Overview

Objectives of the Australian Institute of Marine Science

The Australian Institute of Marine Science (AIMS) is a corporate Commonwealth entity established by the Australian Institute of Marine Science Act 1972. It is a not-for-profit entity.

The mission of AIMS is to provide the research and knowledge of Australia’s tropical marine estate required to support growth in its sustainable use, effective environmental management and protection of its unique ecosystems.

The continued existence of AIMS in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for AIMS administration and science research programs.

Basis of Preparation of the Financial Statements

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 and notes 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 and values are rounded to the nearest thousand dollars unless otherwise specified.

Significant Accounting Judgements and Estimates

In the process of applying the accounting policies listed in this note, AIMS has made the following judgements that have the most significant impact on the amounts recorded in the financial statements.

• Recognition of revenue from contracts with customers – Refer Note 1.2: Own-Source Revenue and Gains
• Fair value of buildings, plant and equipment – Refer Note 2.2: Non-Financial Assets
• Remaining useful lives of buildings, infrastructure, plant and equipment - Refer Note 2.2: Non-Financial Assets
• Employee entitlement provision – Refer Note 3.1: Employee Provisions
• Contingent assets and contingent liabilities – Refer Note 4.1: Contingent Assets and Liabilities

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period.

New Australian Accounting Standards

All new/revised 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 to AIMS’ 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.

AIMS 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 AIMS 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), AIMS applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, AIMS shall consider whether AASB 1058 applies.

In relation to AASB 15, AIMS elected to apply the new standard to all new and uncompleted contracts from the date of initial application. AIMS is required to aggregate the effect of all of the contract modifications that occur before the date of initial application. There was no impact on AIMS transitioning to AASB 15.

In terms of AASB 1058, AIMS 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.

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 16 Leases

AIMS 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.

AIMS 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.

AIMS 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, AIMS 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, the Entity recognises right-of-use assets and lease liabilities for most leases. However, the Entity 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, AIMS recognised right-of-use assets and lease liabilities in relation to leases of land and office which had previously been classified as operating leases. The lease liabilities were measured at the present value of the remaining lease payments, discounted using the AIMS’s incremental borrowing rate as at 1 July 2019. AIMS'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 2.37%.

The right-of-use assets were 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, AIMS recognised additional right-of-use assets and additional lease liabilities. The impact on transition is summarised below as at 1 July 2019:

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

Taxation

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

Revenues, expenses, assets and liabilities are recognised net of GST, except:

1. where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
2. for receivables and payables.

Insurance

AIMS is insured through the Governments insurable managed fund Comcover.

Workers compensation is insured through Comcare Australia.

Events After the Reporting Period

There was no subsequent event that had the potential to significantly affect the ongoing structure and financial activities of AIMS.

Financial Performance

1.1 Expenses

Accounting Policy

Accounting policies for employee related expenses are contained in the People and relationships section.

Accounting Policy

Short‐term leases and lease of low‐value assets

AIMS has elected not to recognise right-of-use assets and lease liabilities for short-term leases of assets that have a lease term of 12 months or less and leases of low-value assets (less than $10,000). AIMS recognises the lease payments associated with these leases as an expense on a straight-line basis over lease term.

1. AIMS has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

The above lease disclosure should be read in conjunction with the accompanying notes 1.1B, 2.2 and 2.4.

Accounting Policy

All borrowing costs are expensed as incurred.

1.2 Own Source Revenue and Gains

Accounting Policy - AASB 118

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date.

The revenue is recognised when:

1. the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and
2. the probability of economic benefits associated with the transaction will flow to AIMS.

The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date

bear to the estimated cost of the transaction.

Accounting Policy - AASB 15 & AASB 1058

AIMS contracts comprise of a number of performance obligations including, but not limited to, research services and time and materials. Under AASB 15, AIMS must evaluate the separability of the promised good and services based on whether they are 'distinct'. A promised good or service is 'distinct' if both:

1. the customer benefits from the item either on its own or together with other readily available resources; and
2. it is 'separately identifiable' i.e. AIMS provides its time to a specific circumstance and is paid for that time.

