STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2020

The above statement should be read in conjunction with the accompanying notes.

Budget Variances Commentary

Statement of Comprehensive Income

Expenses

Suppliers ($4.544m less than budget) comprises decreases in the following:

AIS property costs – $1.534m following reduced activity on site throughout the year as a result of bushfire smoke and COVID-19.

Operating lease rentals – $1.029m due to the introduction of AASB 16 Leases on 1 July 2019, property and vehicle leases previously recognised as an expense are now recognised as a reduction in principal of a lease liability.

Contractors and consultants – $1.359m largely due to a decision to delay a number of projects following the COVID-19 outbreak.

Travel – $0.566m due to the restrictions associated with COVID-19.

Write-down and impairment of other assets ($1.401m greater than budget): largely due to the impairment on software and of ASC facilities for the AIS site campus in Bruce, ACT.

Grants ($7.885m greater than budget): due to grants delivered in 2019-20 that were agreed after the 2019-20 Budget was finalised in May 2019, including Government election commitments funded directly via the Department of Health, Community Sport Infrastructure grants which were delayed from 2018-19. This was partially offset by grants which will now be delivered in 2020-21 for programs impacted by COVID-19 including Sporting Schools, Community Sport Infrastructure and Better Ageing.

Income

Revenue from contracts with customers ($2.072m less than budget): due to a reduction in commercial activity resulting from bushfire smoke and the temporary suspension of commercial activities in response to COVID-19. Both events resulted in the temporary closure of the AIS Site impacting on revenue generated from accommodation and facility hire, retail and café and childcare.

Contributions from Government entities ($11.085m greater than budget): funding is received from Federal and State and Territory government agencies to assist in delivering sport outcomes. The majority of 2019-20 contributions relate to funding received from the Department of Health to deliver grants to various National Sporting Organisations.

STATEMENT OF FINANCIAL POSITION as at 30 June 2020

The above statement should be read in conjunction with the accompanying notes.

Budget Variances Commentary

Statement of Financial Position

Assets

Financial Assets ($55.395m greater than budget): this is due to a higher Cash and Term deposits balance as at 30 June 2020. This has resulted predominantly from the unbudgeted year end surplus of $36.799m compared with a budgeted deficit of $8.958m due to the timing of revenue and expenditure across years. In addition, the timing of capital expenditure has resulted in a higher cash balance than originally budgeted.

Non-Financial Assets

Land and buildings and Intangibles ($17.515m less than budget): capital expenditure was scaled back in response to COVID-19 which impacted timing of capital expenditure.

Liabilities

Leases ($6.500m more than budget): with the implementation of AASB 16 Leases on 1 July 2019, the ASC recognised a lease liability, and corresponding right-of-use asset, associated with tenancies held in Australia and at the European Training Centre, Varese, Italy. This liability will reduce over the life of the lease as both principal and interest payments are recognised.

CASH FLOW STATEMENT for the year ended 30 June 2020

The above statement should be read in conjunction with the accompanying notes.

Budget Variances Commentary

Cash Flow Statement

Operating cash received

Sale of goods and rendering of services ($1.251m less than budget): due to a reduction in commercial activity resulting from bushfire smoke and the temporary suspension of commercial activities in response to COVID-19. Both events resulted in the temporary closure of the AIS Site impacting on revenue generated from accommodation and facility hire, retail and café and childcare.

Contributions from Government entities ($10.943m greater than budget): funding is received from Federal and State and Territory government agencies to assist in delivering sport outcomes. The majority of 2019-20 contributions relate to funding received from the Department of Health to deliver grants to various National Sporting Organisations.

Operating cash used

Employees ($3.443m less than budget): resulting from lower average staffing numbers than provided for in the Budget mainly as a result of the temporary suspension of commercial operations and lower variable labour costs.

For budget variance commentary in relation to Suppliers and Grants, refer commentary for the Statement of Comprehensive Income on previous pages.

Investing cash used

Purchase of infrastructure, plant and equipment ($24.928m less than budget): capital expenditure was scaled back in response to COVID-19 which impacted timing of capital expenditure.

Financing cash used

Principal repayments of lease liabilities ($1.485m greater than budget): due to the introduction of AASB 16 Leases on 1 July 2019, property and vehicle leases previously recognised as a supplier expense are now recognised as a reduction in principal of a lease liability.

STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2020

The above statement should be read in conjunction with the accompanying notes.

Accounting Policy

Equity injections

Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year.

