1. Summary of significant accounting policies

Objectives

The Australian National Maritime Museum (the museum) is an Australian Government controlled and not‑for‑profit entity. The role of the museum is the promotion and conservation of Australia’s maritime heritage.

The museum is structured to meet a single outcome:

Outcome 1 – Increased knowledge, appreciation and enjoyment of Australia’s maritime heritage by managing the National Maritime Collection (NMC) and staging programs, exhibitions and events.

The continued existence of the museum in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for the museum's administration and 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 (PGPA Act).

The financial statements and notes have been prepared in accordance with:

• Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
• 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. Values are rounded to the nearest $1,000, except key management personnel remuneration (Note 11. Key management personnel remuneration) which is rounded to the nearest dollar.

Consolidation and associated company
The financial statements show information for the economic entity only; this reflects the consolidated results for the parent entity, the museum, and its controlled entity, the Australian National Maritime Museum Foundation (the foundation). The results of the parent entity do not differ materially from the economic entity and have therefore not been separately disclosed. The foundation is a company limited by guarantee (see Note 14. The Australian National Maritime Museum Foundation).

The accounting policies of the foundation are consistent with those of the museum and its assets, liabilities and results have been consolidated with the parent entity accounts in accordance with Accounting Standards. All internal transactions and balances have been eliminated on consolidation.

New Accounting Standards

Future Australian Accounting Standard Requirements
All new, revised and amended standards and interpretations that were issued prior to the sign‑off date and are applicable to the current reporting period:

• did not have a material impact on the museum’s financial statements; and
• are not expected to have a material impact on the museum’s future financial statements.

Transactions by the Government as owner

Equity Injections
Amounts appropriated which are designated as ‘equity injections’ for the year, which include Collection Development Acquisition Budget (CDAB), are recognised directly in Contributed Equity in that year (2019: $7,821; 2018: $7,980).

Taxation

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

Breach of Section 83 of the Constitution

There were no breaches of Section 83 of the Constitution by the museum and its controlled entity for the reporting period.

2. Events after the reporting period

There were no events after the reporting period that provide evidence of conditions that existed as at 30 June 2019 or are indicative of conditions that arose after the date that require adjustment to, or disclosure in, these financial statements.

3. Expenses

Accounting Policy
Accounting policies for employee related expenses is contained in Note 9. Provisions.

4. Income

Accounting Policy Revenue from the sale of goods is recognised when: the risks and rewards of ownership have been transferred to the buyer; and the museum retains no managerial involvement or effective control over the goods. Revenue from the rendering of a service is recognised after delivery of service or over the service/subscription period or by reference to the stage of completion of the contract to provide the service. The contract stage of completion is determined according to the proportion that costs incurred to date bear to the estimated total costs of the transaction. Receivables for goods and services are recognised at the nominal amounts due less any impairment allowance. Collectability of debts is reviewed at balance date. Allowances are made when collection of the debt is no longer probable.

Accounting Policy Resources received free of charge are recognised as revenue when and only when a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Cash donations with no commitments are recognised when received.

	2019		2018
	$'000		$'000
4E: Other gains
Donated assets - heritage and cultural	486		1,238
Total other gains	486		1,238

Accounting policy Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government entity as a consequence of a restructuring of administrative arrangements. Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

Accounting Policy Funding received or receivable from non-corporate Commonwealth entities is recognised as Revenue from Government by the museum unless the funding is in the nature of an equity injection or a loan.

5. Financial assets

Accounting Policy

Financial assets
With the implementation of AASB 9 Financial Instruments for the first time in 2019, the entity classifies its financial assets in the following categories:
a) financial assets at fair value through profit or loss;
b) financial assets at fair value through other comprehensive income; and
c) financial assets measured at amortised cost.

The classification depends on both the entity'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 entity 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 flows from the financial asset expire or are transferred upon trade date.

Comparatives have not been restated on initial application.

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 method.

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

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.

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

The museum currently has no loans.

Transition from AASB 139 to AASB 9
All financial assets were originally classified as held to maturity under AASB 139 and are now classified as amortised cost under AASB 9. At the date of initial application, 1 July 2018, the carrying amounts under AASB 139 and AASB 9 were identical.

6. Non-financial assets

Accounting Policy

Acquisition of assets
Assets are recorded at cost on acquisition except as otherwise 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.

Revaluations
Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are 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 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 operating results. Revaluation decrements for a class of assets are recognised directly in the operating results except to the extent they reverse a previous revaluation increment for that class.

When an item of property, plant and equipment is revalued, any accumulated depreciation as at the revaluation date is treated in one of the following ways:
a) restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount; or
b) eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset.

Non-financial assets were valued using Level 2 and Level 3 unobservable inputs.

Depreciation
Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the museum 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
Wharves Buildings	5–10 years 10–60 years	5–10 years 10–60 years
Property, Plant & Equipment	3–20 years	3–20 years
Heritage & Cultural	10-400 years	10-400 years

Planned expenditure on the preservation of museum buildings is depreciated over the Strategic Asset Management Plan (SAMP) cycle of 10 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 museum 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.

Heritage and Cultural Assets
The museum collects, manages and displays heritage and cultural assets relating to Australia’s maritime history. These assets are classified as heritage and cultural assets as they are primarily used for purposes that relate to their cultural significance.

