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Managing uncertainties

This section analyses how the Memorial manages financial risks within its operating environment.

4.1 Contingent Assets and Liabilities

The Memorial has one contingent asset in respect of the balance of an estate to be paid to the Memorial as beneficiary which is estimated at $575,000 (2019: nil). There were no contingent liabilities in the current reporting period (2019: nil).

Accounting policy

Contingent assets and liabilities are not recognised in the statement of financial position but contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

4.2 Financial Instruments

2020

2019

$'000

$'000

Note 4.2A: Categories of Financial Instruments

Financial assets at amortised cost

Cash at bank

2,717

2,460

Trade and other receivables

629

581

Deposits in short-term investments

85,500

75,500

Accrued interest revenue

578

1,060

Total financial assets at amortised cost

89,424

79,601

Total financial assets

89,424

79,601

Financial Liabilities

Financial liabilities measured at amortised cost

Trade creditors

3,301

3,948

Total financial liabilities measured at amortised cost

3,301

3,948

Total financial liabilities

3,301

3,948

Note 4.2B: Net Gains or Losses on Financial Assets

Financial assets at amortised cost

Interest revenue

1,813

2,293

Impairment

(1)

(2)

Net gains/(losses) on financial assets at amortised cost

1,812

2,291

Net gains on financial assets

1,812

2,291

The net interest income from financial assets not at fair value through profit or loss is $1,812,670 (2019: $2,292,611).

Accounting Policy

Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the Memorial 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 the Memorial’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 Memorial 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 recognition.

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 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.

Financial liabilities

The Memorial classifies its financial liabilities as either ‘at fair value through profit and 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.

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

4.3 Fair Value Measurement

Accounting Policy

The Memorial procured independent valuation services from Pickles Valuations for plant and equipment assets this year. The revaluation of the Memorial's exhibition assets was undertaken by Pickles Valuations in 2019 and the revaluation of the Memorial’s Heritage and Cultural (Collection) assets was undertaken by Australian Valuations Pty Ltd in 2018. The Memorial relies on the valuation models provided by our valuers which are reviewed and tested by the Memorial at least once every 12 months.

The significant unobservable inputs used in the fair value measurement of the Memorial's plant and equipment assets are identical or similar items sold through recorded auction sales, catalogues and known private collections. Significant increases (decreases) in any of those inputs in isolation would not result in a significantly higher (lower) fair value measurement.

Generally, a change in the assumption used for professional appraisals of similar items is accompanied by a directionally similar change in the assumption used for private sales of similar items.

No assets were transferred between Levels 1 and 2 during the reporting period. The highest and best use of all non-financial assets is the same as their current use.

Note 4.3A: Fair Value Measurement

Fair value measurements at the end of the reporting period

2020

2019

$'000

$'000

Non-financial assets

Land

13,096

13,096

Buildings on freehold land

183,752

162,319

Heritage and Cultural (Collection)

1,164,611

1,153,060

Exhibitions

25,088

30,430

Other property, plant and equipment13

11,032

8,616

Total non-financial assets

1,397,579

1,367,521

Liabilities measured at fair value comprise $20,000 for lease liabilities over plant and equipment (2019: nil). Fair value is represented by the present value of the remaining lease payments, discounted using the incremental borrowing rate.