OVERVIEW

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:

• the 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 are 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 Judgments and Estimates

In the process of applying the accounting policies listed in this note, the Australian Sports Commission (ASC) has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:

a) The fair value of buildings has been taken to be the depreciated replacement cost as determined by an independent valuer. The ASC uses this valuation methodology as the buildings are purpose built and may in fact realise more or less than the market value.

b) The ASC assesses impairment of all assets at each reporting date by evaluating conditions specific to the ASC and to the particular asset that may lead to impairment. If an impairment trigger exists then the recoverable amount is restated.

Impact of COVID-19

The economic uncertainty related to the COVID-19 pandemic (COVID-19) has resulted in the ASC reviewing and assessing all aspects of business, particularly those that may impact the users of the financial statements or give question to the going concern of the entity.

As a corporate Commonwealth entity (CCE), the ASC is primarily funded by the Australian government to support and invest in sport and physical activity at all levels. This funding has continued to ensure the success of Sport 2030, the Australian Governments strategic Sports Plan.

The ASC has a significant non-financial asset base which is subject to the ASC revaluation policy. In 2019-20 the ASC has worked closely with the valuer and has taken the position that while there is recognisable market uncertainty as at reporting date, this is not measurable due to the inability to observe and reconcile the impact on market prices.

The ASC has conducted a sensitivity analysis over the next accounting periods forecast and over a range of possible scenarios in relation to the ASC’s asset base. The ASC considers the impact of this analysis low on the going concern considerations of the ASC. On this basis, the ASC has made no accounting assumptions or estimates that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting period.

The ASC generates independent Income from the commercial activities of the AIS site which in 2019-20 represented less than 4% of income. Whilst a number of these activities have been impacted by the temporary closure of ASC sites, steps have been taken to reduce the impact on the ASC. In 2019-20, the ASC took proactive steps to address the impact of COVID-19 on the business, including delaying non-essential capital expenditure to strengthen the ASC’s balance sheet and with that, the ASC’s liquidity and solvency position. In addition, the ASC paused a number of programs and projects to ensure the ASC remains a going concern. The ASC has taken a conservative approach to forecasting over the following 12 months and has assumed COVID-19 will continue to impact the ASC’s operations for a significant portion of 2020-21, especially in relation to non-high performance usage of AIS facilities. The ASC is managing this risk closely through reserves and tighter selection of project considerations to ensure the ASC is a going concern in the next accounting period.

Past the next accounting period the ASC will continue to work closely with government to refine a program of capital works as scheduled asset replacements exceed available cash. This program of work is essential to ensure the ASC remains a going concern in future years.

Further disclosures relevant to COVID-19 may be found in the appropriate Accounting Policy in the notes to the financial statements.

New Australian Accounting Standards

Application of AASB 15 Revenue from Contracts with Customers / AASB 1058 Income of Not-For-Profit Entities

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

In relation to AASB 15, the ASC elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The ASC is required to aggregate the effect of all of the contract modifications that occur before the date of initial application.

In terms of AASB 1058, the ASC 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.

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 and AASB 1058. The first column shows amounts prepared under AASB 15 and AASB 1058 and the second column shows what the amounts would have been had AASB 15 and AASB 1058 not been adopted:

Upon implementation of AASB 15 and 1058, the ASC reviewed all income streams to ensure that each was recognised correctly for the purposes of the financial statements. Income assessed as being recognised under AASB 15 is now presented as Revenue from Contracts with Customers, with revenue falling under AASB 1058 presented as Other revenue.

Further, income previously received in advance and presented as Other Payables, was assessed to identify whether the transaction should be recognised under AASB 15 as a contract or refund liability. Any income recognised under AASB 1058 remained as Other Payables.

Application of AASB 16 Leases

The ASC 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.

The ASC 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. The ASC 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, the ASC 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 ASC recognises right-of-use assets and lease liabilities for most leases. However, the ASC 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, the ASC recognised right-of-use assets and lease liabilities in relation to leases of office space, heavy equipment and automobiles, 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 ASC’s incremental borrowing rate as at 1 July 2019. The ASC’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 0.09% per month.

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

1. Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
2. All other leases: the carrying value that would have resulted from AASB 16 being applied from the commencement date of the leases, subject to the practical expedients noted above.

Impact on transition

The impact on transition to AASB 16 is summarised below:

Taxation

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

Events after the Reporting Period

There were no events occurring after reporting date which would significantly affect the ongoing structure and financial activities of the ASC.

