Overview

Objectives of the Entity

The Bureau of Meteorology is an Australian Government controlled entity. It is a not-for-profit entity. The objective of the Bureau of Meteorology is to provide a wide range of products and services relating to weather, climate and water to support informed decision-making by governments, emergency services, industry and the community.

The Basis of Preparation

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements have been prepared in accordance with:

a) Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and

b) 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.

New Accounting Standards

All new standards and/or interpretations that were issued prior to the sign-off date are applicable to the current reporting period. AASB 15 and AASB 1058 did not have a material effect on the Bureau of Meteorology’s financial statements. AASB 16 did not have a material effect on the Statement of Comprehensive Income, however, this resulted in a material increase in both asset and liability values in the Statement of Financial Position.

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

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

In relation to AASB 15, the Bureau of Meteorology elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The Bureau of Meteorology 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 Bureau of Meteorology 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.
The Bureau of Meteorology’s revenue recognition practices under the previous accounting standards align with that of AASB 15 and AASB 1058. Regarding material revenue streams relating to Section 74 revenue, the expenses incurred for delivering the products and services is expected to provide the best measure of progress towards satisfaction of the performance obligation, which is consistent with existing revenue recognition practices.

There is no impact to the financial statement as a result of the adoption of AASB 15 and AASB 1058.

Application of AASB 16 Leases

The Bureau of Meteorology 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 Bureau of Meteorology 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 Bureau of Meteorology 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 Bureau of Meteorology 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 Bureau of Meteorology recognises right-of-use assets and lease liabilities for most leases. However, the Bureau of Meteorology 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 Bureau of Meteorology 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 Bureau of Meteorology’s incremental borrowing rate as at 1 July 2019. The Bureau of Meteorology’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 1.06%.

The right-of-use assets were measured as follows:
a) Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
b) 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

On transition to AASB 16, the Bureau of Meteorology recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:

The following table reconciles the Departmental minimum lease commitments disclosed in the Bureau of Meteorology's 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

Taxation

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

Reporting of Administered activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.

Except where otherwise stated, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.

Events After the Reporting Period

Departmental

There was no subsequent event that had the potential to significantly affect the ongoing structure and financial activities of the Bureau of Meteorology. Furthermore, based on current assessment of the COVID-19 pandemic, there are no significant subsequent events to report, however, this will be continuously monitored.

Administered

There was no subsequent event that had the potential to significantly affect the ongoing structure and financial activities of the Bureau of Meteorology.

Financial Performance

This section analyses the financial performance of the Bureau of Meteorology for the year ended 2020.

1.1 Expenses

Accounting Policy
Accounting policies for employee related expenses is contained in the People and Relationships section (note 5.1).

1. The Bureau of Meteorology 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 1.1C, 2.2A and 2.4A.

Accounting Policy

Short-term leases and leases of low-value assets

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

1.2 Own-Source Revenue

Accounting Policy

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

A contract is in scope of AASB 15 when it has commercial substance whereby it is probable that the Bureau will collect the consideration to which it will be entitled based on the existing relationship with and knowledge of customer’s ability and intention to pay the consideration. Contracts with the Bureau are usually in the form of formal memorandum of understanding, agreements, work order or purchase order.

The Bureau is required to determine at each contract’s inception whether it satisfies the performance obligation over time or satisfies the performance obligation at a point in time. The satisfaction of a performance obligation over time is dependent on the following factors:

• The customer simultaneously receives and consumes the benefits provided by the Bureau’s performance as the entity performs the service;
• The Bureau’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
• The work performed by the Bureau does not create an asset with an alternate use to the Bureau and the Bureau has an enforceable right to payment for work completed to date.

The following is a description of principal activities from which the Bureau of Meteorology generates its revenue:

1. Aviation weather services – Relates to the provision of meteorological services in support of Civil Aviation, the costs for which is recovered through a levy charged pursuant to the Meteorology Act 1955. Revenue generated from levy charges falls under the scope of AASB 1058. The Bureau recognises the revenue when the service has been delivered.

2. Defence weather services – Recognition is contingent on the terms of the individual contract. Due to the nature of the services, the customer simultaneously receives and consumes the benefits as the services are delivered and therefore revenue is recognised over time in line with the term of the contract as per AASB 15.

3. Consultative services – Recognition is contingent on the terms of the individual contract. Due to the nature of the services, the customer simultaneously receives and consumes the benefits as the services are delivered and therefore revenue is recognised over time in line with the term of the contract as per AASB 15.

