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Notes to the financial statements

1. Financial performance

This section analyses the financial performance of Australia Council for the year ended
30 June 2019.

1.1 Expenses

2019

2018

1.1A: Employee benefits

$’000

$’000

Wages and salaries

10,971

10,749

Superannuation

 Defined contribution plans

1,177

1,115

 Defined benefit plans

277

269

Leave and other entitlements

191

9

Total employee benefits

12,616

12,142

Accounting policy

Accounting policies for employee related expenses is contained in the People and Relationships section.

2019

2018

1.1B: Suppliers

$’000

$’000

Core

 Goods and services supplied or rendered

4,158

5,002

Total goods and services supplied or rendered-Core

4,158

5,002

Programs

 Goods and services supplied or rendered

6,553

3,769

Total goods and services supplied or rendered-Programs

6,553

3,769

Other suppliers

 Minimum lease payments

2,228

2,228

 Provision for surplus lease space

(172)

(219)

 Workers compensation expenses

40

41

Total other suppliers

2,096

2,050

Total suppliers

12,807

10,821

Leasing commitments

Operating lease commitments payable include commitments for leased premises, IT contracts and related services and overseas studios. Commitments for leased premises include the existing office lease at 372 Elizabeth Street, Surry Hills, NSW until 30 September 2019 and for a new office lease at 60 Union Street, Pyrmont from 1 September 2019 onwards. The new office lease is for a period of 10 years.

Property lease payments are subject to an annual increase in accordance with contractual terms. Commitments are shown GST inclusive where relevant.

2019

2018

$’000

$’000

Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:

 Within 1 year

6,845

5,495

 Between 1 to 5 years

8,217

2,442

 More than 5 years

16,977

87

Total operating lease commitments

32,039

8,024

GST Recoverable on commitments for the non-cancellable
operating leases are as follows:

 Within 1 year

601

465

 Between 1 to 5 years

735

160

 More than 5 years

1,535

Total GST recoverable on operating lease commitments

2,871

625

Accounting policy

Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets. From 1 July 2019 the Council is required to adopt AASB 16 Leases and the nature of the premises lease expense for the new premises will change because the Council will recognise a depreciation charge for right-of-use assets and interest expense on lease liabilities.

2019

2018

1.1C: Impairment of assets

$’000

$’000

Write off computer software

880

Total impairment of assets

880

No assets were impaired during the year (2018: $880k).

2019

2018

1.1D: Impairment loss on trade receivables

$’000

$’000

Impairment loss on trade receivables

38

There was no impairment loss on trade receivables during the year (2018: $38k).

2019

2018

1.1E Grants

$’000

$’000

 Council grants and initiatives

23,514

24,274

 Government initiatives

20,171

24,427

 Small to Medium Arts organisations

28,726

29,537

 Major Performing Arts

113,553

111,013

Total grants

185,964

189,251

Grants commitments comprise the following major categories:

Major Performing Arts companies

 Within 1 year

125,807

25,856

 Between 1 to 5 years

154,676

Total Major Performing Arts companies

280,483

25,856

Small to medium arts organisations

 Within 1 year

31,267

31,934

 Between 1 to 5 years

290

31,648

Total small to medium arts organisations

31,557

63,582

Commitments in 2019 relate to the Four Year Funding for Organisations program.

Visual Arts and Craft Strategy

 Within 1 year

5,376

5,326

 Between 1 to 5 years

292

289

Total Visual Arts and Craft Strategy

5,668

5,615

Catalyst novated grants

 Within 1 year

1,805

4,135

 Between 1 to 5 years

1,805

Total catalyst novated grants

1,805

5,940

Other grants

 Within 1 year

2,401

4,641

 Between 1 to 5 years

1,264

1,717

Total other grants

3,665

6,358

Total grant commitments

 Within 1 year

166,656

71,892

 Between 1 to 5 years

156,522

35,459

Total grant commitments

323,178

107,351

GST recoverable on commitments for grants payable

 Within 1 year

15,134

6,509

 Between 1 to 5 years

14,229

3,221

Total GST recoverable on grants payable commitments

29,363

9,730

For organisations under MPA, Small to Medium Arts, Visual Arts and Craft Strategy and Catalyst Novated grants funding arrangements, the quantum of commitments will be determined by the point in time at which the balance date falls within the funding agreement cycle.

