Recognition and measurement

Acquisition of assets

Assets are recorded at cost at the time of acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken.

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

Fair value measurement of assets and liabilities

The Corporation has adopted the following general policies relating to the determination of fair value of assets and liabilities.

The fair value of land is determined by reference to the market value of the land component of ABC property because it is possible to base the fair value on recent sales of comparable sites. The Corporation’s independent valuers detail these reference sites in valuation reports for respective properties.

The fair value of buildings, plant, equipment and intangibles is determined by reference to depreciated replacement cost as they are typically specialist in nature, with broadcasting in mind.

Generally, the fair value of the Corporation’s other financial assets and liabilities is deemed to be their carrying value as it approximates fair value. The fair value of long-term loans is the net present value of future discounted cash flows arising.

AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level in accordance with the following fair value measurement hierarchy:

• Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
• Level 3 - unobservable inputs for an asset or liability.

The Corporation does not hold any assets or liabilities measured at fair value that are classified as Level 1 inputs (i.e. with reference to quoted prices (unadjusted) in active markets for identical assets or liabilities).

The carrying value of cash and cash equivalents, financial assets and non-interest-bearing financial liabilities (except for derivatives used for hedging) of the Corporation, are measured at amortised cost that approximates their fair value. There have been no recurring fair value measurements transferred between the respective levels for assets and liabilities to 30 June 2020.

Presentation in the financial statements

The aforementioned is summarised on the following table.

Measurement of right-of-use assets and accompanying liability under AASB 16 Leases

Leased right-of-use assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received.

On initial adoption of AASB 16 the Corporation has adjusted the right-of-use assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any right-of-use asset that shows indicators of impairment and an impairment loss is recognised against any right-of-use asset that is impaired. Lease right-of-use assets continue to be measured at cost after initial recognition in Commonwealth agency, GGS and Whole of Government financial statements.

Assumptions surrounding uncertainty –

Lease liability

Refer to the commentary in Note 8B Lease liability under the same heading.

5. Financial Assets

Recognition and measurement

Cash and cash equivalents

Cash and cash equivalents are recognised at their nominal amounts and include:

• cash on hand; and
• cash at bank and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

Receivables

Trade receivables, loans and other receivables that are held for the purpose of collecting the contractual cash flows where the cash flows are solely payments of principal and interest, that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

In respect of the Receivables balance, the ABC has adopted the modified retrospective provisions of AASB 15 and has not classified the prior year’s balances between Contract assets and Receivables.

These are included in current assets, unless they mature more than 12 months after the Statement of Financial Position date, in which case they are classified as non-current assets.

Other receivables

As at 30 June 2020, Other receivables includes forward exchange contracts at fair value through surplus/(deficit) of nil (2019 $62,159).

Under the fair value measurement hierarchy, these are Level 2 financial instruments as defined earlier under Fair value measurement of assets and liabilities.

The balance represents estimated future cash flows, based on market forward exchange rates at 30 June 2020 and the forward contract rate, discounted by the observable yield curves of the respective currencies. The above amount reflects a 1.1% average depreciation (2019 2.2%) of the Australian dollar against those currencies for which forward exchange contracts have been taken out, where the market forward rate at 30 June 2020 is lower than the contracted rate.

Insurance recoveries

At 30 June 2020, Receivables (Goods and services) included $11,307,284 (2019 $13,727,176) for amounts invoiced to Comcover for insurance recoveries relating to expenditure incurred on the remediation of the ABC's Ultimo building.

At 30 June 2020, Other receivables – Other, including receivables attributable to joint operations included $3,133,819 (2019 $29,544,550) for insurance recovery amounts yet to be invoiced.

The total Receivables amount recognised in respect of the insurance recovery for the ABC Ultimo remediation works is $14,441,103 (2019 $43,271,726). This represents the amount that the ABC has invoiced.

Impairment of financial assets

Financial assets are assessed for impairment throughout each reporting period as outlined below;

• Financial assets held at amortised cost
  • If there is objective evidence that an impairment loss has been incurred for loans and receivables or held-to-maturity investments held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an impairment allowance account. The loss is taken to the Statement of Comprehensive Income.
• Bad and doubtful debts
  • The Corporation assesses the likelihood of recovery of those debts, factoring in past bad debts experience. Bad debts are written off when identified.
• Impairment and adoption of AASB 9 Financial Instruments
  • The ABC calculates an expected credit loss (ECL) provision, based on historical rates of credit impairment, adjusted for any external factors likely to impact the rate of impairment. The carrying value of the ECL provision is monitored against the value of debts likely to be considered at risk of being non-recoverable.

