Objectives of the CSIRO and its Subsidiaries (the Group)

CSIRO is an Australian Government controlled not‐for‐profit entity and is classified as a Corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013. CSIRO is a research enterprise that aims to deliver great science and innovative solutions for industry, society and the environment.

CSIRO is structured to meet the following outcome:
Provide innovative scientific and technological solutions to national challenges and opportunities to benefit industry, the environment and the community, through scientific research and capability development, services and advice.

The continued existence of CSIRO in its present form and with its present programs is dependent on Government policy and on continued funding by Parliament for CSIRO’s administration and programs.

The Basis of Preparation

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

CSIRO and the Group’s Consolidated Financial Statements have been prepared in accordance with:

• Public Governance, Performance and Accountability (Financial Reporting Rule) 2015 (FRR) for reporting periods ending on or after 1 July 2015; 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 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 impacts of Coronavirus (“COVID‐19”) have been assessed by CSIRO and it is not expected to have a material impact on CSIRO operations or its ability to meet its objectives.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

Key Judgements and Estimates

In the process of applying the Group's accounting policies, management has made a number of judgements and applied estimates and assumptions to future events. Information around judgements and estimates which are material to the financial statements are found in the following notes:

• Note 3.1 Employee Provisions
• Note 4.3 Fair Value Measurement

CSIRO has a provision (under provisions) for remediation costs required at a remote and other CSIRO locations, based on estimates provided by internal and external qualified experts. The provision is predominantly based on externally provided costings, with additional amounts derived from comparable remediation works. The provision is based on the scope of work as it currently stands as at 30 June 2020. As remediation works progress, the scope and costs may be subject to change. The work is expected to take several years to reach completion. Provisions for remediation also includes a provision for the makegood costs at leased CSIRO sites which is based on rates provided by an expert valuer.

Consolidation

The consolidated financial statements comprise the financial statements of the CSIRO and its subsidiaries (referred to as ‘the Group’). The subsidiaries of CSIRO are the Science and Industry Endowment Fund (SIEF), the CSIRO Chile Research Fundación (Fundación), National ICT Australia (NICTA), the Innovation Fund and the US Office. WLAN Services Pty Ltd (WLAN) was deregistered in 2019. Refer to: 3.6 Related Party Disclosures.

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by CSIRO as at 30 June 2020 and the results of the controlled entities for the year then ended. Subsidiaries are consolidated from the date on which control is obtained through to the date on which control ceases. The Group applies consistent accounting policies and the effects of all transactions and balances between the entities are eliminated in full. The non‐controlling interest in the results and equity of subsidiaries is shown separately in the statement of comprehensive income, statement of financial position and statement of changes in equity of the consolidated Group.

Foreign Currency Translation

The functional currency of CSIRO and its Australian subsidiaries is Australian dollars. The Group has three overseas subsidiary entities, the Fundación and the US Office entities. On consolidation, those entities:

• Assets and liabilities are translated into Australian dollars at the rate of exchange prevailing at the reporting date; and
• The statement of comprehensive income is translated at average exchange rate.

The exchange rate differences arising are recognised in the net cost of services.

New Australian Accounting Standards

All new, revised and/or amending standards and/or interpretations that were issued prior to the signing of these statements and applicable to the current reporting period were adopted by CSIRO. This includes the following new standards:

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

CSIRO 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. It is presented as previously reported under the applicable standards and related interpretations.

Under the new income recognition model CSIRO first determines 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), CSIRO applies the general AASB 15 principles to
determine the appropriate revenue recognition. If these criteria are not met, CSIRO considers whether AASB 1058 applies.

In relation to AASB 15, CSIRO elected to apply the new standard to all new and uncompleted contracts from the date of initial application. CSIRO 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, CSIRO 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 impact on transition is summarised below:

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 table shows amounts prepared under AASB 15 and AASB 1058, compared to what the amounts would have been had AASB 15 and AASB 1058 not been adopted, for both the Consolidated Group, and CSIRO only:

Application of ASSB 16 Leases

CSIRO adopted AASB 16 using the modified retrospective approach. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

CSIRO elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made in applying AASB 117. 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. CSIRO applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:

• 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, CSIRO 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, CSIRO recognises right‐of‐use assets and lease liabilities for most leases. However, CSIRO 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, CSIRO recognised right‐of‐use assets and lease liabilities in relation to land and buildings and plant and equipment, which had previously been classified as operating leases. The lease liabilities were measured at the present value of the remaining lease payments, discounted using CSIRO’s incremental borrowing rate based on zero coupon yields as prescribed by the Department of Finance at 1 July 2019. The weighted‐average rate applied was 1.00%.

The right‐of‐use assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid lease payments. The total Consolidated and CSIRO impact on transition is summarised below:

Taxation

In accordance with Section 53 of the Science and Industry Research Act 1949, CSIRO is exempt from all forms of Australian taxation except the fringe benefits tax (FBT) and the goods and services tax (GST). The Group pays applicable taxes in overseas countries.

Revenues, expenses, assets and liabilities are recognised net of GST except:

• where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
• for receivables and payables.

The SIEF is exempt from income tax in Australia. WLAN and the Innovation Fund entities are subject to all applicable taxes in Australia. The Fundación is subject to all applicable taxes in Chile. The US Office is subject to taxes in the United States. NICTA is exempt from income tax however NICTA’s subsidiaries (including NICTA IPR Pty Ltd) are subject to applicable taxes in Australia.