Accounting policy

Grants and program expense and payables include grants to artists and arts organisations, funding to major performing arts and small-to-medium organisations, art sector projects, such as the Venice Biennale, that are managed by the Council and costs associated with implementing government initiatives.

Grants and program liabilities are recognised at the amounts approved by the Council for disbursement as contractually payable.

2019

2018

1.1F: Finance costs

$’000

$’000

Unwinding of discount

7

Total finance costs

7

1.1G: Loss from asset disposal

Loss on disposal

2

3

Total losses from asset disposal

2

3

1.1H: Foreign exchange losses

Realised foreign exchange losses

10

19

Total foreign exchange losses

10

19

1.2 Own-source revenue and gains

2019

2018

1.2A: Interest

$’000

$’000

Deposits

1,413

1,201

Total interest

1,413

1,201

Accounting policy

Interest revenue is recognised using the effective interest method.

2019

2018

1.2B: Rental income and lease incentives

$’000

$’000

Operating lease

722

754

Total rental income

722

754

Subleasing rental income commitments

The Council in its capacity as lessor has subleasing arrangements in place for office space at 372 Elizabeth Street, Surry Hills. This lease will cease at 30 September 2019 and all current subleasing arrangements will end at that date. Lease Commitments shown are GST inclusive.

Commitments for sublease rental income receivables are as follows

2019

2018

$’000

$’000

 Within 1 year

144

859

 Between 1 to 5 years

162

Total sublease rental income commitments

144

1,021

GST payable on commitments for sublease rental income

 Within 1 year

13

78

 Between 1 to 5 years

15

Total GST payable on sublease rental income commitments

13

93

Lease incentive

The Council will move to new premises on 1 September, 2019. Under the terms of the new lease contract at 60 Union Street, Pyrmont, the Council will receive a lease incentive of $3,929k (inclusive of GST).

2019

2018

1.2B: Rental income and lease incentives (continued)

$’000

$’000

Commitments for lease incentive receivables are as follows

 Within 1 year

1,387

 Between 1 to 5 years

832

 More than 5 years

1,710

Total lease incentive commitments

3,929

GST payable on commitments for lease incentive

 Within 1 year

126

 Between 1 to 5 years

76

 More than 5 years

155

Total GST payable on lease incentive commitments

357

1.2C: Other revenue

Returned Grants

502

956

Income from fund raising:

 Venice Biennale

956

643

 Venice Pavilion

4

 Workplace giving

5

39

 Other

40

33

Department of Communications and the Arts:

 Australian Brandenburg Orchestra

250

 International Arts Strategy Outcomes Fund

10

Department of Foreign Affairs and Trade:

 Visiting International Publishers

3

 Asia Pacific Regional Conference

9

 Arts Leaders Program

213

122

Contributions from other non-government entities:

 Venice Biennale sponsorship

82

 Venice Biennale professional development program

69

95

 Venice Biennale Champions program

334

120

 Other

387

402

Total other revenue

2,598

2,676

Accounting policy

Revenue

For reciprocal grants (equal value is given back by the Council to the provider), such as ‘Arts Leaders Program’, the Council only recognises the grants as revenue when the Council has satisfied its performance obligations under the terms of the grant.

For non-reciprocal grants, the Council only recognises the grants as revenue when the grant is receivable or received.

2019

2018

1.2D: Revenue from Government

$’000

$’000

Appropriations

 Departmental appropriations

208,186

209,393

Total revenue from Government

208,186

209,393

Accounting policy

Revenue from Government

Funding received or receivable from the Council’s portfolio department (appropriated to the Department for payment to the Council) is recognised as Revenue from Government by the Council (as a corporate Commonwealth entity) unless the funding is in the nature of an equity injection or a loan.

2. Financial position

This section analyses the Australia Council assets used to conduct its operations and the operating liabilities incurred as a result.

