Bundanon Trust

For the year ended 30 June 2020

1. Summary of Significant Accounting Policies

(a) Basis of preparation

The financial report is general purpose financial report that has been prepared in accordance with the Australian Accounting Standards - Reduced Disclosure Requirements, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board, the Australian Charities and Not-for-profits Commission Act 2012, the Corporations Act 2001 and the Public Governance, Performance and Accountability (Financial Report) Rule 2015 (FRR).

The directors have resolved in accordance with AASB 101 that given the "not for profit" nature of the company, the term "Operating surplus and deficit" will be adopted rather than "Profit and loss".

The financial report for the year ended 30 June 2020 was approved and authorised for issue by the Board of Directors on 16 October 2020.

(b) Basis of measurement

The financial report has also been prepared on an accrual basis and is based on historical costs, except for donated inventory for resale which is valued at net realisable value and the Bundanon collection and land and buildings which have been measured at fair value. Changes in fair values of these assets have been dealt with directly in equity. Financial instruments have been measured at fair value but where there has been objective evidence that the asset is impaired, the cumulative loss in equity is removed from equity and recognised in the income statement. The financial report is presented in Australian dollars.

Management has made an assessment that the Trust is a going concern and the financial report has been prepared on that basis. As noted, the Trust is dependant on the Australian government's ongoing support and has a four year operational funding agreement for the period from 1 July 2019 to 30 June 2023 and a three year capital funding agreement commencing 30 January 2020. The Trust also has a three year capital funding agreement with the NSW government, commenced in June 2018. The recognition of the capital grants will result in comprehensive income in excess of $20,000,000 in the year ended 30 June 2021 and $2,000,000 in the year ended 30 June 2022. Projected cashflows to the period ending 12 months after the reporting, incorporating the capital project and funding, provide support that there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they become due and payable.

(c) Use of estimates and judgements

The preparation of financial report requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The fair value of land has been taken to be the market value as assessed by an independent valuer every three years.

The fair value of buildings has been taken to be the depreciated market value, and assessed by an independent valuer every three years. Management undertakes an assessment of the fair values in the intervening years to assess the movement, if any in those values. This assessment includes consideration of the building price index and the reports by the Valuer General NSW on land value movements. At 30 June 2020, management assessed the movement in values to be nil. (2019: Nil)

The fair value of the Collection adopted by the valuer reflects a range of methodologies applicable to the various items in the Collection. Items valued at $30,000 or more were valued in full. Specific categories were also valued in full, being Textiles, Miscellaneous, Furniture and Rugs. Random sampling of the residual was undertaken to determine the average value of the sampled assets and applying the data to the various asset categories, incorporating weighting. The collection value is assessed by an independent valuer every three years and the valuer reviews those values in the intervening two year period. The valuer has determined that the values continue to represent fair market values.

(d) Material Accounting Policies

The following is a summary of the material accounting policies adopted by the Trust in the preparation of the financial report:

a. Taxation matters

1. Bundanon Trust (the Trust) is a non-profit organisation established for the promotion of the arts and is exempt from income tax pursuant to Section 50-5 of the Income Tax Assessment Act, 1997. The Trust is subject to the Goods and Services Tax (GST) and Fringe Benefits Tax (FBT).
2. Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown exclusive of GST. Cashflows are presented in the statement of cash flows on a gross basis, except for the GST components of investing and financing activities, which are disclosed as operating cash flows.
3. As a public art gallery approved by the Australian Taxation Office under Division 30 of the Income Tax Assessment Act, 1997, the Trust is entitled to receive gifts of the value of $2 and upwards of money or of property other than money from donors who may claim a taxation deduction under Section 82KH (1) of the Income Tax Assessment Act, 1997.
4. As an organisation listed on the Register of Cultural Organisations administered by the Ministry for the Arts within the Department of Communications and the Arts, gifts of money to the Trust's Cultural Fund are tax deductible pursuant to Division 30-100 of the Income Tax Assessment Act, 1997.

b. Inventories

Inventories are measured at the lower of cost or net realisable value. This includes merchandise stock donated in previous years, held at net realisable value. Costs are assigned on a first-in first-out basis. A provision for obsolete stock is made when it is deemed there are excessive levels of individual stock lines.

c. Biological Assets – Livestock

Agricultural activities continue under an agistment arrangement and consequently there are no biological assets held by the Trust at 30 June 2020 (2019: nil).

d. Non- Financial Assets Property, plant and equipment

Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value and, where applicable, less any accumulated depreciation. Purchases costing less than $1,000, are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

Property

Freehold land, land improvements and buildings are measured on the fair value basis, being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. It is the policy of the Trust to have an independent valuation every three years, with annual appraisals being made by management.

