL GRAHAM MBBS, FRACS Vascular Surgeon, Lismore NSW 1992 – Present; Chairman, Divisional Group of Rural Surgery, RACS, 2004 – present. ANTHONY ERIC HARDY MBChB, FRACS Clinical Director Orthopaedic Surgery, Auckland Hospital; Past President New Zealand Orthopaedic Association.

ROBERT NICHOLAS LINACRE MBBS, FRACS Secretary / Treasurer, General Surgeons Australia.

GUY JOHN MADDERN MBBS, PhD, MS, MD, FRACS R.P. Jepson Professor of Surgery, University of Adelaide, 1993 – present; Director, Division of Surgery, The Queen Elizabeth Hospital, 1993 – present; Director, Basil Hetzel Institute, 1996 – present; Surgical Director, ASERNIP-S, 1997 – present; President, Surgical Research Society of Australasia, 2002 – present; Vice-President, Australian Patient Safety Foundation, 2000 – present; Chair, RACS Board of Research, 2002 – present.

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2. Councillors’ Qualifications and Experience (Continued):

ERROL JOHN MAGUIRE, AM, RFD, ILHS MB, BS, PhD, FRCS Ed, FRCS (Eng), FRACS, FACTM Professor of Surgery, Bond University; Senior Surgeon, Townsville Hospital; President, General Surgeons Australia.

PETER LEWIS MALYCHA MBBS, FRCS, FRACS Director Endocrine Surgery, Royal Adelaide Hospital; Chairman, Division of General Surgery; President, General Surgeons Australia.

HUGH CHARLES ORMSBY MARTIN MBBS (Hons), FRACS, FRCS Head, NSW Paediatric Burn Referral Unit, CHW – 1992 – 2004; Chairman, Education Committee; Director, Comserv (No. 709) Pty. Ltd; Senior Visiting Surgeon, The Children’s Hospital at Westmead. JENEPHER ANN MARTIN MBBS, MS, Med, FRACS Director, Specialist Surgery and Spinal CSU, Austin Health, Vic. 2002-2004; Director, Gastroenterology, Surgery and Transplant CSU, Austin Health, Vic. 2004-present; Consultant General Surgeon, Austin Health, Vic. 1994-present; Associate Professor, Centre for Medical and Health Sciences Education, Monash University, 2004-present. GLENN ANTHONY JOHN MCCULLOCH MBBS, FRCS(Ed), FRACS Head of Department of Neurosurgery – The Queen Elizabeth Hospital, Woodville, South Australia, up to April 2004; Member of Executive of Neurosurgical Society of Australasia; 1983 – 2005; Member, Editorial Board of the Journal of Clinical Neuroscience 1999 – 2005. KEITH LOUIS ANTHONY MUTIMER MBBS, FRACS JOHN MICHAEL QUINN MBBS, FRACS, FACS Senior Visiting Vascular Surgeon, Princess Alexandra Hospital Brisbane; Senior Visiting Transplant Surgeon, Princess Alexandra Hospital; Chairman Vascular Panel QComp (Workers Compensation Regulatory Authority, Qld). STEPHEN GRAHAM STENING MBBS, FRACS, FRCS

RUSSELL WILLIAM STITZ MBBS, FRCS, FRACS

IVAN JOHN THOMPSON MBBS, FRACS Chairman of PFT Board in General Surgery (2001 – present).

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2. Councillors’ Qualifications and Experience (Continued):

BRUCE PHILIP WAXMAN BMedSc(Hons), MBBS (Hons), FRACS, FRCS (Eng), FACS, MRACMA

Associate Professor of Surgery, Monash University; Medical Program Director for Surgery, Southern Health, Victoria; Director, Academic Surgical Unit, Dandenong Hospital, Southern Health, Victoria; Councillor, Colorectal Surgical Society of Australia; Senior Editor, ANZ Journal of Surgery; Director, RFDS Victorian Section Board; RAAF Specialist Reserve

RICHARD HUGH WEST AM MBBS, FRCS, FRACS

Director – Sydney Breast Cancer Institute; Head of Department of Breast Surgery, Royal Prince Alfred Hospital; Adjunct Associate Professor of Surgery – Sydney University.

3. The principal activities of the College in the course of the year were promoting the study of the science and art of medicine and clinical and scientific research. During the year there was no significant change in the nature of those activities.

4. The net surplus as shown in the Statement of Financial Performance of the College for the year was $6,901,760

(2003: $2,647,177). The College is a company limited by guarantee which has no share capital and declared no dividends.