4. Research – Research income relates to the performance of research related activities. These activities are usually performed in accordance with an agreement outlining desired outputs and outcomes and therefore recognition is contingent on the conditions of the applicable contract. In accordance with AASB 15, revenue is either recognised over time and in line with the performance obligations as set out in the contract, or recognised upon satisfactory completion of the specifically identifiable performance obligations.

5. Calendar sales – Revenue recognised on sale of calendars are recognised at a point in time basis when the sale occurs in accordance with AASB 15.

6. Data extraction consumables and special data processing – Relates to information to customers provided upon request. Revenue is recognised at a point in time basis when the sale occurs in accordance with AASB 15.

7. Offshore mining – This relates to the provision of tropical cyclone and offshore-specific wind and wave forecasts to facilitate the smooth and safe operation of off-shore rigs. As access to these services is provided on a subscription basis and the benefits are transferred as the service is delivered, revenue is recognised over time in accordance with AASB 15.

8. Sale of houses – Relates to the Bureau’s sale of houses originally used to house staff in remote locations. Revenue is recognised at a point in time basis when the sale is completed in accordance with AASB 15.

The transaction price is the total amount of consideration to which the Entity 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.

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.

1. Bathythermographs gifted from the Department of Defence.

Accounting Policy

Resources Received Free of Charge

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. Resources received free of charge are recorded as either revenue or gains depending on their nature.

Accounting Policy

Revenue from Government

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the Bureau of Meteorology gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts.

1.2E: Unsatisfied Obligations
The Bureau of Meteorology expects to recognise as income any liability for unsatisfied obligations associated with revenue from contracts with customers according to the terms or milestones as set out in the contracts. Majority of the Bureau of Meteorology’s revenue will be recognised in line with the delivery of products or outputs with the customers.

Financial Position

This section analyses the Bureau of Meteorology’s 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

The contract assets are associated with any transfers of goods or services relating to Section 74 revenue to a customer before the customer pays consideration or before payment is due when a contract is performed.

Refer Note 2.3A for information relating to contract liabilities.

Credit terms for goods and services were within 30 days (2019: 30 days).

Accounting Policy

Financial assets

Trade receivables, loans and other receivables 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.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period.

Asset balances in the above table includes assets under construction.
1. The carrying amount of computer software included $12.689 million of purchased software and $166.033 million of internally developed software (2019: $16.531 million and $113.533 million, respectively).
2. A revaluation was undertaken for the three asset classes during the 2019-20 financial year. Refer to accounting policy note for further details.
3. The balance in the transfers of assets between classes is due to transfer of land and buildings classes to assets held for sale class.

Contractual commitments for the acquisitions of property, plant and equipment and intangible assets
The Bureau of Meteorology has commitments for the purchases of the following property, plant and equipment:
- High Performance Computing;
- Radar Sustain and Modernisation;
- Public Services Transformation; and
- Improved security and resilience for ICT systems

Accounting Policy

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, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

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. This is particularly relevant to ‘make good’ provisions in property leases taken up by the Bureau of Meteorology where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Bureau of Meteorology's leasehold improvements and relevant assets with a corresponding liability recognised as a provision for ‘make good’ (Note 2.5).

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 Bureau of Meteorology 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

Following initial recognition at cost, land, buildings, property, plant and equipment (excluding ROU assets) are carried at fair value (or an amount not materially different from 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 depended upon the volatility of movements in market values for the relevant assets. Currently revaluations are done on a class basis every three years.

The Bureau of Meteorology undertook a revaluation of three of its asset classes (land, buildings, and property, plant and equipment) during the 2019-20 financial year. The entity engaged the services of a qualified valuer (James Munroe from AON Risk Services Australia Limited) for the purpose of the revaluation in accordance with AASB 116. Any revaluation increment was 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 surplus/deficit. Revaluation decrements for a class of assets were recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class. Any accumulated depreciation as at the revaluation date was eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Bureau of Meteorology using, in all cases, the straight-line method of depreciation. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease. Leased assets are amortised over the period of the lease.

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:

The depreciation rates for ROU assets are based on the commencement date to the earlier of either the end of the useful life of the ROU asset or the end of the lease term.

Impairment

All asset classes were assessed for impairment at 30 June 2020. 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 Bureau of Meteorology 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.

Intangibles

The Bureau of Meteorology's intangibles comprise software licences, purchased software, and internally developed software. The software is 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 Bureau of Meteorology's software is predominately 3 to 5 years other than the Services System software which has a useful life of 20 years (2019: 3-5 years and 20 years, respectively).

Heritage and Cultural Assets

During the 2020 financial year, the Bureau of Meteorology undertook a valuation of its library collection, consisting of both heritage class of assets and Property, Plant and Equipment. On initial recognition in 2018, the heritage assets were non-depreciating, however, this has been updated for a useful life of 30 years retrospectively from the recognition date to reflect the library's default useful life. These assets are included within Property, Plant and Equipment and depreciated on a straight-line basis over its useful life.