While this represents a significant new guidance, the implementation of this new guidance did not have a significant impact on the

timing or amount of revenue recognised by AIMS during the year.

To determine whether to recognise revenue, AIMS follows a 5-step process;

1. Identifying the contract with customer;
2. Identifying the performance obligations;
3. Determine the transaction price;
4. Allocating the transaction price; and
5. Recognising the revenue when/as performance obligation(s) are satisfied.

Revenue is recognised either at a point in time for services rendered or over time in accordance to contractual milestones, when (or as) AIMS satisfies performance obligations by transferring the promised goods or services to its customers.

AIMS recognises contract liabilities for consideration received in respect of performance obligations paid for up-front and reports these amounts as contractual liabilities in the statement of financial position. Similarly, if AIMS satisfies a performance obligation before it it receives the consideration, AIMS recognises either a contractual asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.

The transaction price is the total amount of consideration to which AIMS expects to be entitled to exchange for transferring of contracted goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts or both. In most instances, AIMS contributes its own investment of resources in accordance with the AIMS Strategy 2025.

Receivables for services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account Collectability of debts is reviewed at end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

Sale of Assets

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

Interest

Interest revenue is recognised using the effective interest method.

Revenue from Government

Funding received or receivable from agencies (appropriated to AIMS as a corporate body payment item) is recognised as revenue

from Government when the entity gains control of the funding unless the funding is in the nature of an equity injection or loan.

Accounting Judgement and Estimates

Revenue recognition for contractual revenue with customers has significant judgements applied to performance obligations. The determination of the revenue recognition is on contractual term, distinction of research services over time or time and materials at a point in time, transaction price, satisfaction of control has passed to a client, identification of costs that can be capitalised and any material variations to contracts. Most of AIMS research services contracts have multiple deliverables, the transaction price is allocated to each performance milestone and revenue is recognised based on the actual services provided as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously. This is determined on the actual costs of the project relative to the total expected costs of the project.

1.2 Own Source Revenue and Gains (cont.)

1.2C Unsatisfied Obligations

AIMS does not have any unsatisfied performance obligations as AIMS contracts are 1) for one year or less or 2) AIMS recognises revenue at the amount to which it has a right to invoice that corresponds directly to the value to the customer of AIMS performance to date.

Financial Position

2.1 Financial Assets

Accounting Policy

Cash is recognised at its nominal amount. Cash and cash equivalents includes:

1. Cash on hand; and
2. demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

Accounting Policy

Financial Assets

Trade receivables 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 rate method adjusted for a loss allowance.

2.2 Non-Financial Assets

2.2: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Computer Software

1. The carrying amount of computer software included $387,595 purchased software and $3,936,246 internally generated software.
2. No property, plant and equipment and intangibles are expected to be sold or disposed of within the next 12 months.
3. No indicators of impairment were found for buildings, property plant and equipment and intangibles.

Revaluations of non-financial assets

In the current year a desktop valuation review was completed by Pickles Valuation Services (PVS) who completed the comprehensive valuation in 2018.

For assets classified as having Level 2 inputs, PVS compared the Written Down Value (WDV) of the assets against similar assets in the most appropriate active market.

This enabled PVS to ascertain that the WDV was materially in line with observable market data. For assets that PVS were unable to be valued by identifiable observable market data an alternative approach was utilised. These assets were valued by the cost approach method, a depreciated replacement cost (DRC) approach, utilising Level 3 Inputs. In doing so, the PVS review ensured the estimated replacement cost, total useful lives (TUL), and remaining useful lives (RUL) were in line with industry standards to ensure the DRC calculation was reliable. PVS have relied upon previous valuation and asset lives data to conduct this review.

No changes were made in 2019/20 for property, plant and equipment. The next scheduled revaluation of Property, Plant and Equipment is in 2020/21 by an independent valuer.