Plant and equipment

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows, which will be received from the assets employed and subsequent disposal. The expected net cash flows have not been discounted to present values in determining the recoverable amounts.

Intangible assets

Internally developed software

Internally developed software is initially recorded at the purchase price and amortised on a straight line basis over the period of 3 years. The balances are reviewed annually and any balance representing future benefits the realisation of which is considered to be no longer probable are written off.

Depreciation

The depreciable amounts of all buildings and plant and equipment, but excluding freehold land and historic buildings, are depreciated on a diminishing value basis over their useful lives commencing from the time the asset is held ready for use.

The major depreciation periods used for each class of depreciable assets are:

Impairment

Assets subject to annual depreciation or amortisation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the asset may be impaired.

An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount.

e. Employee Benefits

Liabilities for ‘short-term employee benefits’ (as defined by AASB 119 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.

Short-term employee benefit obligations

The liability for employee benefits includes provision for annual leave and long service leave. Personal leave is non vesting and recognised as an expense when it is incurred. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. The expected cost of short-term employee benefits in the form of compensated absences such as annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.

Employer contributions for superannuation have been expensed in the accounts and include liabilities up to 30 June.

Long-term employee benefit obligations

Liabilities arising in respect of long service leave and annual leave which is not expected to be settled within twelve months of the reporting date are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. This calculation incorporates for estimated indexation wage increases, probability factors on reaching entitlement and discounted cash flow based on 10 year government bond rates.

Employee benefit obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.

f. Other financial assets

Other financial assets include the balance of capital funds, of $516,749 provided by the Australian Government on the formation of the Trust. The purpose of the funds was to provide an investment income to provide for the ongoing management of Trust assets. These assets cannot be drawn down to fund the ongoing operations of the Trust without prior ministerial approval.

Other financial assets comprise cash on short-term deposit, listed investments and Australian Carbon Credit Units (ACCUs). These assets are recorded at cost and subsequently revalued at fair value. The ACCUs were first recognised on 30 June 2020, following their registration on the Australian National Registry of Emissions Units.

g. Bundanon Collection

The valuation of Bundanon collection artworks as at 30 June 2018 was based on an independent valuation undertaken by Simon Storey Valuers, MVAA. This value was reviewed by Simon Storey Valuers MVAA in June 2019 and June 2020 and the valuation was confirmed.

Depreciation of the Bundanon collection

Depreciation of the collection is provided on a straight-line basis over the estimated useful life of the asset.

Impairment

Assets subject to annual depreciation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the asset may be impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount.

h. Cash

For the purposes of the statement of cash flows, cash includes deposits at call that are readily convertible to cash on hand.

i. Comparative Figures

When required, comparative figures have been reclassified for consistency with current year disclosures.

j. Revenue

Revenue arises mainly from the sale of goods, provision of services, grant funding, sponsorship income, donations and investment income.

To determine whether to recognise revenue, the Trust follows a 5 step process:

• Identifying the contract with a customer
• Identifying the performance obligations
• Determining the transaction price
• Allocating the transaction price to the performance obligations
• Recognising revenue when performance obligations are satisfied

Sale of Goods

Revenue from the sales of goods is recognised when:

• the risks and rewards of ownership have been transferred to the buyer;
• the seller retains no managerial involvement nor effective control over the goods;
• the revenue and transaction costs incurred can be reliably measured; and
• performance obligations are satisfied.

Provision of Services

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

The Trust provides an education program for schools and tertiary institutions and venue hire for weddings and functions. There is a requirement for a holding deposit to be paid to confirm the bookings and these deposits are recognised as a liability (Note 14) as they are refundable. Venue hire contracts have a forfeiture clause 90 days from the booking date and these deposits are recognised as revenue at that time.

In all other instances, monies received will only be recognised as a liability when the service is yet to be delivered and the customer has a clear right of recourse per the terms of the agreement.

Revenue and other income

The Trust recognises the revenue from contracts with customers, in relation to operating and specific funding or sponsorship contracts, by applying the 5-step model detailed in AASB 15 – Revenue from Contracts with Customers as follows:

1. Identify the contract with the customer
2. Identify separate performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price
5. Recognise revenue when a performance is satisfied

Where AASB 15 applies to a transaction or part of a transaction, the principles are applied to determine the appropriate revenue recognition. When AASB 15 does not apply to a transaction or part of a transaction, it is then considered whether AASB 1058 applies.

Grant Revenue

If sufficiently specific performance obligations are attached to the grant which must be satisfied before it is eligible to receive the contribution, the recognition of the grant will be deferred until those obligations are satisfied. If the grant is relation to the construction or acquisition of a recognisable financial asset, it is recognised as the Trust satisfies its obligation to construct the asset.