Assets not recognised

Historical meteorological data has not been recognised as an asset due to difficulties in the application of control criteria.

For historical meteorological data to be recognised as an asset the following criteria need to be met:
· the weather data must generate future economic benefits;
· the cost of collecting and maintaining the data can be reliably measured;
· the data can be separately identifiable as an asset; and
· the Bureau of Meteorology maintains control of the data.

The Bureau of Meteorology provides meteorological data to the public at no cost. From this point the Bureau of Meteorology has no control over and cannot regulate the information. Based on the above criterion, control of the asset is not met. For this reason the Bureau of Meteorology does not recognise historical meteorological data as an asset.

Accounting Judgements and Estimates

The fair value of land and buildings and property, plant and equipment has been taken to be the market value of similar assets as determined by an independent valuer.

During 2020 $4.598 million of inventory held for distribution was recognised as an expense (2019: $4.598 million).

Accounting Policy

Inventories held for distribution are valued at cost; costs have been assigned to inventory quantities on hand at balance date using the average cost basis, adjusted for any loss of service potential.

The Bureau of Meteorology’s inventory holding consists of Publications held for sale and items utilised in the installation of sites, or the repair/maintenance of its equipment.

The inventory is held to ensure that repairs/maintenance can be made at short notice to keep the operational equipment in service. The range of inventory held consists of items which can be utilised across a significant part of the operational network and as such is not limited to a specific piece of equipment. When items of inventory are sold or utilised to make repairs/maintenance to equipment, the carrying amount of the items are recognised as an expense.

Items held for the purposes of major spare parts or as stand-by equipment are classified in the Bureau of Meteorology’s accounts and records as Property, Plant and Equipment in accordance with AASB 116, consistent with the Bureau of Meteorology Asset Management Policy.

Settlement was usually made within 30 days. All supplier payables are expected to be settled within 12 months.

The contract liabilities are associated with Bureau’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer relating to Section 74 revenue.

Refer Note 2.1A for information relating to contract assets.

¹ Comparative information represents the deferred revenue balance in 2018-19.

² The Bureau of Meteorology 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.

Refer Note 5.1 for accounting policy information relating to separation and redundancies.

Accounting Policy

Financial Liabilities

The Bureau of Meteorology classifies its financial liabilities which includes supplier and other payables as 'other financial liabilities'. 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). Supplier and other payables are derecognised upon payment.

2.4 Interest Bearing Liabilities

1. The Bureau of Meteorology 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.

Total cash outflow for leases for the year ended 30 June 2020 was $13.811 million.

Accounting Policy

Refer Overview section for accounting policy on leases.

2.5 Provisions for Restorations

The Bureau of Meteorology has four hundred and thirty seven agreements (2019: four hundred and thirty seven) for the leasing and licensing of premises and land which have provisions requiring the Bureau of Meteorology to restore the premises and land to their original condition at the conclusion of the lease. The Bureau of Meteorology has made a provision to reflect the present value of these obligations.

Accounting Judgements and Estimates

Make Good

A provision for restoration obligation (make good) is recognised if, as a result of a past event, the Bureau of Meteorology has a present obligation (legal or constructive) that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Make good provisions are measured at the best estimate of the expenditure required to settle the present obligation at reporting date, including the risks and uncertainties specific to the liabilities.

Make good provisions are discounted to present value when the time value of money is material.

Provisions are reviewed annually and adjusted to reflect the current best estimate.

Assets and Liabilities Administered on Behalf of Government

This section analyses assets used to conduct operations and the operating liabilities incurred. The Bureau of Meteorology does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

3.1 Administered - Financial Assets

Credit terms for goods and services were within 30 days (2019: 30 days).

Accounting Policy

Where receivables are not subject to concessional treatment, they are carried at amortised cost using the effective interest method. Gains and losses due to impairment, derecognition and amortisation are recognised through profit and loss.

3.2 Administered - Financial Liabilities

Accounting Policy

The Bureau of Meteorology classifies its financial liabilities which includes supplier and other payables as 'other financial liabilities'. Supplier and other payables are recognised at amortised cost.

Funding

This section identifies the Bureau of Meteorology’s funding structure.

4.1 Appropriations

4.1A: Annual Appropriations ('Recoverable GST exclusive')

Annual Appropriations for 2020

1. The adjustments to appropriation is for the PGPA Act Section 74 Receipts.

2. The variance disclosed is made up of the movement in cash, appropriation receivable, GST receivable and return of equity appropriations.