2.1 Financial assets

2019

2018

2.1A: Cash and cash equivalents

$’000

$’000

 Cash on hand or on deposit

6,718

10,954

Total cash and cash equivalents

6,718

10,954

Accounting policy

Cash and cash equivalents includes $292k (2018: $386k) for monies held in trust for The Marten Bequest and Harding Miller Foundation which is offset in other payables in Note 2.3D. Refer to Note 5.1 for further information.

2019

2018

2.1B: Trade and other receivables

$’000

$’000

 External parties

131

217

Total goods and services receivables

131

217

Other receivables

 GST Receivable

1,112

1,024

 Interest

3

18

 Other

65

Total other receivables

1,115

1,107

Total trade and other receivables

1,246

1,324

Trade and other receivables expected to be recovered

 No more than 12 months

1,246

1,324

Total trade and other receivables

1,246

1,324

Trade and other receivables aged as follows

 Not overdue

1,246

1,324

Total trade and other receivables

1,246

1,324

There was no expected credit loss during the year (2018: $16k). Credit terms for goods and services were within 30 days (2018: 30 days). Sub-lease tenants invoices are payable in advance of the rental period.

Accounting policy

Receivables

Receivables, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance. Allowances for expected credit losses are made on an on-going basis.

Impairment of financial assets

Financial assets are assessed for impairment at the end of each reporting period.

2.2 Non-financial assets

2.2A: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles for 2019

Land

Build-
ings

Leasehold improve-
ments

Plant
and equip-ment

Comp-uter software

Other

Total

$’000

$’000

$’000

$’000

$’000

$’000

$’000

As at 1 July 2018

Gross book value

149

8,649

4,203

1,944

5,998

411

21,354

Accumulated depreciation, amortisation and impairment

(3,958)

(827)

(5,585)

(6)

(10,376)

Total as at
1 July 2018

149

8,649

245

1,117

413

405

10,978

Additions

 Purchases

912

189

1,806

2,907

Disposals

 Cost

(3)

(3,838)

(3,841)

Accumulated

depreciation

3,838

3,838

Depreciation
and amortisation

(185)

(215)

(417)

(312)

(6)

(1,135)

Total as at
30 June 2019

149

8,464

942

886

1,907

399

12,747

Total as at 30 June 2019 represented by

Gross book value

149

8,649

5,115

2,130

3,966

411

20,420

Accumulated depreciation, amortisation and impairment

(185)

(4,173)

(1,244)

(2,059)

(12)

(7,673)

Total as at 30 June 2019 represented by

149

8,464

942

886

1,907

399

12,747

Plant and equipment includes computer equipment and office furniture and fittings. Other Assets includes works of art.

No indicators of impairment were found for property, plant and equipment.

Computer software additions for the year include $1,806k (2018: $297k) and plant and equipment additions for the year include $138k (2018: $242k) related to the business system transformation program.

A violoncello is expected to be sold within the next 12 months and consequently it has been classified as Assets held for sale.

All non financial assets were assessed for revaluations in accordance with the revaluation policy. Information was obtained on the movement of underlying drivers of value from independent valuers. On that basis it was assessed that a fair value adjustment is not required.

The Council owns the Australian Pavilion building in Venice (value at 30 June 2019 – $8,229k). A land concesssion had been granted by the Municipality of Venice to allow the Council to use the land on which the Pavilion sits. The latest land concession expired on 31 December 2018 and the Council has requested an extension of the land concession from the Municipality of Venice.

Reconciliation of the opening and closing balances of property, plant and equipment for 2018

Land

Build-
ings

Leasehold improve-
ments

Plant
and equip-ment

Comp-uter
software

Other

Total

$’000

$’000

$’000

$’000

$’000

$’000

$’000

As at 1 July 2017

Gross book value

149

8,361

4,186

1,646

5,574

382

20,298

Accumulated depreciation, amortisation and impairment

(333)

(3,825)

(740)

(4,344)

(11)

(9,253)

Total as at 1 July 2017

149

8,028

361

906

1,230

371

11,045

Additions

 Purchases

16

309

424

749

Surplus on revaluation

787

5

82

40

914

Disposals

 Cost

(32)

(32)

Accumulated Depreciation written back

29

29

Depreciation and amortisation

(166)