NOTE 1: DEPARTMENTAL FINANCIAL PERFORMANCE

This section analyses the financial performance of the Australian Sports Commission for the year ended 2020.

1.1: Expenses

Accounting Policy

Accounting policies for employee related expenses is contained in the People and Relationships section.

The ASC has no short-term lease commitments as at 30 June 2020.

The above lease disclosures should be read in conjunction with the accompanying notes 1.1D, 2.2A and 2.4A.

Accounting Policy

Short-term leases and leases of low-value assets

The ASC 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). The ASC recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The ASC 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 disclosures should be read in conjunction with the accompanying notes 1.1B, 2.2A and 2.4A.

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

1.2: Own Source Revenue and Gains

Accounting Policy

Revenue from the sale of goods is recognised when control has been transferred to the customer.

The ASC recognises income under AASB 15 if the performance obligations are required by an enforceable contract and they are sufficiently specific to enable the ASC to determine when they have been satisfied.

The ASC recognises income for Childcare and Aquatic and Fitness programs over time, as these services are simultaneously received and consumed by the customer. These services are provided for a specific, nominated period and recognised over the period that the obligations are met.

For all other services, the ASC recognises income at the point in time that the service is obligation is satisfied. The customer obtains control of these promised goods or services at the point of sale.

The transaction price is the total amount of consideration to which the ASC expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

NOTE 2: DEPARTMENTAL FINANCIAL POSITION

This section analyses the Australian Sports Commission assets used to conduct its operations and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.

2.1: Financial Assets

Refer Note 2.3A for information relating to contract liabilities.

Cycling Australia Ltd Loan

The ASC has two loans receivable from Cycling Australia, which were provided to assist them with restructuring and other financial assistance.

In prior years, the ASC recognised an impairment allowance in connection with the loans. The ASC has assessed the impairment allowance and has determined that it remains appropriate as at 30 June 2020. The ASC continues to work closely with Cycling Australia to address the financial situation.

Accounting Policy

Loans and Receivables

Trade receivables, other receivables and loans 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 classified as subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

Receivables for goods and 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.

Loans and other receivables that are provided on more favourable terms than the borrower could obtain in the market place contain a concessional discount. The ASC does not adjust the fair value for the concessional component unless it is considered material.

Concessional loans are measured at fair value at initial recognition and classified as subsequently measured at amortised cost using the effective interest method, adjusted for any loss allowance.

Impairment

All financial assets are assessed for impairment at the end of each reporting period. When recovery of a financial asset is assessed as unlikely, an impairment allowance is made. If there is objective evidence that an impairment loss has been incurred for loans and receivables, the amount of the loss is measured as the difference between the assets 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, recognised in the Statement of Comprehensive Income.

As at 30 June 2020, the ASC has also considered whether there is any increased uncertainty on the collection of receivables due to the impact of COVID-19. Although the ASC has not changed the payment terms and conditions of receivables, there has been objective evidence that future collections may be impacted, which has been reflected in the impairment allowance.

2.2: Non-Financial Assets

The above carrying values include work in progress costs for buildings and land improvements $1.754m (2019: $1.705m) and computer software $0.407m (2019: $3.785m).

Revaluations of infrastructure, plant and equipment

All revaluations were conducted in accordance with the revaluation policy stated in the Overview. An independent valuer conducted a revaluation of land and buildings as at 31 May 2019, and a desktop review of land and buildings and infrastructure, plant and equipment as at 30 June 2020.

Contractual commitments for the acquisition of infrastructure, plant, equipment and intangibles

The ASC had $0.504m outstanding contractual commitments for infrastructure, plant, equipment and intangibles as at 30 June 2020 (2019: $1.026m). Contractual commitments primarily relate to equipment purchases. The ASC expects all contractual commitments to be settled within 12 months.

Accounting Policy

Acquisition of assets

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.

Asset recognition threshold

Purchases of infrastructure, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than the threshold for the asset’s sub-class, 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 or are purchases of computer equipment).

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. This is particularly relevant to ‘make-good’ provisions in property leases taken up by the ASC where there exists an obligation to restore the property to its original condition. These costs are included in the value of the ASC’s leasehold improvements with a corresponding provision for the make-good recognised.

