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Overview

Objectives of ACIAR

The Australian Centre for International Agricultural Research (ACIAR) is an Australian Government controlled entity. ACIAR is a not-for-profit entity. The objective of ACIAR is to achieve more productive and sustainable agricultural systems, for the benefit of developing countries and Australia, through international agricultural research partnerships. Developing countries are the major beneficiaries but there are also benefits for Australia. To achieve this objective, ACIAR facilitates and supports bilateral and multilateral research and development activities in a broad range of agricultural areas, including crops, animals, fisheries, forestry, land and water resources management, post-harvest technology, and economic studies of agricultural and natural resource utilisation.

ACIAR is structured to meet one outcome:

Outcome 1: To achieve more productive and sustainable agricultural systems for the benefit of developing countries and Australia through international agricultural research and training partnerships.

Although a portion of ACIAR revenue is from external sources, the continued existence of ACIAR in its present form and with its present program is dependent on Government policy and on continuing funding by Parliament for ACIAR's administration and program.

ACIAR activities contributing towards this outcome are classified as either Departmental or Administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by ACIAR in its own right. Administered activities involve the management or oversight by ACIAR, on behalf of the Government, of items controlled or incurred by the Government.

ACIAR conducts the following administered activity on behalf of the Government:

  • International agriculture research and development.

Basis of preparation

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements have been prepared in accordance with :

  1. Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
  2. Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements are presented in Australian dollars.

New accounting standards

Adoption of new Australian accounting standard requirements

Standard/ interpretation

Nature of change in accounting policy, transitional provisions, and adjustment to financial statements

AASB 15 Revenue from Contracts with Customers / AASB 2016-8 Amendments to Australian Accounting

Standards – Australian Implementation Guidance for Not-for-Profit Entities and AASB 1058 Income of Not-For-Profit Entities

AASB 15, AASB 2016-8 and AASB 1058 became effective 1 July 2019.

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

AASB 1058 is relevant in circumstances where AASB 15 does not apply. AASB 1058 replaces most of the not-for-profit (NFP) provisions of AASB 1004 Contributions and applies to transactions where the consideration to acquire an asset is significantly less than fair value principally to enable the entity to further its objectives, and where volunteer services are received.

The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

AASB 16 Leases

AASB 16 became effective on 1 July 2019.

This new standard has replaced AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation 115 Operating Leases—Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

Application of AASB 15 Revenue from contracts with customers / AASB 1058 Income of Not-For-Profit Entities

ACIAR adopted AASB 15 and AASB 1058 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under the various applicable AASBs and related interpretations.

Under the new income recognition model ACIAR shall first determine whether an enforceable agreement exists and whether the promises to transfer goods or services to the customer are ‘sufficiently specific’. If an enforceable agreement exists and the promises are ‘sufficiently specific’ (to a transaction or part of a transaction), ACIAR applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, ACIAR shall consider whether AASB 1058 applies.

In terms of AASB 1058, ACIAR is required to recognise volunteer services at fair value if those services would have been purchased if not provided voluntarily, and the fair value of those services can be measured reliably.

Following a review of relevant arrangements ACIAR determined that AASB 15 applied to Administered transactions in 2019–20, and the accounting for revenue for Departmental transactions continued to be the same. External revenue is primarily associated with management fees from agreements with the Department of Foreign Affairs and Trade for the management of Research Programs. The agreements provide flexibility for ACIAR to draw on the management fee as needed (to a capped limit) or to apply funds to additional Administered project activities. Undrawn management fees are reported as unearned income in Administered liabilities.

Set out below are the amounts by which each financial statement line item is affected as at and for the year ended 30 June 2020 as a result of the adoption of AASB 15. The first column shows amounts prepared under AASB 15 and the second column shows what the amounts would have been had AASB 15 not been adopted:

Effect of adoption of standard AASB 15

Administered

AASB 15

Previous AAS

Increase/(decrease)

$’000

$’000

$’000

Revenue and expenses

Expenses

Supplier expenses

11,988

11,988

-

Total expenses

11,988

11,988

-

Revenue

External funds

11,988

9,259

2,729

Total revenue

11,988

9,259

2,729

Net cost of services

-

(2,729)

2,729

Assets and liabilities

Assets

Special account

7,509

7,509

-

Total assets

7,509

7,509

-

Liabilities

Unearned income

7,353

-

7,353

Payables

156

156

-

Total liabilities

7,509

156

7,353

Retained earnings

-

(2,729)

2,729

Adjustment to opening retained earnings

Liabilities

Unearned income

10,082

-

10,082

Total liabilities

10,082

-

10,082

Total adjustment to retained earnings

10,082

-

10,082

ACIAR adopted the modified retrospective application for AASB 15 on transition. As a consequence, comparative information for the preceding periods has not been restated.

Previously ACIAR accounted for external income under AASB 1004 and recognised revenue when income was received. On the date of initial application of AASB 15 this meant that the balance of funds held in the special account represented an unperformed performance obligation ($8.851 million) adjusted for receivables of ($1.571 million) less project accruals ($0.340 million), which was taken up as a liability with a corresponding adjustment against the opening balance of retained earnings as at 1 July 2019.

Revenue will now be recognised as performance obligations are satisfied. Consistent with AASB 15.35(a) this will be as project services are consumed, which will be determined by reference to expenses incurred for project services at the end of each month.

Application of AASB 16 leases

ACIAR adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

ACIAR elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.

AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. ACIAR applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:

  • Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
  • Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date;
  • Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of assets as at the date of initial application; and
  • Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.

As a lessee, ACIAR previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, ACIAR recognises right-of-use assets and lease liabilities for most leases. However, ACIAR has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.

On adoption of AASB 16, ACIAR recognised right-of-use assets and lease liabilities in relation to leases of office space which had previously been classified as operating leases.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using ACIAR’s incremental borrowing rate as at 1 July 2019. ACIAR’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 1.17%

The right-of-use assets were measured as follows:

Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

Impact on transition

On transition to AASB 16, ACIAR recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:

Impact of transition to AASB 16

Departmental

1 July 2019

$'000

Right-of-use assets - Buildings

7,461

Lease liabilities

(7,276)

Prepayments

(185)

Rent payable

(33)

Lease Incentive

(236)

Retained earnings

269

The following table reconciles the Departmental minimum lease commitments disclosed in the ACIAR 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

Reconciliation of Departmental lease commitments

1 July 2019

$'000

Minimum operating lease commitment at 30 June 2019

5,459

Less GST included in commitments

(429)

Less: non leasing components

(648)

Plus: effect of extension options reasonably certain to be exercised

3,367

Undiscounted lease payments

7,749

Less: effect of discounting using the incremental borrowing rate as at the date of initial application

473

Lease liabilities recognised at 1 July 2019

7,276

All other new/revised/amending standards and/or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect on the ACIAR financial statements.

Taxation

ACIAR is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Reporting of Administered activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the Administered Schedules and related notes.

Except where otherwise stated, Administered items are accounted for on the same basis and using the same policies as for Departmental items, including the application of Australian Accounting Standards.

Events after the reporting period

Departmental

There have been no events or transactions after the reporting date which could significantly affect the ongoing structure and financial activities of ACIAR.

Administered

There have been no events or transactions after the reporting date which could significantly affect the ongoing structure and financial activities of ACIAR.