(137)

(177)

(361)

(6)

(847)

Less: Elimination of accumulated depreciation

(499)

(4)

(62)

(11)

(576)

Elimination on revaluation

499

4

62

11

576

Total as at 30 June 2018

149

8,649

245

1,117

1,293

405

11,858

Land

Build-
ings

Leasehold Improve-
ments

Plant
and Equip-ment

Comp-uter Soft-ware

Other

Total

$’000

$’000

$’000

$’000

$’000

$’000

$’000

Total as at 30 June 2018 represented by

Gross book value

149

8,649

4,203

1,944

5,998

411

21,354

Accumulated depreciation, amortisation and impairment

(3,958)

(827)

(4,705)

(6)

(9,496)

Total as at
30 June 2018

149

8,649

245

1,117

1,293

405

11,858

Provision for impairment of intangibles

Provision for impairment of computer software

(880)

(880)

Total as at
30 June 2018

149

8,649

245

1,117

413

405

10,978

Accounting policy

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition.

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than $2,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions in property leases taken up by the Council where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Council’s leasehold improvements with a corresponding provision for the ‘make good’ recognised.

Revaluations

Following initial recognition at cost, property, plant and equipment are carried at latest revaluation less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depend upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class.

When an item of property, plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the asset is treated in one of the following ways:

  1. the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. For example, the gross carrying amount may be restated by reference to observable market data or it may be restated proportionately to the change in the carrying amount. The accumulated depreciation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses; or
  2. the accumulated depreciation is eliminated against the gross carrying amount of the asset.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the entity using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

2019

2018

Buildings on freehold land

40–50 years

40–50 years

Buildings on leasehold land

50–75 years

50–75 years

Leasehold improvements

Lease terms

Lease terms

Plant and equipment

3–50 years

3–50 years

Other – works of art

15–100 years

15–100 years

Impairment

All assets were assessed for impairment at 30 June 2019. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Computer software

The Council’s computer software comprise internally developed software for internal use as well as implementation costs for cloud-based software. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Implementation costs for cloud-based software are amortised over the terms of the relevant service agreements. Internally generated software is amortised on a straight-line basis over its anticipated useful life. The useful life of the Council’s internally developed software is 4 years (2018: 7 years).

All software assets were assessed for indications of impairment as at 30 June 2019.

2019

2018

2.2B: Prepayments

$’000

$’000

 Prepayments

855

667

Total other non-financial assets

855

667

Other non-financial assets expected to be recovered

 No more than 12 months

798

661

 More than 12 months

57

6

Total other non-financial assets

855

667

No indicators of impairment were found for other non-financial assets.

2.3 Payables

2019

2018

2.3A: Suppliers

$’000

$’000

Trade creditors and accruals

1,620

1,185

Operating lease rentals

114

548

Total suppliers

1,734

1,733

Suppliers expected to be settled

No more than 12 months

1,734

1,619

More than 12 months

114

Total suppliers

1,734

1,733

Settlement was made within 30 days. Payments to suppliers include GST Payable.

Suppliers expected to be settled under 12 months includes $114k (2018: $434k) for operating lease rentals.

2019

2018

2.3B: Grants

$’000

$’000

 Other

1,188

3,154

Total grants

1,188

3,154

Grants expected to be settled

 No more than 12 months

1,188

3,154

Total grants

1,188

3,154

Settlement was usually made according to the terms and conditions of each grant.

This was usually within 30 days of performance or eligibility.

2019

2018

2.3C: Deferred revenue

$’000

$’000

Venice Biennale – future programs

98

92

States & territories – future programs

61

16

Department of Foreign Affaires and Trade

178

National Indigenous Arts and Cultural Authority (NIACA) Government Partnership

75

Rental income

61

64

Other

18

14

Total deferred revenue

313

364

2019

2018

2.3D: Other payables

$’000

$’000

Salaries and wages

275

249

Other

304

553

Total other payables

579

802

Other payables includes an amount payable of $292k (2018: $386k) to The Marten Bequest and Harding Miller Foundation, which is offset in the cash and cash equivalents balance in Note 2.1A.