At 30 June 2020, the balance of the ECL provision is $382,919 (2019 $141,844). For the year to 30 June 2020, this amount was sufficient to cover outstanding debt attributable to customers at risk of non-recoverability, which totalled $360,018 (2019 $132,284).

Assumptions surrounding uncertainty – impairment of financial assets

The Expected Credit Loss model was validated through an assessment of each of the ABC’s trade debtors at 30

June 2020. Estimation assumptions are adjusted as economic and industry sector operating conditions dictate.

Other investments (held to maturity financial assets)

Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Corporation has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Under AASB 9 Financial Instruments, held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.

Surplus cash is invested into short term investments with maturities at acquisition date of greater than three months. These investments are due to be recovered within twelve months.

6A ABC Owned land, buildings, plant and equipment and intangibles

Useful lives of asset classes

Recognition and measurement

Land, buildings, plant and equipment and intangibles

Land is a Level 2 non-financial asset. The fair value of land is determined based on market comparability, using recent sales history for comparable sites as referenced by independent valuers.

Expert valuers undertook a comprehensive valuation of the ABC portfolio of Australian properties.

Consequently a revaluation increment of $32,488,383 (2019 $28,000,000) for land was credited and a decrement of $42,455,027 (2019 increment of $7,465,134) for buildings, fit-out and site improvements was debited to the asset revaluation reserve and included in Changes in asset revaluation reserve within Other Comprehensive Income in the Statement of Comprehensive Income, Reserves within the Statement of Financial Position and Net revaluation of land and buildings in the Statement of Changes in Equity.

In addition, leasehold land was re-classified under right-of-use assets and presented as such. This was reflected in the preceding table under Transfers/reclassifications.

Level 3 non-financial assets comprise buildings, plant and equipment and intangibles, with no observable market data for the assets.

Given the specialised nature of the Corporation’s buildings, valuation is determined with reference to depreciated replacement cost, which is considered to be a reasonable approximation of fair value.

The carrying value of the Corporation’s plant and equipment represents its depreciated replacement cost, which is considered to be a reasonable approximation of its fair value.

The carrying value of the Corporation’s software for internal use represents its amortised replacement cost, which is considered to be a reasonable approximation of its fair value.

Asset recognition threshold

Purchases of land, buildings, plant, equipment and intangibles are recognised initially at cost in the Statement of Financial Position.

Purchases costing less than $2,000 are expensed in the year of acquisition except where they form part of a project or group of similar items, which are significant in total.

Revaluations

Following initial recognition at cost, the fair value of property, plant, equipment and intangibles is measured based on depreciated replacement cost.

Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not materially vary from the assets’ fair values as at the reporting date. The regularity of independent valuations depends 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 revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class, previously recognised through surplus/(deficit). Revaluation decrements for a class of assets are recognised directly through surplus/(deficit) except to the extent that they reverse a previous revaluation increment for that class. Any accumulated depreciation at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the re-valued amount.

Impairment of non-current assets

The aforementioned classes of assets are being subjected to an assessment as to indicators of impairment under AASB 136 Impairment of Assets as at 30 June 2020.

Impairment is assessed with consideration of the asset’s remaining service value.

Disposals

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected.

6B Right-of-use assets

Recognition and measurement

General principles

Right-of-use assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received.

On initial adoption of AASB 16 the Corporation has adjusted the right-of-use assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any right-of-use asset that shows indicators of impairment and an impairment loss is recognised against any right-of-use asset that is impaired. Right-of-use assets continue to be measured at amortised cost after initial recognition.

Land

The ABC’s right-of-use land is measured at amortised cost, in accordance with the requirements of the PGPA (Financial Reporting) Rule 2015.

Buildings

Right-of-use buildings largely consists of the ABC’s Australian regional broadcasting offices for transmission of the undertaking of services provided by Local Radio and the ABC’s overseas reporting bureaux. Under AASB 16 Leases, the right-of-use asset is measured as the present value of the liability to pay future contractual lease payments.

Plant and equipment

Under AASB 16, right-of-use plant and equipment is measured as the present value of the liability to pay future contractual lease payments and were identified as the following:

• A Satellite transponder for digital television distribution;
• Decoder boxes and dishes for satellite downlink services to support television transmission;
• Transmission facility assets for digital terrestrial television transmission:
• Transmission facility assets for terrestrial radio transmission; and
• Vehicles.