All increments and decrements are transferred to the asset revaluation surplus by asset class and included in the equity section of the statement of financial position.

Any disposals of revalued assets, the revaluation amount is transferred to the retained surplus/deficit account. $452,871 was recognised as a decrement (2019: $19,822,731).

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, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor's accounts immediately prior to the restructuring.

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 such as IT equipment).

Lease Right of Use (ROU) Assets

Leased ROU 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. These assets are accounted for by Commonwealth lessees as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

On initial adoption of AASB 16 AIMS has adjusted the ROU 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 lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition in Commonwealth agency, GGS and Whole of Government financial statements.

Revaluations

Following initial recognition at cost, property plant and equipment (excluding ROU assets) are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations were conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially 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 were made on a class basis. Any revaluation increment was credited to equity under the heading of asset revaluation surplus except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluations decrements for a class of assets were recognised directly in the surplus/deficit except to the extent that they reverse a previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

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.

The depreciation rates for ROU assets are based on the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term.

Impairment

All assets were assessed for impairment at 30 June 2020. 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 to sell 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 AIMS were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

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

Computer software

These assets are carried at cost less accumulated amortisation and accumulated impairment losses. Computer software costing less than $2,000 is expensed in the year of acquisition. Computer software is amortised on a straight-line basis over its anticipated useful life.

All software assets were assessed for indications of impairment as at 30 June 2020.

Inventory

Inventories held for distribution are valued at cost, adjusted for any loss of service potential. Costs incurred in bringing each item of inventory to its present location and condition are assigned as follows:

a) raw materials and stores – purchase cost on a first-in-first-out basis; and

b) finished goods and work-in-progress – cost of direct materials and labour plus attributable costs that can be allocated on a reasonable basis.

Accounting Judgements and Estimates

The fair value of property, plant and equipment is assessed at market value or current replacement costs as determined by an independent valuer.

Every 3 years a full revaluation is completed and in between those years a desktop valuation is completed.

2.3 Payables

The Contractual liabilities are associated with the purchase of research services with customers. The closing balance of the contracts pertaining to revenue received in advance or unearned income for milestones in progress is $7,021,000.

2.4 Leases

1. AIMS has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

Total cash outflow for leases for the year ended 30 June 2020 was $53,884.

Accounting Policy

Review Overview section for accounting policy on leases.

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

Accounting Policy

Liabilities for 'short-term employee benefits' (as defined in AASB 119 Employee Benefits ) and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts.

Other long term employee benefits are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligation are to be settled directly.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of AIMS is estimated to be less than the annual entitlement for sick 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 AIMS'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 estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Superannuation

AIMS staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government. The CSS and PSS are a defined benefit schemes for the Australian Government. All other schemes are defined (accumulated funds) contribution schemes.

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 by the Department of Finance administered schedules and notes.

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

The liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.

Accounting Judgements and Estimates

Leave provisions involve assumptions based on the expected tenure of existing staff, patterns of leave claims and payouts, future salary movements and future discount rates.

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 entity, directly or indirectly, including any director (whether executive or otherwise) of the entity. AIMS has determined the Key Management Personnel during the reporting period to be Council members, CEO and Senior Management. Key management personnel remuneration is reported below.

* denotes staff paid under Remuneration Tribunal (Remuneration and Allowances for Holders of Part-time Public Office) Determination 2019.

^ denotes staff paid under Remuneration Tribunal (Principal Executive Offices) Determination No. 2 2019.

+ denotes staff paid through Individual Workplace Agreements.

All other KMP are paid in accordance to AIMS Enterprise Agreement.

The total number of key management personnel that are included in the above table are 21 individuals (2019: 16 individuals). All members in the table were a Key Management Personnel for the financial year except for Frank Tirendi (01/07 - 04/09/2019), Dr Michaela Dommisse (01/07 - 13/11/2019), Dr Nicole Webster (01/07 - 31/12/2019), Dr Karin Cooper (02/09/2019 - 30/06/2020) and Dr Karen Miller (11/11/2019 - 30/06/2020).