Other payables to be settled

 No more than 12 months

579

802

Total other payables

579

802

2.4 Other provisions

2.4A: Other provisions

Provision for restoration

Provision for surplus lease space

Provision for Orchestra Victoria

Total

$’000

$’000

$’000

$’000

As at 1 July 2018

885

292

549

1,726

Amounts used

(530)

(530)

Amounts reversed

(170)

(19)

(189)

Total as at 30 June 2019

885

122

1,007

2019

2018

$’000

$’000

Provision for restoration expected to be settled

 No more than 12 months

885

 More than 12 months

885

Total provision for restoration

885

885

Provision for surplus lease space expected to be settled

 No more than 12 months

122

226

 More than 12 months

66

Total provision for surplus lease

122

292

Provision for Orchestra Victoria expected to be settled

 No more than 12 months

549

Total provision for Orchestra Victoria

549

Accounting judgements and estimates

Provision for restoration

The Council currently has an agreement for the leasing of premises at 372 Elizabeth St, Surry Hills, which requires the Council to restore the premises to their original condition at the conclusion of the lease. With the Council’s relocation to new premises in September 2019, this provision will be fully exhausted to restore the premises to their original condition.

Provision for surplus lease space

A provision for surplus lease space at 372 Elizabeth St, Surry Hills, was created as at 30 June 2014, as the contracted space was considered to be in excess of the Council’s ongoing operating requirements. Consequently, the Council was deemed to have a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. The unavoidable costs of meeting the lease obligations have been offset by estimated income from subleasing surplus space. The provision as at 30 June 2019 was reduced based on the estimated sublease income. With the Council’s relocation to new premises in September 2019, this provision will be fully exhausted.

Orchestra Victoria transition support

In the 2014 financial year the Council agreed to provide support to Orchestra Victoria, in relation to Orchestra Victoria’s transition in ownership to The Australian Ballet. As at 30 June 2014 the Council committed to make available $1.434m for transition costs and support for loss of proficiency payments required under the agreement which Orchestra Victoria has with its employees. The Council’s obligations in this regard have been recognised and measured as a provision. The Council’s obligation with regard to transition were fulfilled in the year 2014–15. Payments of $530k were made towards loss of proficiency in 2019 (2018:$158k). In accordance with the terms of the agreement, the Council’s obligations in regards to loss of proficiency were fulfilled by 31 December 2018.

3. People and relationships

This section describes a range of employment and post employment benefits provided to our people and our relationships with other key people.

3.1 Employee provisions

2019

2018

3.1A: Employee provisions

$’000

$’000

Leave

2,404

2,188

Total employee provisions

2,404

2,188

Employee provisions expected to be settled

 No more than 12 months

1,499

1,276

 More than 12 months

905

912

Total employee provisions

2,404

2,188

Accounting policy

Liabilities for ‘short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts.

Leave

The liability for employee benefits includes provision for annual leave and long service leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the Council’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave is an estimate of the present value of the liability at 30 June 2019. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and redundancy

Provision is made for separation and redundancy benefit payments. The Council recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

The Council’s staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes.

The Council makes employer contributions to the employees’ defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The Council accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

3.2 Key management personnel remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Council, directly or indirectly, including any Board member (whether executive or otherwise) of the Council. The Council has determined the key management personnel to be the Chief Executive, current Board members, former Board members who retired during the year and the Portfolio Minister.

Key management personnel remuneration is reported in the table below:

2019

2018

$’000

$’000

Short-term employee benefits

644

1,892

Post-employment benefits

57

197

Other long-term employee benefits

2

48

Total key management personnel remuneration expenses

703

2,137

The total number of key management personnel that are included in the above table are
13 (2018: 17).

The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister’s remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the Council.

In 2019, the key management personnel are defined as those who have the authority and responsibility for planning, directing and controlling the activities of the Council. These are the Board members and the Chief Executive Officer. They decide on the Council’s strategy and approve the corporate plan and budgets and authorise all material decisions. Accordingly, Executive Officers who had been included in the prior year are excluded in 2019.