3. Departmental and Administered Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services and are not separately identified in the Appropriation Acts.

Annual Appropriations for 2019

1. Under Section 51 of the PGPA Act, the Finance Minister has permanently withheld the Bureau of Meteorology's equity appropriation by $11,000,000 and $32,037,000 for the reallocation between years.

2. The adjustments to appropriation is for the PGPA Act Section 74 Receipts.

3. The variance is made up of the movement in cash, appropriation receivable, GST receivable, section 51 withholding and return of equity appropriations.

4. Departmental and Administered Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services and are not separately identified in the Appropriation Acts.

1. Appropriation Act (No. 2) 2016-17 was repealed on 1 July 2019.

2. Appropriation Act (No. 2) 2017-18 will be repealed on 1 July 2020.

4.2 Special Accounts

Services for Other Entities and Trust Moneys - Bureau of Meteorology Special Account ¹

1. Appropriation: Public Governance, Performance and Accountability Act 2013, section 78.

Establishing Instrument: Financial Management and Accountability Determination 2008/06.

Purpose: To enable the Bureau of Meteorology to hold and expend amounts on behalf of persons or entities other than the Commonwealth.

Total balance to be carried to the next period is the value of cash held in special account of $947,826 (2019: $724,832).

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' (as defined in AASB 119 Employee Benefits) and termination benefits expected within twelve months of the end of 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.

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 minus the fair value at the end of the reporting period of plan assets (if any), out of which the obligations are to be settled directly.

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 Bureau of Meteorology is estimated to be equal or 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 leave is taken, including the Bureau of Meteorology'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 liabilities for annual leave and long service leave have been determined by reference to the work of an actuary as at 30 June 2020. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

The actuarial assessment provides estimates on two valuation bases. There was a change in the accounting estimate for the Bureau's leave liabilities to the basis which is reflective of the probabilistic element of staff actual leave balances at the Bureau. The change in accounting estimate reflects a more realistic approach and comparative to the actual balance.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The Bureau of Meteorology 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 the terminations. Refer Note 2.3B for further details.

Superannuation

Staff of the Bureau of Meteorology are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) and 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 Bureau of Meteorology makes employer contributions to the employees' superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The Bureau of Meteorology accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June 2020 represents outstanding contributions.

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 Bureau of Meteorology, directly or indirectly, including any director (whether executive or otherwise) of the Bureau of Meteorology. The Bureau of Meteorology has determined the key management personnel to be the Director of Meteorology/Chief Executive Officer and Group Executives. Key management personnel remuneration is reported in the table below:

The total number of key management personnel that are included in the above table are 10 individuals (2019: 8 individuals).

1. The above key management personnel remuneration excludes the remuneration and other 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 Bureau of Meteorology.

5.3 Related Party Disclosures

Related party relationships:

The Bureau of Meteorology is an Australian Government controlled entity. Related parties to the Bureau of Meteorology are Key Management Personnel including close family members of key management personnel, entities controlled by key management personnel, the Portfolio Minister and other Australian Government entities.

Transactions with related parties:

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.

Significant transactions with related parties can include:

• the payments of grants or loans;
• purchases of goods and services;
• asset purchases, sales, transfers or leases;
• debts forgiven; and
• guarantees.

Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the Bureau of Meteorology, it has been determined that there are no related party transactions to be separately disclosed.

Managing Uncertainties

This section analyses how the Bureau of Meteorology manages financial risks within its operating environment.

6.1 Contingent Assets and Liabilities

Quantifiable Contingencies

The Bureau of Meteorology has a number of claims with Comcover in respect of property and motor vehicle damage.

Claims to the value of $49,000 (2019: $358,000) have been lodged with Comcover for assessment. Property claims relate to radar failure caused by cyclone, and motor vehicle claims consisted of damages caused by either collision or hail.

The estimate is based on information provided by Bureau staff to the Comcover assessor.

The Bureau of Meteorology had no quantifiable contingent liabilities in 2019-20 (2019: Nil).

Unquantifiable Contingencies

The Bureau of Meteorology has an unquantifiable contingency that may give rise to a liability in the future in relation to past accommodation arrangements. This is currently under investigation and the quantum is indeterminable at this point in time.

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.

The Bureau of Meteorology does not have any administered contingent liabilities or assets to report (2019: Nil).

6.2 Financial Instruments

Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the Bureau of Meteorology 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.

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 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).

6.2C: Net Gains or Losses on Financial Liabilities

There are no gains or losses from financial liabilities not at fair value through the profit or loss in the year ending 2020 (2019: Nil).