1. 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 AIMS.

Remuneration of Senior Executives

All AIMS Senior Executives are captured within the Key Management Personnel (above).

Other highly paid staff - non-Key Management Personnel

3.3 Related Party Disclosures

Related party relationships

AIMS is a Commonwealth controlled entity. Related parties to AIMS are Board members, Executive and Senior Management, the Portfolio Minister, and other Commonwealth controlled entities. There are 6 family members of Key Management Personnel employed by AIMS and other Commonwealth controlled entities in non-executive positions.

Transactions with related parties

Board members and their related parties may hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.

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 Medicare rebate or Higher Education loans. These transactions have not been separately included in this note. Certain entities transacted with AIMS in the reporting period. The terms and conditions of those transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on a similar transactions to non-related entities on an arm's length basis.

Loans to Key Management Personnel or Key Management Personnel-Related Entities

In 2019-20, no loans were made to key management personnel or key management personnel-related entities.

Other Transactions with Key Management Personnel or Key Management Personnel-Related Entities

Details of transactions between key management personnel and related parties during the year for the purchase of science services were:

Details of transactions between key management personnel and related parties during the year for the rendering of science services were:

Details of balances outstanding at year end for purchase of science services were:

AIMS transacts with Australian Government related entities consistent with normal day-to-day business operations provided under normal terms and conditions, including the purchase and rendering of science services.

Details of transactions with related entities during the year for the purchase of science services were:

There were no other transactions with related entities during the year.

Managing Uncertainties

0This section analyses how the Australian Institute of Marine Science manages financial risks within its operating environment.

4.1 Contingent Assets and Liabilities

Quantifiable Contingencies

AIMS holds performance guarantees of $111,000 (2019:$176,000). Performance guarantees include Bank guarantees in relation to the refurbishment of AIMS's buildings.

Unquantifiable Contingencies

AIMS has a 25 year lease on a berthing facility with Port of Townsville. At the expiry of the lease AIMS is required to carry out its own cost remediation work necessary to return the level of contamination in the leased land to a level as prescribed by Assessment and Management of Containment Land in Queensland (May 1998).

Accounting Policy

Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

Accounting Judgements and Estimates

AIMS does not hold or transport any dangerous goods and/or chemicals at the Port of Townsville property and we are required to formally assess the property every 5 years for contamination by an independent environmental assessor therefore our estimate is that there will be no contamination of the Townsville Port land over the lease period and we not be required to complete any remediation work at the end of the lease.

4.2 Financial Instruments

Accounting Policy

Financial Assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, AIMS classifies its financial assets measured at amortised cost. The classification depends on both the AIMS's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the AIMS becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash from the financial asset expire or are transferred upon trade date.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12‐month expected credit losses if risk has not increased.

The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write‐off constitutes a derecognition event where the write‐off directly reduces the gross carrying amount of the financial asset.

Financial Assets at amortised cost

Financial assets included in this category need to meet two criteria:

1. the financial asset is held in order to collect the contractual cash flows; and
2. the cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest rate method.

Effective interest rate

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Financial Liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial liabilities

are recognised and derecognised upon ‘trade date’.

Financial liabilities at amortised cost

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently

measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

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

4.3 Fair Value Measurements

Accounting Policy

AIMS deems transfers between levels of the fair value hierarchy to have occurred at 30 June 2020.

1. The following valuation techniques were used:

• Cost approach: based on the amount required to replace the service potential of an asset
• Market approach: based on market transactions involving identical or similar assets or liabilities

AIMS procured valuation services from Pickles Valuation Services (PVS) and relied on valuation models provided by PVS. PVS re-tests the valuation model every 12 months and has provided written assurance to AIMS that the model developed is compliant with AASB 13.

Other Information

5.1 Aggregate Assets and Liabilities