Capital purchases commitments

6C - 6F Non financial assets

Inventories (general)

Inventories held for resale are valued at the lower of cost and net realisable value. Inventories not held for resale are valued at the lower of cost, adjusted for any loss in service potential, based on the existence of a current replacement cost that is lower than the original acquisition cost or other subsequent carrying amount.

Produced programs

Television programs are produced for domestic transmission and include co-production fees, direct salaries and expenses and production overheads allocated on a usage basis to the program. Production overheads not allocated to programs are expensed in the period in which they are incurred. External contributions received in respect of co-production of television programs are offset against production costs which are recorded as Inventories in the Statement of Financial Position.

Write-down of inventory held for distribution

When inventories held for distribution are distributed, the carrying amount of those inventories is recognised as an expense. The amount of any write-down of inventories for loss of service potential, and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories arising from a reversal of the circumstances that gave rise to the loss of service potential will be recognised as a reduction in the value of inventories recognised as an expense in the period in which the reversal occurs.

Write-down of retail inventory

The amount of any write-down of inventories to net realisable value and all losses of inventory are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories arising from an increase in the net realisable value will be recognised as an inventory expense reduction in expense in the period in which the reversal occurs.

Tax assets

The classification of a tax asset attributable to joint operations was reviewed and a reclassification was made to comparative disclosures to enhance presentation. Share of tax asset attributable to joint operations of $4,635,000 (2019 $4,561,000) which was previously classified as Other non-financial assets is now classified as Tax assets.

7. Payables

Recognition and measurement

Suppliers and other payables

The fair value of suppliers and other payables is deemed to be their carrying value as it approximates fair value.

Note 7B Other payables contains forward exchange contracts at fair value through surplus/(deficit) of ($143,747) (2019 nil). Under the fair value measurement hierarchy, these are Level 2 financial liabilities.

8. Interest Bearing Liabilities

Recognition and measurement

Loans

Loans are classified as current liabilities unless the Corporation has the unconditional right to defer settlement for at least twelve months after the Statement of Financial Position date. The loan facility entered into with the Department of Finance was to cash-flow the construction of a purpose-built facility in Southbank, Victoria.

The total loan facility and all interest due has been fully extinguished, with the final tranche of $10,000,000 being paid in June 2020, ahead of its scheduled repayment in June 2021 (2019 $30,000,000).

Share of loans in joint operations represents the ABC’s 50% share of MediaHub’s loan balances with the ANZ Banking Corporation.

At 30 June 2020, MediaHub had drawn loans under six facilities with ANZ Banking Corporation, with an aggregate balance of $4,459,335 (2019 $5,441,667). The ABC’s share, as reflected in its Statement of Financial Position, is $2,229,667 (2019 $2,720,834). These facilities are generally repayable over 5 years.

The facility is provided on an average variable interest rate to 30 June 2020 of 2% (2019 3%).

Lease liability

Note 8B Lease liability is the present value of future contractual payments, for the remining life of the contracts.

The undiscounted value of future lease payments is $680,837,524 (1 July 2019 $748,602,493). The average discount rate, determined with reference to the Commonwealth Department of Finance incremental borrowing rates, issued quarterly, was approximately 1.11%. The incremental borrowing rate used for each lease approximated the start date for each lease.

Assumptions surrounding uncertainty –

Lease liability

The valuation of the lease liability is influenced by the discount rate, as advised, on a quarterly basis, by the Commonwealth Department of Finance. The carrying balance of this item is reviewed regularly and an assessment is made of the potential impact of a change in discount rates on this balance.

The corresponding asset value as disclosed in Note 6B Right-of-use assets, is based on the value of the liability, being the net present value of the contractual cash-flows.

9. Other Provisions

Recognition and measurement

Other provisions

Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The provision for make good represents the estimated cost to make good leased properties at the end of the lease term. The estimated cost is based on management’s best estimate of the cost to make good each site, plus an allowance for inflation.

During the year, the ABC provided nil further amounts (2019 $19,508,687) for remediation works to replace the external cladding on the Ultimo, NSW building, to ensure compliance with the current BCA Fire Safety Standards. For the year to 30 June 2020, expenditure incurred on this project was $28,720,541 (2019 $17,601,011), resulting in a balance in the provision of $3,892,070 (2019 $32,612,612).