16. Other Significant Accounting Policies
(a) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(b) Foreign currency translation
Foreign currency transactions are translated into the functional currency of the Company using the exchange rates prevailing at the dates of transactions. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
(c) Impairment of assets
The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired.
A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
Significant assets are tested for impairment individually. The remaining financial assets are assessed in groups that share similar credit risk characteristics.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. The loss is recognised in profit or loss.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or before the end of the reporting period but not distributed at the end of the reporting period. Provision must be made in compliance with s254T of the Corporations Act 2001 (Cth).
(e) Revised standards and interpretations applied
The Company has applied the following revised standard for the first time in the financial year commencing 1 July 2019.
AASB 16 Leases
At the inception of a contract, the Company assesses whether a contract is, or contains, a lease which will be the case if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
At the commencement or modification of a contract that contains a lease the Company recognises a right-of-use asset and a lease liability. The right-of-use asset is initially measured at the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying assets or to restore the site on which it is located, less any lease incentives
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate.
The Company determined its incremental borrowing rate by obtaining indicative interest rates from the Department of Finance.
The lease liability is measured at amortised cost using the effective interest rate method. It is remeasured when there is a change in future lease payments arising from a change in index or rate or if the Company changes its assessment of whether it will exercise an extension option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of use asset has been reduced to zero.
The leases impacted by the new standard are:
- the 3-year lease of office space in Port Adelaide where the Company is the lessee
- commercial property leases where the Company is the lessor
- licences with ASC Pty Ltd, ASCSB, ASC AWD and Luerssen where the Company is the lessor.
The impact of the new standard on the Company’s financials in the current financial year is not significant.
Impact on transition
On transition to AASB16 on 1 July 2019, the Company recognised a right-of-use asset and lease liability, originally at $526,601, for the Port Adelaide office. $112,838 less tax of $33,851 relating to a lease incentive that was carried in the balance sheet and was being released to the income statement over the life of the lease, was transferred to accumulated losses on transition.
To assist with the understanding of the impact of the application of AASB 16 in this initial period, refer to the following summary:
Balance at 1 July 2019
Depreciation of right-of-use asset
Balance at 30 June 2020
Balance at 1 July 2019
Reduction in liability
Balance at 30 June 2020
(f) Impact of standards issued but not yet applied
Certain new accounting standards, interpretations and amendments have been published that are not mandatory for 30 June 2020 reporting periods and have not been early adopted by the Company. They are not expected to have a material impact on the Company’s financial statements.