5. During the year, there was no significant change in the College's state of affairs other than that referred to in the

financial statements or notes thereto. 6. There has not been any matter or circumstance, other than that referred to in the financial statements or notes

thereto, that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the College’s operations, the results of those operations, or the College’s state of affairs in future financial years.

7. Disclosure of information regarding likely developments in the operations of the College in future financial years

and the expected results of those operations is likely to result in unreasonable prejudice to the College. Accordingly, this information has not been disclosed in this report.

8. During the year the College paid a premium in respect of a contract insuring the Councillors and Officers of the

College against a liability incurred as a Councillor or Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

The College has not otherwise, during or since the year end, indemnified or agreed to indemnify an officer or auditor of the College or of any related body corporate against a liability incurred as an officer or auditor.

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STATEMENT OF FINANCIAL PERFORMANCE

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 2004 2003 Note $ $ Revenue from ordinary activities 3 44,538,342 20,720,081

Personnel costs and consultancy fees (16,737,937) (7,235,135)

Depreciation and amortisation expense (1,733,803) (901,526)

Borrowing costs (320,457) (83,429)

Travel & accommodation (5,841,203) (2,371,834)

Telephone, teleconference and audio visual costs (601,520) (429,742)

Printing, stationery and photocopying (1,276,141) (1,335,877)

Postage and courier costs (588,074) (348,754)

Information system costs (557,894) (376,832)

Bank fees and merchant charges (509,443) (253,827)

Rent, rates, power, repairs and other property costs (805,169) (567,260)

Equipment purchases, hire and repairs (911,045) (56,194)

Training manuals and consumables used in education and field projects

(1,389,483) (174,201)

Facilities hire and catering costs (1,862,272) (1,742,843)

Scholarships / Fellowships (737,627) (989,297)

Specialist Societies Funding (591,976) -

Other expenses from ordinary activities (3,172,538) (1,206,153) Operating Surplus / (Deficit) 3 6,901,760 2,647,177

Total revenue, expense and valuation adjustments recognised directly in College Funds and Reserves

- -

Total Changes in College Funds and Reserves 6,901,760 2,647,177

Notes to and forming part of the financial statements are included on pages 15 to 32

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STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2004 Notes 2004 2003 $ $ CURRENT ASSETS Cash assets 1,427,255 1,251,989 Receivables 5 12,334,343 9,158,358 Other financial assets 6 25,291,048 16,526,608 Inventories 7 186,083 134,013 Other 8 764,493 1,102,631 TOTAL CURRENT ASSETS 40,003,222 28,173,599 NON CURRENT ASSETS Property, plant and equipment 9 25,227,133 24,188,269 TOTAL NON CURRENT ASSETS 25,227,133 24,188,269 TOTAL ASSETS 65,230,355 52,361,868 CURRENT LIABILITIES Payables 10 1,722,229 2,469,153 Provisions 11 642,039 517,756 Other 12 22,379,431 13,815,377 TOTAL CURRENT LIABILITIES 24,743,699 16,802,286 NON CURRENT LIABILITIES Provisions 13 155,204 129,895 Interest bearing liabilities 14 5,000,000 7,000,000 TOTAL NON CURRENT LIABILITIES 5,155,204 7,129,895 TOTAL LIABILITIES 29,898,903 23,932,181 NET ASSETS 35,331,452 28,429,687 COLLEGE FUNDS AND RESERVES Reserves General Reserve

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233,636

233,636

Retained Profits 3 33,517,378 28,551,649 Investment Account 4 1,580,438 (355,598) TOTAL COLLEGE FUNDS AND RESERVES 35,331,452 28,429,687


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STATEMENT OF CASH FLOWS


2004 2003 $ $ Cash Flows from Operating Activities Subscriptions and Entrance Fees * 7,397,090 3,346,694 Training, Examination and Assessment Fees 9,466,895 8,129,628 Sponsorship and Donations 3,047,333 591,203 Conference Registrations 1,736,786 2,019,813 Property Rental and Recoveries 257,323 120,377 Project Income and Associated Fees 7,207,705 6,919,510 Interest Income 73,324 39,866 Other Income 2,894,730 1,004,530 Payments to suppliers and employees (20,464,520) (22,551,140) Borrowing Costs (320,457) (83,427)

Net cash provided by / (used in) operating activities 22(b) 11,296,209 (462,946) Cash flows from investing activities

Commercial Bill Facility used (repaid) (2,000,000) 7,000,000 Net movement from investment securities (2,336,431) 2,089,355 Payments for property plant and equipment (2,171,947) (10,179,610) Net cash provided by / (used in) investing activities (6,508,378) (1,090,255) Net increase / (decrease) in cash held 4,787,831 (1,553,201) Cash at beginning of financial year 2,383,801 3,937,002 Cash at the end of the financial year 22(a) 7,171,632 2,383,801

* In 2003, only 50% of subscription revenue was received in cash due to the abolition of the policy of subscriptions being invoiced 12 months in advance to Fellows.