Grant contracts that are not enforceable or where the performance obligations are not sufficiently specific, are accounted for under AASB 1058 - Income for Not-for-Profit Entities, whereby income is recognised immediately upon receipt.

Sponsorship Income

Sponsorship revenue is recognised once the terms and conditions of the agreement are met. There is no Unearned Sponsorship (Note 14) recorded as a liability at 30 June 2020.

Donations

Cash donations are generally recognised on receipt of the funds. Gifts of artwork and in kind contributions are recognised at their fair value in the year of receipt. The fair value of donated artworks is confirmed by Simon Storey Valuers, MAVAA annually.

Funds received include those that are received on behalf of another party, based on annual copyright income. This annual income is not quantified until after 30 June and is recognised as a liability at Note 14. This includes donation of annual copyright incomes. Revenue is only recognised after confirmation is received over the amount the Trust may keep.

Investment Income

Interest income is recognised on an accruals basis using the effective interest method and dividend income is recognised when the right to receive payment is established.

Gains / Losses on Sale of Assets

Gains/losses from disposals of non-current assets are recognised when control of the asset has passed to the buyer. All revenue is stated net of the amount of the good and services tax (GST).

k. Expenses

Consultancy Fees

The Trust has not expensed any costs in relation to the development of a Masterplan strategy during the year ended 30 June 2020 (2019: $11,102). The consultancy costs in relation to the project have been capitalised as part of the Masterplan asset.

l. Financial Assets

The Trust classifies its financial assets in accordance with AASB 9 in the following categories:

• 'financial Instruments at fair value through other comprehensive income (FVOCI)', and
• ‘financial assets at amortised cost’.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon ‘trade date’.

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

Financial Instruments at fair value through other comprehensive income (FVOCI) are not held for resale and they are included in non-current assets unless management intends to dispose of the asset within 12 months of the balance sheet date.

These assets are recorded at fair value. Gains and losses arising from changes in fair value are recognised directly in the reserves (equity) with the exception of impairment losses.

The Trust has no instruments where a reliable fair value cannot be established.

Financial assets at amortised cost

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market have been reclassified as financial assets held at amortised cost. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non current assets.

Impairment of financial assets

Financial assets are assessed for impairment at each balance date.

Financial instruments at FVOCI assets - If there is objective evidence that an impairment loss on these assets has been incurred, the amount of the difference between its cost, less principal repayments and amortisation, and its current fair value, less any impairment loss previously recognised in expenses, is transferred from equity to the statement of profit or loss and other comprehensive income statement.

Financial assets held at amortised cost - If there is objective evidence that an impairment loss has been incurred for financial assets held at amortised cost, the amount of the loss is measured as the difference between the asset’s 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 allowance account. The loss is recognised in the statement of profit or loss and other comprehensive income statement.

m. Changes in Australian Accounting Standards

Adoption of new Australian Accounting Standards requirements

No accounting standard has been adopted earlier than the application date as stated in the standard.

New standards and interpretations adopted

AASB 15 Revenue from Contracts with Customers

AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and several revenue-related Interpretations. In order for AASB 15 to apply, there are two critical elements that need to be satisfied:

• the agreement between two or more parties must create ‘enforceable’ rights and obligations;

• the entity’s promise to transfer a good or service needs to be ‘sufficiently specific’.

Where AASB 15 applies to a transaction or part of a transaction, the principles are applied to determine the appropriate revenue recognition. When AASB 15 does not apply to a transaction or part of a transaction, it is then considered whether AASB 1058 applies.

AASB 15 has been applied as at 1 July 2019 using the modified retrospective approach. Under this method, the cumulative effect of initial application is recognised as an adjustment to the opening balance of retained earnings at 1 July 2019 and comparatives are not restated. In accordance with the transition guidance, AASB 15 has only been applied to contracts that are incomplete as at 1 July 2019.

For the year ended 30 June 2020, all grant agreements have been considered under the new standards. The recognition of income under AASB 15 for contracts that result in deferral of the income recognition, is applicable to two contracts that have satisfied the 5-step process. The accounting for these grants has not changed and therefore when this standard was first adopted for the year ended 30 June 2020, there was no material impact on the transactions and balances recognised in the financial statements.

All other grant agreements have been considered under AASB 1058.

AASB 1058 Income for Not-for-Profit Entities

AASB 1058 applies for annual periods beginning on or after 1 January 2019. AASB 1058 replaces most of the not-for- profit (NFP) provisions of AASB 1004 Contributions.