3.3 Related party disclosures

Related party relationships:

The Australia Council is an Australian Government controlled entity. Related parties to the Australia Council are Board members, the Chief Executive, the Portfolio Minister and other Australian Government entities.

Transactions with related parties:

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.

The following transactions with related parties occurred during the financial year:

The Australia Council received income for a professional development program of $8,000 from The National Gallery of Australia. Mrs Christine Simpson Stokes was a Board member of the Australia Council and a family member was Chair of The National Gallery of Australia. There is no balance outstanding at year end.

The Australia Council made a venue hire payment to the Ananguku Arts & Cultural Aboriginal Corporation to the value of $5,000. During this time Ms Lee-Ann Buckskin was a director of the Ananguku Arts & Cultural Aboriginal Corporation and also Deputy Chair of the Australia Council. There is no balance outstanding at year end.

The Australia Council made a grant payment to the Carclew Youth Arts Centre to the value of $19,500. During this time Ms Lee-Ann Buckskin was a producer at the Carclew Youth Arts Centre and also Deputy Chair of the Australia Council. There is no balance outstanding at year end.

4. Managing uncertainties

This section analyses how the Australia Council manages financial risks within its operating environment.

4.1 Financial instruments

2019

2018

4.1A: Categories of financial instruments

$’000

$’000

Financial assets

 Cash and cash equivalents

6,718

10,954

Total cash and cash equivalents

6,718

10,954

Receivables

 Receivables for goods and services

131

217

 Interest receivables

3

18

Total loans and receivables

134

235

Total financial assets

6,852

11,189

Financial Liabilities

Financial liabilities measured at amortised cost

 Trade creditors

1,620

1,342

 Other payables

579

645

 Grants and programs

1,188

3,154

Total financial liabilities measured at amortised cost

3,387

5,141

Total financial liabilities

3,387

5,141

Change in accounting policy

The Council has applied AASB 9 from 1 July 2018. There has been no significant impact of this change on the Council’s financial statements. Trade and Other Receivables that were classified as loans and receivables under AASB 139 are now classified at amortised cost. Impairment loss on trade receivables is shown in the Statement of Comprehensive Income. Previously, impairment of trade receivables was shown as Doubtful Debt Expense.

Expected credit losses are deducted from the carrying amount of the trade receivables in the Statement of Financial Position. Previously, the provision for doubtful debts was shown as a separate deduction from the gross carrying amount of trade receivables.

Accounting policy

Financial assets

The Council has financial assets only in the nature of cash and receivables.

The classification of financial assets depends on how the Council manages it’s financial assets and the characteristics of their contractual cash flow.

Receivables

Receivables are measured at amortised cost less expected credit losses.

Impairment of financial assets

Financial assets are assessed for impairment at the end of each reporting period.

Financial liabilities

Financial liabilities are recognised and derecognised upon ‘trade date’.

Supplier, grants and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

2019

2018

4.1B: Net gains on financial assets

$’000

$’000

 Interest revenue

1,413

1,201

Net gains on financial assets

1,413

1,201

4.1C: Fair value of financial instruments

Carrying amount is equal to fair value.

Financial assets

 Cash at bank

6,718

10,954

 Receivables for goods and services

134

235

Total financial assets

6,852

11,189

Financial liabilities

 Trade and other creditors

2,199

1,987

 Grants and programs

1,188

3,154

Total financial liabilities

3,387

5,141

4.1D: Credit risk

The Council is exposed to minimum credit risk as the maximum exposure to credit risk is the risk that arises from potential default of debtors. This amount is equal to the total amount of goods and services trade receivables and interest receivables (2019: $134k and 2018: $235k).

Credit quality of financial assets not past due or individually determined as impaired

Not past due nor impaired

2019

Not past due nor impaired

2018

Past due or impaired

2019

Past due or impaired

2018

$’000

$’000

$’000

$’000

Cash and cash equivalents

6,718

10,954

Receivables for goods and services

134

235

16

Total

6,852

11,189

16

4.1E: Liquidity risk

The Council’s financial liabilities are trade creditors and grant payables. The Council has sufficient available financial assets to meet all financial liabilities at 30 June 2019. The exposure to liquidity risk is based on the notion that the Council will encounter difficulty with regard to obligations associated with financial liabilities. This is highly unlikely due to liabilities being budgeted and adequately covered by the appropriation received by the Council.