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NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 1. ACCOUNTING POLICIES

Financial Reporting Framework The Royal Australasian College of Surgeons is incorporated as a company limited by guarantee.

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, applicable Accounting Standards and Urgent Issues Group Consensus Views, and complies with other requirements of the law. The financial report has been prepared on the basis of historical cost and except where stated, does not take into account changing money values or valuations of non current assets. Cost is based on the fair values of the consideration given in exchange for assets. Comparative figures are, where appropriate, reclassified so as to be comparable with the figures presented for the current financial year. Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous year except for: - Funds held on behalf of Others During the year the approach to accounting for certain funds held on behalf of specialist surgical groups and societies has changed. In previous years these funds had been reflected as revenue of the College. Following a review of these funds, it was apparent that the College did not have the right to control these funds and therefore the revenue previously recognised has been reversed and the funds reclassified as liabilities in the Statement of Financial Position. The financial impact of this change in accounting policy has been a one off decrease in the Operating Surplus for the year of $773,269. - Revenue Recognition The College has adopted the revised Accounting Standard AASB 1004 “Revenue”, which has resulted in a change in the accounting policy for the recognition of revenue and surplus / deficits for College Projects. Previously, the College only recognised revenue on College Projects as a surplus (deficiency) net of expenditure to date at the completion of each project. A provision for a foreseeable loss was made as soon as the loss was anticipated and was made for work completed to date and for future work on the project. In accordance with AASB1004 ‘Revenue’, revenue on College Projects is now recognised by reference to the stage of completion, using the percentage of completion method such that revenue is brought to account in the financial years in which the services are rendered. Revenue is only recognised when it is probable that the economic benefits associated with the project will flow to the College. The financial effect of this change has been to increase the Operating Surplus for the year by $435,746. The change to the policy of recognising revenue on College Projects in accordance with AASB1004 ‘Revenue’ was made to order to ensure greater transparency in the College accounts in relation to the activity on College Projects.

Significant Accounting Policies Accounting policies are selected and applied in a manner which ensures that the resultant financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions and other events is reported. The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

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FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 1. ACCOUNTING POLICIES (Continued) (a) Investments

Investments which are readily marketable are reflected in the financial statements at market value. All other investments are valued at the lower of cost and net realisable value. All movements in the market value of marketable investments are brought to account in the Statement of Financial Performance in the financial period in which they arise.

Dividends and other distributions from investments are taken to income on an accruals basis. (b) Foreign Currency

All foreign currency transactions during the year have been brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at balance date are translated at the exchange rate existing at that date. All exchange differences are brought to account in the surplus in the financial period in which they arise.

(c) Property, Plant and Equipment

Buildings, plant and equipment are depreciated on a straight line basis so as to write off the cost over their expected useful lives. The following estimated useful lives are used in the calculation of depreciation:

2004 2003 - Buildings 40 years 40 years - Plant & Equipment 3–6 years 3-6 years

Treasures (antique furniture, silverware and artwork) donated to the College, are recorded at their “deemed cost” (previously fair value) as determined by the Councillors, and accounted for as donation income. The Gordon Craig Library, Great Mace and Treasures, subject to proper maintenance, are considered to have indefinite useful lives and their recoverable value is not expected to diminish overtime. Accordingly these assets are not depreciated.

(d) Inventories Inventories are valued at the lower of cost and net realisable value. Costs are assigned to inventory on hand by the method most appropriate to each particular class of inventory, with the majority being valued on a specific cost basis.

(e) Employee Benefits

Provision is made for benefits accruing to employees in respect of annual leave and long service leave when it is probable that settlement will be required and capable of being measured reliably. Provisions made in respect of annual leave and long service leave expected to be settled within 12 months are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. Provision made in respect of long service leave which is not expected to be settled within 12 months is measured as the present value of the estimated future cash outflows to be made by the College in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflow the market yield as at the reporting date on national government bonds, which have a maturity approximating the terms of the related liability, are used.