AASB 1058 will apply when a NFP:

• enters into a transaction where the consideration to acquire an asset is significantly less than fair value principally to enable the NFP to further its objectives; and

• receives volunteer services (recognition of volunteer services is only mandatory to entities in the public sector).

The Trust will recognise income in relation to Capital funding, being a transfer of a financial asset, received for the purposes of constructing a recognisable non-current financial asset to be controlled by the Trust in accordance with AASB 1058. As noted in the standard, as the contract does not establish rights and obligations for the transfer of the non-financial asset, it is not a contract with a customer under AASB 15 and is accounted for under AASB 1058.

In relation to Capital funding, for the year ended 30 June 2020, $4,280,593 has been recognised as income (2019: $1,030,170) and the balance of the funding received and invoiced to date of $9,452,476 continued to be recognised as a liability.

The Trust recognises the liability for its obligation under the agreement and recognises income as it satisfies the obligation to construct the facility. The proportion of the construction completed and recognised as satisfying the obligation to construct the facility under the agreement, is based on the assessment prepared by the external capital project managers.

The Trust receives a range of grants that were previously considered to satisfy the specificity requirements of AASB 15. These grants have been reviewed and where applicable, identified as subject to AASB 1058. The income for grants received before 1 July 2019 have been restated as an adjustment to equity at the date of the initial application of AASB 1058 on 1 July 2019. These grants total $260,491.

The grant contracts after 1 July 2019, have been considered under AASB 1058 and the income recognised on receipt.

The Trust has elected to apply the modified retrospective application, without restating comparatives. Under this approach, the cumulative effect of initially applying the new requirements is recognised as an adjustment to equity at the date of initial application.

AASB 16 Leases

The Trust does not hold any leases nor is it impacted by the changes to this standard. When this standard was first adopted for the year ended 30 June 2020, there was no material impact on the transactions and balances recognised in the financial report.

2. Members Guarantee and Government Support

a) Members guarantee

The Trust is a public company limited by guarantee. The constitution provides that:

"Every member of the Company undertakes to contribute to the property of the Company in the event of the same being wound up while he is a member, or within one year after he ceases to be a member, for payment of debts and liabilities of the Company (contracted before he ceases to be a member)and of the costs, charges and expenses of winding up and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding one hundred dollars ($100)."

b) Economic Dependence

The Trust is dependent on the Australian Government's ongoing support. The Australian Government has confirmed funding of $6.027 million, commencing 1 July 2019 for four years until 30 June 2023, to support the operations of the Trust.

16. Related Parties

The names of the persons who were directors of the Trust during the period from 1 July 2019 to 30 June 2020 are as follows:

Ms Jennifer Bott (Chairman), Ms Michelle Bishop, Mr Tony Emery, Ms Anne Flanagan, Mr Mark Tucker, Prof Paul Wellings, Sam Edwards and Ms Holly Byrne.

No director received remuneration from the Trust or any related corporation in relation to the management of the Trust.

The total number of Key management personnel included in the table above is one (2018-19: one).

18. Capital management policies and procedures

Management controls the capital of the Trust to ensure adequate cash flows are generated to fund its programs and that returns from investments are maximised. The Board and management ensure that the overall risk management strategy is in line with this objective.

Management manages the Trust's capital by assessing the Trust's financial risk and responding to changes in these risks and in the market. These responses may include the consideration of debt levels. There have been no changes to strategy adopted by management to control capital of the trust since the previous year.

20. Events after the reporting period

The directors are not aware of any significant events that would have an impact on the financial reports since the end of the reporting period.

21. Commitments and contingencies

The Trust has entered into contracts in relation to the Riversdale Masterplan Project. As at 30 June, contracts with Capital Project Control Pty Ltd (CPC), Kerstin Thompson Architects Pty Ltd (KTA) and JBG Contractors (JBG) had been executed and substantially completed. ADCO Constructions Pty Ltd (ADCO) was appointed as the main building works contractor, contract dated 16 June 2020 and on 20 June 2020, the Early works contract with JBG was novated to ADCO. The project value is $31,092,299 and funds have been applied to the project to 30 June 2020 of $4,740,112. The ADCO contract price is $21,799,078 (excluding GST), with additional sub contractors and novated works, $25,048,131 (GST exclusive). Contingencies have been provided and the project management provided by CPC, in conjunction with the Board sub committee, the Project Control Group.

22. ​Information furnished under the Charitable Fundraising Act 1991 (NSW)

The Trust is registered under the Charitable Fundraising Act 1991 (NSW) to conduct fundraising activities.

Statement demonstrating how funds received were applied to charitable purposes

All funds received from fundraising appeals are used to fund the Trust project work. No funds are used for the purpose of administration.