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 the ASC 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

Fair values for each class of asset are determined as shown below:

Following initial recognition at cost, infrastructure, plant and equipment (excluding ROU assets) are carried at fair value (or an amount not materially different from fair value). 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 reverses a previous revaluation decrement of the same asset class that was previously recognised through operating result. Revaluation decrements for a class of asset are recognised directly through the operating result except to the extent that they reverse a previous revaluation increment for that class. Any accumulated depreciation as at the revaluation date is 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 re-valued amount.

Impact of COVID-19

A desktop review of land and buildings, and infrastructure, plant and equipment was undertaken by an independent valuer as at 30 June 2020, with consideration given to the uncertain conditions that COVID-19 has caused. Whilst the valuer has advised that there is market uncertainty as at reporting date, this is not measurable due to the inability to observe and reconcile the impact on market prices.

Intangibles

The ASC’s intangibles comprise purchased and internally-developed software.

Purchases of intangibles are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than the threshold of the asset’s sub-class, 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).

These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the ASC’s software are 3 to 7 years (2019: 3 to 7 years).

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

Impairment

All assets were assessed for impairment at 30 June 2020. Where indicators 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.

Derecognition

All assets are derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Depreciation

Depreciable infrastructure, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the ASC 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 sub-class of depreciable asset are based on the following useful lives:

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.

2.3: Payables

The contract liabilities are associated with:

• Sponsorships – whilst the majority of Sponsorship agreements are recognised under AASB 1058 due to the inability to assign specific transaction prices to performance obligations, there are some performance obligations that are sufficiently specific to be able to determine an obligation period and a transaction price against that performance obligation and are therefore recognised under AASB 15. The ASC has determined that any variable considerations associated with these obligations is highly unlikely to result in a reversal of the recognised revenue
• Seconded staff - An ASC staff member has been seconded to another government department. The ASC has determined that any variable considerations associated with these obligations is highly unlikely to result in a reversal of the recognised revenue.

The refund liabilities relate to contracts recognised under AASB 15 that have a variable consideration element in the agreements in the form of refund clauses. COVID-19 has resulted in a significant increase in cancellations due to the temporary closure of commercial operation at the AIS facilities. To assess the refund liability as at 30 June 2020, the ASC has applied the expected value method in estimating the amount of variable consideration in relation to the arrangements below:

• Accommodation and facilities hire – The ASC has determined that there is a 60% chance of event cancellation and refund, with the remainder treated as a contract liability.

• Aquatic and fitness programs - the ASC has determined that there is a 20% chance of event cancellation and refund, with the remainder treated as a contract liability. The lower probability reflects the fact that many customers have already sought refunds with the remainder of customers holding their accounts in credit until swim classes resume.

Refer Note 2.1A for information relating to contract assets

2.4: Provisions

2.5: Interest Bearing Liabilities

The ASC 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.

Accounting Policy

Refer Overview section for accounting policy on leases.

NOTE 3: CASH FLOW RECONCILIATION

NOTE 4: NET CASH APPROPRIATION ARRANGEMENTS

The inclusion of depreciation/amortisation expenses related to ROU leased assets and the lease liability principal repayment amount reflects the cash impact on implementation of AASB 16 Leases, it does not directly reflect a change in appropriation arrangements.

NOTE 5: 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.

5.1: Employee Provisions

Accounting Policy

Liabilities for ‘short-term employee benefits’ and termination benefits expected within twelve months of the end of the reporting period are measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

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 the ASC 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 ASC’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 liability for long service leave and annual leave has been determined by reference to the work of an actuary as at 30 June 2020 and management assessments relating to salary growth rates. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and general pay increases.

Impact of COVID-19

The ASC has considered the impact of COVID-19 on employee benefits by reference to the work of an actuary. Whilst there has been consideration given to current travel restrictions and precarious social and economic environment, no adjustment has been made as at reporting date.

Separation and redundancy

A liability is recognised for separation and redundancy benefit payments. The ASC recognises a liability for termination when it has developed a detailed formal plan for the terminations or when an offer is made to an employee and is accepted.

Superannuation

Staff of the ASC 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 defined benefit schemes for the Australian Government. The remaining funds are defined 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 in the Department of Finance’s administered schedules and notes.

The ASC makes employer contributions to the employee superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government of the superannuation entitlements of the ASC’s employees. The ASC accounts for the contributions as if they were contributions to defined contribution plans.