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1. ACCOUNTING POLICIES (Continued)

(f) Recoverable Amount of Non-Current Assets

Non-current assets are written down to recoverable amount where the carrying value of any non-current asset exceeds recoverable amount. In determining recoverable amounts, expected net cash flows have not been discounted to their present value.

(g) Taxation

The College is exempt from income tax as it is considered an income tax exempt charitable entity under Subdivision 50-B of the Income Tax Assessment Act 1997.

(h) Unexpended Grant Income Income received in relation to specific projects is taken to account in accordance with Accounting Standard AASB1004 ‘Revenue’. The excess of the total amount invoiced for a project over the revenue recognised for a project under the new revenue recognition policy for Projects (see Changes in Accounting Policies) is taken to Unexpended Grant Income.

(i) Receivables

Trade receivables and other receivables are recorded at amounts due less any provision for doubtful debts.

(j) Payables

Trade payables and other payables are recognised when the College becomes obliged to make future payments resulting from the purchase of goods and services.

(k) Donated Services and “In Kind” Sponsorship

From time to time the College receives donated services from various sources. Due to an inability to reliably estimate the value of these services, it is the policy of the College not to recognise such services in the financial statements. The College also receives “in kind” sponsorship in the form of specific goods or equipment provided for use in the College’s education programmes. Where such sponsorship is significant and quantifiable, the fair value of the equipment or goods received is capitalised and recorded as revenue.

(l) Acquisition of Assets

Assets acquired are recorded at the cost of acquisition, being the purchase consideration determined as at the date of acquisition plus costs incidental to the acquisition.

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1. ACCOUNTING POLICIES (Continued)

(m) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: i. Where the amount of GST incurred is not recoverable from the taxation authority, it is

recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii. For receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cashflows are included in the statement of cashflows on a gross basis. The GST component of cashflows arising from investing and financing activities that is recoverable from, or payable to, the taxation authority is classified as operating cashflows.

(n) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the College and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

• All sources of revenue, including subscriptions, fees, grants, sponsorships and donations are taken

to income on an accrual basis. • Subscriptions billed in advance are recorded as Income Received in Advance and are recognised

as income in the year to which the subscription relates.

• Interest – control of the right to receive the interest payment.

• Dividend – control of the right to receive the dividend payment.

• College Projects (refer Note 1, changes in Accounting Policies)

(o) Interest Bearing Liabilities

Bills of exchange are carried at the principal amount plus deferred interest.

(p) Cash and Cash Equivalents

Cash on hand and in banks are stated at nominal value. For the purpose of the Statement of Cash Flows, cash including cash on hand and in banks and money market investments readily convertible to cash within 2 working days.

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2004 2003 $ $

2. OPERATING SURPLUS Operating surplus includes the following items of revenue and expense Operating Revenue Rental Income from College Properties 49,339 67,957 Royalties 61,141 4,328 Interest – other entities 73,297 58,271 Expenditure Remuneration of Auditors: Auditing the financial report – Ernst & Young 35,500 33,750 Other services – Ernst & Young 9,500 - Unrealised exchange loss 40,892 108,892 Depreciation of non current assets - Property, plant and equipment 1,733,803 901,526 Interest expense 320,457 83,429 Net transfer to provisions for employee entitlements 149,592 23,501 Loss on sale of property, plant and equipment (excluding Great Hall writeoff) 276,476 6,476 Specific Items Included in the Operating Surplus are the following revenues and expenditure whose disclosure is relevant in explaining the financial performance of the College:

Investment Revenue (cash and noncash) 4,977,853 1,936,934 Sponsorship in kind (Laproscopic Stackes donated by Smith & Nephew) 877,195 0 Net surplus recognised on open projects as a result of changes in accounting policy 435,746 0 Victorian Government grant for East Wing 1,000,000 0 Donations for new bequests 868,636 0 Transfer of bequest monies held in trust into the College accounts 420,597 0 Doubtful debts (expense) / write back (190,939) 250,788 Write off of book value associated with the demolition of Great Hall (265,685) 0 Write back of prior year surpluses in relation to funds held on behalf of others as a result of change in accounting policy (773,269) 0