Heritage and cultural assets are valued on a continuing basis by external valuers and by the museum’s curators based on their potential market value.

The museum has adopted appropriate curatorial and preservation policies for the heritage and cultural assets, which are depreciated according to the assessment of useful lives.

Planned expenditure on the conservation and preservation of heritage and cultural assets is depreciated over the current planning period.

Intangibles
The museum’s intangibles comprise internally developed software for internal use and digital content for external use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software and digital content is amortised on a straight-line basis over its anticipated useful life.
The useful lives of the museum's software are 3 to 20 years (2018: 3 to 20 years).

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

Significant estimates and judgements
The fair value of land has been determined by an independent valuer, with reference to the market value of similar properties, which is then discounted to recognise the restricted permitted use of the land under the terms of the lease. The significant unobservable inputs used in the fair value measurement is the subjective discount factor to reflect restricted use provisions.

The fair value of the buildings, which are purpose built, has been determined by an independent valuer at depreciable replacement cost. The significant unobservable inputs used in the fair value measurement is the replacement cost of purpose‑built buildings.

The fair value of the wharves has been determined by an independent valuer using an income capitalisation approach, whereby a yield is applied to the potential income earning capacity of the underlying asset. The significant unobservable inputs used in the fair value measurement is the estimated market yields.

The fair value of the vessels (a sub‑set of heritage and cultural assets) has been determined by an independent valuer, using either the:

• current replacement cost less accumulated depreciation (in the case of the Endeavour)
  – the significant unobservable input used in fair value measurement is the cost of rebuilding the vessel; or
• cost approach (in the case of all other vessels in the museum’s fleet), taking into account
  both the residual (scrap) value of the vessel and indexed costs of planned maintenance
  – the significant unobservable inputs used in fair value measurement include the scrap value and required condition of the vessels.

The fair value of heritage and cultural assets (excluding vessels) has been determined by either an independent valuer or museum curators at the market value of similar heritage and cultural assets. The significant unobservable inputs used in the fair value measurement are the market values of the individually valued items (those items assessed at over $10,000) and the sample price of items valued by way of sampling.

Significant differences in the above mentioned unobservable inputs would result in a significantly different fair value measurement.

During 2019 $490 of inventory held for sale was recognised as an expense (2018: $467). All inventories are current assets.

Inventories held for resale by the museum store are valued at the lower of cost and net realisable value.

Inventories acquired at no cost or nominal consideration are initially measured at current replacement cost at the date of acquisition.

7. Payables

8. Interest bearing liabilities

Accounting Policy
A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of the leased assets. An operating lease is a lease that is not a finance lease.

Where an asset is acquired by means of a finance lease, the asset is capitalised at either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability is recognised at the same time and for the same amount.

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.

Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.

9. Provisions

Accounting Policy
Liabilities for ‘short-term’ employee benefits and termination benefits expected within 12 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.

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 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 the museum’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 non-current portion of the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees 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 entity 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 terminations (2019: nil; 2018: nil).

Superannuation
The museum’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 museum 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 museum accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June 2019 represents outstanding contributions.

10. Related party disclosures

Related party relationships
The entity is an Australian Government controlled entity. Related parties to this entity are the Director, Key Management Personnel including Councillors, the Portfolio Minister and Senior Executives, and other Australian Government entities.

Transactions with related parties
The museum’s related party transactions during the financial year were nil (2018: nil).

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. These transactions have not been separately disclosed in this note.

11. 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. The museum has determined the key management personnel to be the museum’s Councillors, the Director and CEO, and all members of the museum’s Executive.

12. Contingent liabilities

At 30 June 2019 the museum had one unquantifiable contingent liability in respect of legal action commenced against it and multiple other parties in the United States of America (the action). The action relates to damage to a submersible vehicle while in transit to the museum (the event). It is not possible to estimate the amount of any eventual payments that may be required in relation to the event.

The museum holds current insurance policies in relation to the event. Those policies have reimbursed legal and other expenses incurred to date by the museum in defending the action and are available in the event that any potential damages are incurred.

Accounting Policy
Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the 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.

13. Aggregate assets and liabilities

14. The Australian National Maritime Museum Foundation

The Australian National Maritime Museum Foundation (the foundation) is a company limited
by guarantee and is controlled by the museum.

The foundation’s objectives are:

• to create a capital fund, through gifts, bequests and fundraising activities, for the purposes of:
  • acquiring major additional items or collections of items to develop the National Maritime Collection (NMC) referred to in Section 9 of the Australian National Maritime Museum Act 1990;
  • conserving the NMC; and
  • other activities which enhance the NMC;
• to receive gifts and bequests for specific activities relating to the NMC and the museum; and
• to support the NMC and the museum generally.

The financial position of the foundation is consolidated into the Australian National Maritime Museum and is as follows:

15. Assets held in trust

The museum has established a number of trust accounts which are detailed below.

Gifts and moneys received for specified purposes are placed in separate bank accounts and expended on those purposes in accordance with the trust terms. These moneys are not available for other purposes of the museum and not recognised in the financial statements.

16. Net cash appropriation arrangements

The museum receives a separate Collection Development Acquisition Budget (CDAB) provided through an equity appropriation to fund heritage and cultural assets.