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

5.2: 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 of that entity. The ASC has determined the key management personnel to be the statutory position holders as per the Australian Sports Commission Act 1989, and the Portfolio Minister. Key management personnel remuneration is reported in the table below:

The total number of key management personnel (noting this includes Commissioners) in the above table is 15 individuals (2019: 23). The total number of substantive key management positions (noting this includes Commissioners) in the above table is 15 individuals (2018: 18). The variance between these figures reflects the maturing of the new operating model during the financial year, whereby the Sport Australia and AIS Executive are involved in strategic decisions related to their own operating stream. As such, it is only the Executive Director (the Chief Executive Officer, Sport Australia), the Director of the Institute (Chief Executive Officer, AIS) and the Commissioners who are responsible for collectively implementing the direction and strategy across the ASC.

The above key management personnel remuneration excludes the remuneration and benefits of the Portfolio Minister. The Portfolio Minister's remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the ASC.

Note 5.2 is prepared on an accruals basis and excludes short-term acting arrangements (less than three months).

5.3: Related Party Disclosures

Related party relationships

The ASC is an Australian Government controlled entity. Related parties to the ASC are Key Management Personnel (KMP) (refer definition at Note 5.2) and other Australian Government entities.

Transactions with Commonwealth controlled entities

During the year, the ASC had arrangements with government entities including the Department of Health to assist with the delivery of the ASC's activities and programs. The income received from government entities is disclosed as 'Contributions from Government entities' in the Statement of Comprehensive Income. All expenses paid to government entities are under normal terms and conditions.

Loans to Key Management Personnel related entities

There were no loans made to KMP or related entities.

Contributions to related organisations

Contributions are made to various sporting organisations as part of the ASC’s normal course of business. They were approved and made on normal terms and conditions.

KMP are required to register conflicts of interest in any sporting organisations or related parties of the ASC’s business. KMP are not part of decisions where there is a real or perceived conflict. The table below represents payments made during the period the KMP were related to the entity.

There were also payments to KMP to reimburse costs incurred on behalf of the ASC. These and the transactions referred to above were conducted with conditions no more favourable than would be expected if the transactions occurred at arm’s length.

Individual KMP may hold professional engagements with related parties. Such engagements are not reported in this note as they are not required to be disclosed as related party transactions under Australian Accounting Standards.

Transactions reported for KMP are limited to direct interests where holdings are greater than 50%.

Transactions exclude GST where relevant.

NOTE 6: MANAGING UNCERTAINTIES

This section analyses how the Australian Sports Commission manages financial risks within its operating environment.

6.1: Contingent Assets

Unquantifiable Contingencies

At 30 June 2020, the ASC had an outstanding claim with Comcover in relation to works done to replace external combustible cladding used on the facades of some of the buildings across the AIS site. As at 30 June 2020 this claim is still being assessed. It was not possible to estimate the amounts of any eventual payments that may be required in relation to these claims.

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.

6.2: Financial Instruments

Accounting Policy

Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the ASC classifies its financial assets into the following categories:

1. financial assets at amortised cost;
2. financial assets at fair value through other comprehensive income; and
3. financial assets at fair value through profit and loss.

The classification depends on both the ASC’s business model for managing the financial assets and contractual cash flow characteristics of the item at initial recognition. Financial assets are recognised when the ASC becomes 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 a 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 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.

Financial Assets at fair value through other comprehensive income (FVOCI)

Financial assets measured at fair value through other comprehensive income are held with the objective of both collecting contractual cash flows and selling the financial assets, and the cash flows meet the SPPI test.

Any gains or losses as result of fair value measurement or the recognition of an impairment loss allowance is recognised in other comprehensive income.

Financial Assets at Fair Value Through Profit and Loss (FVTPL)

Financial assets are classified at fair value though profit and loss where the financial assets either do not meet the criteria of financial assets held at amortised cost or at FVOCI (i.e. mandatorily held at FVTPL) or may be designated.

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.

Impairment

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.

Impact of COVID-19

The ASC has considered the impact of COVID-19 on the impairment allowance, and has assessed that there has been a minor increase in the risk of default in certain debt groups. This has been reflected in the allowance as at reporting date.

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 Fair Value Through Profit or Loss

Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

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.

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

NOTE 7: OTHER INFORMATION

7.1: Aggregate Assets and Liabilities

7.2: Assets Held in Trust

Promoters Trust Account

Purpose – The ASC operates a Promoters Trust Account into which it deposits monies received in the course of conducting events at the ASC. These monies are held until such time as the events are completed and all costs associated with the events have been finalised. The remaining funds are then apportioned between the promoter and the ASC in accordance with the terms of each agreement. These monies are not available for other purposes of the ASC and are not recognised in the financial statements.