NOTES TO THE CONCISE FINANCIAL REPORT


2004 2003 $ $ 3. REVENUE AND EXPENDITURE REVENUE College Operations 22,338,988 18,714,301 Bequests and Scholarships 3,805,576 1,381,645 College Projects 16,457,742 - Investment Account 1,936,036 624,135 TOTAL REVENUE 44,538,342 20,720,081 EXPENDITURE College Operations 20,846,346 17,077,098 Bequests and Scholarships 768,269 995,806 College Projects 16,021,967 - TOTAL EXPENDITURE 37,636,582 18,072,904 OPERATING SURPLUS 6,901,760 2,647,177 Total Accumulated Funds at the beginning 28,196,051 25,548,874 of the year TOTAL ACCUMULATED FUNDS AT THE END OF THE YEAR 35,097,811 28,196,051 4. INVESTMENT ACCOUNT Balance at the beginning of the financial year (355,598) (979,733) REVENUE Investment revenue(loss) 1,936,036 624,135 TOTAL REVENUE 1,936,036 624,135 NET RESERVE SURPLUS / (DEFICIT) FOR THE YEAR 1,936,036 624,135 BALANCE AT THE END OF THE FINANCIAL YEAR 1,580,438 (355,598)

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2004 $

2003 $

5. CURRENT RECEIVABLES Subscriptions and Levies in Advance 6,755,412 6,457,456 Other Sundry Debtors 5,985,908 2,916,940 Less Provision for doubtful debts (406,977) (216,038) 12,334,343 9,158,358 6. OTHER CURRENT FINANCIAL ASSETS Non-quoted Investments – at cost Funds at call 5,744,377 1,131,812 Market Value of Quoted Investments Shares and Trusts 19,546,671 15,394,796 Commonwealth and Semi-Government Securities - -

25,291,048 16,526,608 7. CURRENT INVENTORIES Finished goods – at cost 186,083 134,013

8. OTHER CURRENT ASSETS Prepayments 367,002 358,116 Projects Work in Progress

Endoluminal Project #2 - 1,957 Medical Equipment Maintenance Program 34,032 - Trauma Centre Verification Project 10,930 76,332 Australian Surgical and Efficacy Register of New Interventional Procedures #2

275,448 545,244

Rural Locum Program #2 - 21,917 Paediatric Surgical Outreach Project #2 - 71,064 National Breast Audit #2 77,081 28,001 397,491 744,515 764,493 1,102,631

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FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 9. PROPERTY, PLANT AND EQUIPMENT Freehold

Land Buildings Plant and

Equipment (incl WIP)

Treasures, Gordon Craig

Library and Great Mace

TOTAL

$ $ $ $ $ GROSS CARRYING AMOUNT AT COST

Balance at 1 January 2004 5,665,337 16,372,256 6,387,259 326,807 28,751,659 Additions - 683,709 2,543,442 - 3,227,151 Disposals - (299,476) (46,456) - (345,932) Work in Progress - 6,726 (180,466) - (173,740) Balance at 31 December 2004 5,665,337 16,763,215 8,703,779 326,807 31,459,138 ACCUMULATED DEPRECIATION Balance at 1 January 2004 - (372,566) (4,190,824) - (4,563,390) Disposals - 29,521 35,667 - 65,188 Depreciation expense - (409,825) (1,323,978) - (1,733,803) Balance at 31 December 2004 - (752,870) (5,479,135) - (6,232,005) NET BOOK VALUE As at 31 December 2003 5,665,337 15,999,690 2,196,435 326,807 24,188,269

As at 31 December 2004 5,665,337 16,010,345 3,224,644 326,807 25,227,133

CURRENT VALUE OF FREEHOLD LAND AND BUILDINGS With the completion of the East Wing, Spring Street Melbourne during 2004, the Councillors obtained an independent valuation of the College land and buildings for the financial year ended 31 December 2004. The valuation was performed on an open market basis, being the amounts for which these assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arms length transaction, at valuation date The College land and buildings were valued at $32,693,782 which is in excess of their written down value of $21,676,682. The College has elected to account for all non current assets at cost. As a consequence any excess of fair value over net cost is not reflected in the Financial Statements.