Maturities for non-derivative financial liabilities in 2019

On demand

Within 1 year

Between 1 to 2 years

Between 2 to 5 years

More than 5 years

$’000

$’000

$’000

$’000

$’000

Trade Creditors

2,199

Grants and programs

1,188

Total

3,387

Maturities for non-derivative financial liabilities in 2018

Trade Creditors

1,185

Grants and programs

3,154

Total

4,339

4.1F: Market risk

Currency risk

Currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Australia Council is exposed to foreign exchange currency risk primarily through undertaking certain transactions denominated in foreign currency.

The Australia Council is exposed to foreign currency denominated in EURO, United States dollar, Pound sterling, New Zealand dollar, Indian Rupee, Canadian dollar, Renminbi and Yen.

Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables are translated at the exchange rates current as at balance date. Associated currency gains and losses are not material.

Interest rate risk

The Council manages its interest rate risk by holding surplus funds with banks in accordance with S 59 (1) of the PGPA Act 2013 and with its investment policy.

4.2 Fair value measurement

The following tables provide an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the statement of financial position do not apply the fair value hierarchy.

The different levels of the fair value hierarchy are defined below:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Council can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Accounting policy

The Council values its non-financial assets at fair value as per AASB 13. The Council enlists professional external valuers for valuing its overseas properties. Freehold properties are valued on the basis of market comparables and leasehold properties with restrictions on sale are valued on the basis of deprival of market rent. Properties of a specialised nature (Venice Pavilion) and leasehold improvements are valued on the basis of depreciated replacement cost. Works of Art are valued on the basis of market comparables. Full professional valuations are performed every three to five years. In the interim years an update on the drivers of market value is obtained from the valuers and an adjustment to fair value made only when material.

2019

2018

Category (Level
1, 2 or 3)1

Valuation Technique(s)

Inputs Used

$’000

$’000

Non-financial assets

Land

149

149

Level 2

Market comparables

Price per square metre
Market rate of interest

Freehold property

370

379

Level 2

Market comparables

Price per square metre
Market rate of interest

Buildings on leasehold land

561

573

Level 2

Estimated rental value

Price per square metre
Market rate of interest

Venice Pavilion (leasehold property)

7,533

7,696

Level 2

Depreciated replacement cost

Current
replacement cost

Leasehold improvements

942

246

Level 2

Depreciated replacement cost

Cost, estimated obsolesence and service capacity

Property, plant and equipment

886

875

Level 2

Depreciated replacement cost

Cost, estimated obsolesence and service capacity

Works of art

399

405

Level 2

Market comparables

Professional appraisals of similar artworks

Total non-financial assets

10,840

10,323

1. The remaining assets and liabilities reported by the Council are not measured at fair value in the Statement of Financial Position.

5. Other information

5.1 Assets held in trust

Established through the estate of the late John Chisholm Marten, the Marten Bequest is administered by the Australia Council on behalf of Perpetual Limited as trustee. Scholarships are awarded across nine arts disciplines, providing financial support for Australian artists to undertake study and training both here and overseas. The Australia Council uses its expertise to promote and review scholarship applications. It then recommends to Perpetual the successful recipients, and manages their scholarship payments.

The Harding Miller Foundation was established by Irene Miller and Kim Harding to champion the education opportunities for women. In 2017, the Foundation established through the Australia Council a scholarship to support the study and training for a female opera-singer. The Australia Council uses its expertise to promote and review scholarship applications. It then recommends to the Foundation the successful recipient, and manages her scholarship payments.

2019

2018

$’000

$’000

Donations and bequests

As at 1 July 2018

386

225

 Receipts

410

310

 Payments

(504)

(149)

Total as at 30 June 2019

292

386

Total monetary assets held in trust

292

386

Non-monetary assets

Each year Perpetual pays the total annual scholarships and awards amount to the Australia Council. These monies are held in trust in a bank account by the Australia Council. During the year the Australia Council pays each beneficiary a quarterly sum based upon the scholarship/award conditions.