6.3 Administered - Financial Instruments

Other Information

7.1 Budget Variances Commentary

The variance explanations below relate to the movements between budgeted information for the Bureau of Meteorology published in the 2019-20 Portfolio Budget Statements (PBS) and actual amounts presented in the Bureau of Meteorology's financial statements.

As a guide, variances are considered to be 'major' based on the following criteria:
  the variance between budget and actual is greater than 10%; and
  the variance between budget and actual is greater than 2% of the relevant category (Income, Expense and Equity totals); or
  an item below this threshold but is considered important for the reader's understanding or is relevant to an assessment of the discharge of accountability and to an analysis of performance of the Bureau of Meteorology.

An explanation for a major variance may not be provided where the item is considered immaterial in the overall context of the financial statements.

Statement of Comprehensive Income for Bureau of Meteorology

Suppliers

Factors contributing to the variance in Supplier expense includes the introduction of the new AASB 16 standard which realigned some lease expenditure to the balance sheet, contractors related to specialist project work and expenditure related to projects from external revenue generating activities.

Depreciation and amortisation expense

The variance relates to the impact of the new AASB 16 standard which introduced depreciation expense for balance sheet leases and the impact of the Bureau asset revaluation which resulted in an increase in the value of the Bureau asset base by $58mil with subsequent impact on depreciation expenditure for the year. The impact of these items was unknown at the time of the Budget build in March 2019, the impact of the increase in depreciation associated with the AASB 16 standard was included in the PAES Budget update completed later in the 2019-20 financial year.

Finance cost unwinding of discount

Item now includes impact of interest on lease liabilities associated with AASB 16 standard.

Contributions to WMO and IOC

Bureau contributions to the WMO have over the past few years been impacted by a higher contribution rate applied to the Australian Government subscription and the impact of the movement in Swiss Franc exchange rate. Additional funding was provided by Government in the PAES Budget update.

Sale of goods and rendering of services

Reduced revenue from the Aviation sector resulting from the COVID-19 pandemic occurring from March, offset by an increase in the number and value of non-Aviation externally generated project activities.

Revenue from Government

Funding from Government during the year including during the PAES Budget update for a New Policy Proposal (NPP) related to the Disaster Preparedness Initiative and as part of the Government response to the COVID-19 pandemic occurring from March in support of Bureau activities relating to the Aviation sector.

Statement of Financial Position for Bureau of Meteorology

Trade and other receivables

Carry over of unspent Appropriated funding related to Bill 5 Aviation sector support to be spent in the 2020-21 financial year and usage of cash for purchase of assets in support of the Bureau asset program.

Non-financial assets

Overall the non-financial asset variance is 31% higher than Budget. The variance reflects the AASB 16 standard with ROU asset values recognised under non-financial asset for the first time and the impact of the Bureau revaluation of its asset base completed late in the financial year. This contributed to the respective increase of $119mil in ROU assets and $59mil in revaluations. The impact of the AASB 16 standard was included in the Bureau Budget later in the financial year as part of the PAES Budget update.

Suppliers

Variances associated with the timing of payments to vendors.

Interest bearing liabilities

This reflects the recognition of Lease Liabilities as part of the introduction of the AASB 16 standard. Budget adjustments were made as part of the PAES Budget update completed later in the financial year.

Reserves

Variance relates to the asset revaluation completed late in the financial year.

Cash Flow Statement for Bureau of Meteorology

Appropriations
Additional funding from Government (Bill 5), increase in expenditure associated with external generated project activities, staff separations including redundancies and additional asset purchases.

Employees

Due to payments for staff entitlements and restructuring costs associated with staff separations from the Bureau during the 2019-20 financial year.

Suppliers

Large number of vendor payments early in the financial year and other supplier costs accrued during the 2018-19 year and additional expense associated with the increase in externally generated project activity.

Sale of goods and rendering of services

Receipts received associated with an increase in externally generated activities for current and future (yet to commence) Section 74 projects.

Purchase of property, plant and equipment and intangibles

Variance reflects increased asset spend funded through externally generated revenues and purchase of assets through cash reserves.

7.2 Assets Held in Trust
To enable the Bureau of Meteorology to hold and expend amounts on behalf of persons or entities other than the Commonwealth.

7.3 Aggregate Assets and Liabilities

Note 7.3B: Administered - Aggregate Assets and Liabilities

7.4 Fair Value Measurement

Fair value measurements at the end of the reporting period

Accounting Policy

The Bureau of Meteorology procured valuation services from AON Services Pty Ltd (AON). The Bureau of Meteorology tests the procedures of the valuation model at least once every twelve months. AON provided written assurance to the Bureau of Meteorology that the valuation model(s) developed comply with AASB 13.