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10. CURRENT PAYABLES 2004 $

2003 $

Unsecured: Trade Payables 1,208,991 2,314,740 Other 513,238 154,413 1,722,229 2,469,153 11. CURRENT PROVISIONS Employee benefits – Annual leave (note 13) 524,954 427,903 Long service leave (note 13) 117,085 89,853 642,039 517,756

12. OTHER CURRENT LIABILITIES Unsecured: Sundry Funds American College of Surgeons Visiting Fellowship Fund 31,948 26,601 Pan Pacific Surgical Association Fund 180,907 138,320 Australian Society of Otolaryngology - Head and Neck Surgery 584,219 446,685 Provincial Surgeons Association 67,679 51,748 Australian & New Zealand Society of Vascular Surgeons – Conference

96,738 56,387

Division of Cardiothoracic Fund 3,044 - Division of Vascular Surgery Fund 13,588 - Section of Colon and Rectal Surgery Fund 292,335 - B K Rank Travelling Professorship Fund 282,949 - Fellowship Levy 142,190 - IPRAS – Asia Pacific Fees 35,481 - ANZ Chapter of International Society-Cardio Vascular 244,114 - Melbourne Vascular Surgeons Association 1,941 - 1,977,133 719,741

Net External Conference monies held 786,386 2,488

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2004 $

2003 $

12. OTHER CURRENT LIABILITIES (Continued) Unexpended Grant / Project Revenue Tertiary Health Services PNG #3 (previously PIP – PNG) 107,495 127,249 Pacific Islands Project #3 – AusAID 315,831 338,260 East Timor Project 256,295 27,225 East Timor Project – Victorian Grant (ETP) 48,730 97,313 Medical Equipment Maintenance - 151,072 ASERNIP-S Other Projects 387,531 277,095 Trans Urethral Needle Ablation of the Prostate Project - 94,352 Endoluminal Project – Phase 2 41,190 - Sentinel Node vs Axillary clearance in Early Cancer Project - 31,231 Rural Locum Project II 23,289 - Rural Surgical Training Program II 158,128 87,926 Advance Surgical Upskilling – NT Surgeons - 41,989 Support Scheme for Rural Specialists – Audit & Peer Review 28,170 13,816 Support Scheme for Rural Specialists - 29,000 East Collaborative Health Training Education (ECHTEC) 524,680 402,903 Paediatric Surgical Outreach Services Project II 59,925 - Definitive Trauma Care Course 54,036 33,775 East Collaborative Health Training Education Centre – Capital Works Federal Government Funding

3,811,955 2,153,216

Vascular Surgery Information Project 34,777 77,480 East Collaborative Health Training Education Centre – Capital Works NSW Government Funding

4,374,238 1,288,101

SSRS Risk Management Workshop 37,635 - Specialist Re-entry Program 31,631 - Outer Metropolitan Training Project 109,072 - SA Mortality Audit 179,586 - 10,584,194 5,272,003

Amounts allocated and committed for specific purposes Sponsorship and donations billed in advance 379,138 208,182 Subscriptions billed in advance 6,751,378 6,411,914 Examination entry and annual training fees billed in advance 1,901,202 1,201,049 9,031,718 7,821,145 22,379,431 13,815,377

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2004 $

2003 $

13. NON-CURRENT PROVISIONS Employee Benefits Long Service Leave 155,204 129,895 The aggregate employee benefit liability recognised and calculated in the financial statements is as follows:

Current (note11) 642,039 517,756 Non-current 155,204 129,895 797,243 647,651 14. INTEREST-BEARING LIABILITIES Secured: Bank Commercial Bills 5,000,000 7,000,000 Secured by a mortgage over the following College freehold land and buildings, the total current market value of which exceeds the value of the mortgage:

College of Surgeons Gardens’, Spring Street Melbourne, VIC 177A Albion St, Surry Hills, NSW 51-54 Palmer Place, North Adelaide, SA

15. RESERVES General Reserve 233,636 233,636

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16. SUPERANNUATION COMMITMENTS The College sponsors a superannuation fund for its employees which is administered by an independent superannuation organisation. The details of the fund are set out below:

Royal Australasian College of Surgeons Staff Superannuation Fund

Type of Benefits Accumulation of contributions of employee and employer. Covering all employees and providing benefits on retirement, death or disability.

Contributions by: - Employee

Contributions are optional.

- Employer At rates varying between 9% and 19% of base salary of employee.

The College has a legal obligation to contribute as set out in the trust deed but has the right to vary the rate of, or terminate, contributions upon giving notice as prescribed in the deed. Any variations to contributions would nevertheless ensure that contributions of up to 9% of employees wages and salaries are in accordance with Australian legal requirements.

Date of annual review 31 March 2005 Funds are available to satisfy all benefits that would have vested under the plan in the event of termination of the plan or voluntary or compulsory termination of employment of each employee.

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FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 17. COUNCILLORS’ REMUNERATION The names of the Office Bearers and the Councillors during the year were: Anne Kolbe Robert Nicholas Linacre Peter William Harold Woodruff Glenn Anthony John McCulloch Patricia Margaret Davidson Guy John Maddern Andrew Darcy Sutherland Errol John Maguire (coopted June 2004) Robert Neville Atkinson Peter Lewis Malycha (resigned May 2004) Robert John Black Hugh Charles Ormsby Martin Ross Douglas Blair Jenepher Ann Martin (elected May 2004) Ian Donald Shepherd Civil Keith Louis Anthony Mutimer Stephen Arthur Deane John Michael Quinn Patrick Arthur Dewan Stephen Graham Stening Ian Carnegie Dickinson Russell William Stitz Mark Gordon Edwards Ivan John Thompson Ian Ronald Gough Bruce Philip Waxman John Campbell Graham Richard Hugh West (resigned May 2004) Anthony Eric Hardy Aggregate income received, or due and receivable 2004 2003 by Councillors of the Royal Australasian College of $ $ Surgeons in connection with the management of the College was: NIL NIL 18. MEMBERS' GUARANTEES The Royal Australasian College of Surgeons is a company limited by guarantee and without share capital. If the company is wound up the Articles of Association state that each member is required to contribute a maximum of $1.00 towards meeting any outstanding obligations of the company. At 31 December 2004 the number of members was 5,496 (31 December 2003 - 5,396).

19. RELATED PARTY TRANSACTIONS 2004

$ 2003

$ During the year the Medical Director, Professor G Maddern FRACS, a Councillor of the College, provided consultancy services as Medical Director for the ASERNIP projects.

Consultancy fees 91,520 103,532

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20. ASSETS AND LIABILITIES OF TRUSTS FOR WHICH

THE COLLEGE IS TRUSTEE 2004 2003

$ $ The College administers the following Trust Funds :

T F Ryan Endowment (J P Ryan and M Ryan Fellowship) - 36,588 Surgical Research Fellowship - 67,588 Syme Memorial Orator - 38,416 A Watson Memorial Lecturer - 17,229 H Windsor Visiting Lecturer - 30,777

- 190,598 Represented by : Investments - 160,012 Cash - 28,324 Sundry Debtors - 2,357 Sundry Creditor - (95)

- 190,598 Trust Funds, previously reported separately, were transferred into the College Accounts during 2004. The purpose of this was to achieve greater efficiency in the management of these funds as well as to earn each trust fund a higher rate of return using the College’s main portfolio with Goldman Sachs J B Were.

21. FINANCIAL REPORTING BY SEGMENTS

The College promotes the study of science and art of medicine and clinical and scientific research. The College operates predominantly in Australia and New Zealand.

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FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 22. NOTES TO THE STATEMENT OF CASHFLOWS (a) Reconciliation of Cash For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:

2004 2003 $ $ Cash assets 1,427,255 1,251,989 Funds at call (note 6) 5,744,377 1,131,812 7,171,632 2,383,801 (b) Reconciliation of net cash flows from operating activities to the operating surplus Operating surplus 6,901,760 2,647,177 Non cash items Depreciation of non-current assets 1,733,803 901,526 Net (increase) / decrease in carrying value of investments (2,321,666) (1,241,491) Management fees charged to projects - (665,742) Write off of non current assets 276,476 6,476 Estimated surpluses on projects (481,378) - Loss associated with change in accounting treatment of certain funds held on behalf of Specialist Groups and Societies

773,269

-

In Kind sponsorship of Laparoscopic stackes (877,195) - Changes in assets and liabilities: (Increase) in current receivables (2,456,540) (3,689,205) (Increase) / Decrease in current inventories (52,069) 127,445 (Increase) / Decrease in other current assets 338,138 (426,541) Increase / (Decrease) in current payables (746,921) 443,682 Increase / (Decrease) in current provisions 124,283 (33,896) Increase in non-current provisions 25,309 57,397 Increase in other current liabilities 8,058,940 1,410,226 Net cash flow from / (used in) operating activities 11,296,209 (462,946) (c) Financing facilities available Commercial bill facility used 5,000,000 7,000,000 Commercial bill facility unused - -

Commercial Bill Facility secured against College properties at Spring Street, Melbourne, Vic; Albion Street, Surry Hills, NSW and Palmer Place, North Adelaide, SA.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 23. FINANCIAL INSTRUMENTS (a) Significant Accounting Policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements. (b) Interest Rate Risk The following details the College’s exposure to interest rate risk as at the reporting date.

2004 Average Fixed Fixed Variable Non- Interest Interest Interest Interest Interest Total rate Rate Rate Rate Bearing Less than 1-5 years 1 year

% $ $ $ $ $ Financial Assets Cash 4.2% - - 1,427,255 - 1,427,255 Trade receivables (net) - - - - 12,334,343 12,334,343 Cash at call 5.3% - - 5,744,377 - 5,744,377 Shares and trusts - - - - 17,840,958 17,840,958 Floating rate notes 5.1% - - 1,705,713 - 1,705,713 - - 8,877,345 30,175,301 39,052,646 Financial Liabilities Trade payables - - - 1,587,415 1,587,415 Other liabilities - - - 22,379,431 22,379,431 Employee entitlements - - - 797,243 797,243 Bank Commercial Bills - secured

- - 5,000,000 - 5,000,000

- - 5,000,000 24,764,089 29,764,089

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23. FINANCIAL INSTRUMENTS (Continued) 2003 Average Fixed Fixed Variable Non- Interest Interest Interest Interest Interest Total rate Rate Rate Rate Bearing Less than 1-5 years 1 year

% $ $ $ $ $ Financial Assets Cash 3.8% - - 1,251,989 - 1,251,989 Trade receivables (net) - - - 9,158,358 9,158,358 Cash at call 4.5% - - 1,131,812 - 1,131,812 Shares and trusts - - - 14,960,046 14,960,046 Floating rate notes 3.2% - - 434,750 - 434,750 - - 2,818,551 24,118,404 26,936,955 Financial Liabilities Trade payables - - - 2,469,153 2,469,153 Other liabilities - - - 13,815,377 13,815,377 Employee entitlements - - - 647,651 647,651 Bank Commercial Bills - secured

- - 7,000,000 - 7,000,000

- - 7,000,000 16,932,181 23,932,181 (c) Credit Risk Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the College. The College has adopted the policy of only dealing with creditworthy counterparts and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial losses from defaults. The College does not have any significant credit risk exposure to any single counter-party or any group of counter-parties having similar characteristics. The carrying amount of financial assets recorded in the statement of financial position, net of any provision for losses, represents the College’s maximum exposure to credit risk, without taking account of the value of any collateral or other security obtained. (d) Net Fair Value The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair values determined in accordance with the accounting policies disclosed in note 1 of the financial statements.

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23. FINANCIAL INSTRUMENTS (continued) 2004 2003 $ $ 24. COMMITMENTS FOR EXPENDITURE

Capital expenditure commitments contracted for at balance date but not provided for or payable

RACS Head Office Development including the Skills Centre - Victoria

Not longer than 1 year - 1,433,990 Longer than one year and not later than 5 years

- 1,433,990

25. ADDITIONAL COMPANY INFORMATION The Royal Australasian College of Surgeons is a company limited by guarantee incorporated and operating in Australia and New Zealand. Principal Registered Office and Place of Business is: Royal Australasian College of Surgeons, Spring Street, Melbourne Victoria 3000 Telephone: (03) 9249 1200 At 31 December 2004, the number of permanent and casual employees at the College was 252 (31 December 2003 – 225).

26. SUBSEQUENT EVENTS There were no matters or circumstances which have arisen since the end of the financial year which have significantly affected or may significantly affect the operation of the College, the results of those operations, or the state of affairs of the College. 27. IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS Set out below are the key areas where accounting policies will change and may have an impact on the financial report of the College. At this stage the College has not been able to reliably quantify the impacts on the financial report. Classification of Financial Instruments Under AASB 139 ‘Financial Instruments: Recognition and Measurement’, financial instruments will be required to be classified into one of five categories which will, in turn, determine the accounting treatment of the item. The classifications are loans and receivables – measured at amortised cost, held to maturity – measured at amortised cost, held for trading – measured at fair value with fair value changes charged to net profit or loss, available for sale – measured at fair value with fair value changes taken to equity and non-trading liabilities – measured at amortised cost. This will result in a change in the current accounting policy that does not classify financial instruments. Current measurement is at amortised cost. The future financial effect of this change in accounting policy is not yet known as the classification and measurement process has not yet been fully completed. Impairment of Assets Under the Australian equivalent to IAS 36 ‘Impairment of Assets’ the recoverable amount of an asset is determined as the higher of net selling price and value in use. This will result in a change in the College’s current account policy which determines the recoverable amount of an asset on the basis of discounted cast flows. Under the new policy it is likely that impairment of assets will be recognised sooner and that the amount of write-downs will be greater. Reliable estimation of the future financial effects of this change in accounting policy is impracticable because the conditions under which impairment will be assessed are not yet known.

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