Events after the Reporting Period

At the time of completion of these financial statements, the Group is not aware of any significant events occurring after the reporting date.

Future Events

CSIRO is exploring future commercial opportunities for the Ginninderra Field Station, a 701 hectare area of land which CSIRO owns in north Canberra. Due to rapid urban growth in the surrounding area, the site has become under‐utilised and the field station requires relocation to a more rural setting. As part of its focus on exploring the future possibilities for this site, CSIRO has successfully requested the National Capital Authority (NCA) to include the site as ‘Urban Area’ on the General Policy Plan for Metropolitan Canberra in the National Capital Plan draft Amendment 86. The Amendment became effective in November 2016.

This initial step in rezoning the land has allowed CSIRO to explore avenues to divest the Ginninderra land in a commercially beneficial way. The CSIRO proposes to divest Ginninderra east via a conditional sale. External advice has indicated that a sale would be more attractive to potential developers than partnering with the CSIRO in a joint venture development. The conditions on the sale are necessary to meet community expectations that the land will be developed with a significant componenet of science and sustainability. As this progresses, it is expected that there will be a material increase in the recorded value of the Ginninderra land.

1.1 Expenses

Accounting policy

Accounting policy for employee related expenses is contained in 3. People and Relationships.

Accounting Policy
Research and Development Expenditure and Intellectual Property
All research and development costs, including costs associated with protecting intellectual property (e.g. patents and trademarks), are expensed as incurred.

Short-term leases and leases of low-value assets
The Entity 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 or leases of low-value assets (less than $10,000). The entity recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

1.2 Revenue and Gains

Own Source Revenue

Disaggregation of revenue from contracts with customers
CSIRO derives its revenue under AASB 15 from two main sources, being the sale of goods and rendering of services and royalties and licence fees. The sale of goods and rendering of services has been disaggregated based on the line of business, with each line providing similar services to CSIRO customers. No disaggregation is available for royalties and licence fees.

Accounting Policy

Revenue from contracts with customers

Revenue from the sale of goods is recognised when control has been transferred to the buyer. A contract falls within the scope of AASB 15 when the criteria for accounting for a contract with a customer is met as per paragraph 9 of the standard. Performance obligations are required by an enforceable contract with the satisfaction of these performance obligations either measured over time or a point in time.

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

Accounting Policy

Interest revenue is recognised using the effective interest method as set out in AASB 9 Financial Instruments.

Operating Leases

CSIRO has operating lease income receivables from the sub-leasing of offices and scientific research accommodation. The amounts below are GST inclusive.

Maturity analysis of operating lease income receivables

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

Accounting Policy

Other Revenue

Other revenues includes sale of CSIRO publications and products, conferences and ‘pass through’ funding for costs of suppliers and external service providers.

Revenues 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 entity 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. Approprations receivable are recognised at their nominal amounts.

Funding received or receivable from non-corporate Commonwealth entities (appropriated to the non-corporate Commonwealth entity as a corporate Commonwealth entity payment item for payment to this entity) is recognised as Revenue from Government by the corporate Commonwealth entity unless the funding is in the nature of an equity injection or a loan.

Approprations are received from the Australian Government Department of Industry and Science (appropriated to CSIRO as a corporate Commonwealth entity payment item).

1.3 Other Comprehensive Income

Accounting Policy

Reserves for equity valuation

Under AASB 9 Financial Instruments, changes in the fair value of CSIRO’s equity investment portfolio assets are recognised through Profit and Loss. Changes in the fair value of the Innovation Fund equity investment portfolio are recognised through Profit and Loss (refer 4.2 Financial Instruments and 4.3 Fair value measurement).

2. Financial Position

This section analyses CSIRO’s assets used to generate financial performance and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.

2.1 Financial Assets

Accounting Policy

Cash is recognised at its nominal value. Cash and cash equivalents includes:

a) cash on hand;

b) demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value; and

c) cash in special accounts.

Accounting Policy

Trade and Other Receivables

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance. Collectability of debts is reviewed on an ongoing basis and allowances are made before collectability of the debt is no longer probable and before the loss is incurred. All trade and other receivables are expected to be recovered in no more than 12 months.

Impairment of Financial Assets

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

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment

Accounting Policy

CSIRO has investments in a number of unlisted start-up companies over which it does not have significant influence or control. These companies have been established for the purpose of commercialisation of CSIRO’s intellectual property. CSIRO also has some investments in companies which have been listed on the Australian Stock Exchange and in the Uniseed trust. CSIRO, as part of the National Innovation and Science Agenda, has also established and invested in an Innovation Fund to invest in the development of early stage technology opportunities. Refer to Note 3.6 Related Party Disclosures for more information.

CSIRO’s other investments are accounted for in accordance with AASB 9 Financial Instruments and AASB 10 Consolidated Financial Statements. See 4.2 Financial Instruments and 4.3 Fair value measurement for further information.

2.2 Non-Financial Assets

Valuation of non-financial assets

All valuations were conducted in accordance with the revaluation policy at 4.3 Fair value measurement.

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 considerations are initially recognised as assets and revenues at their fair value at the date of acquisition. Property, plant and equipment which are purchased from contract research funds and where the control and subsequent sale proceeds are refunded to contributors under the terms of the agreements, are expensed during the year of purchase.

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 CSIRO 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 CSIRO 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. Leased ROU assets continue to be measured at cost after initial recognition in CSIRO, GGS and Whole of Government financial statements.

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 $5,000, 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).

Revaluations

Following initial recognition at cost, property, plant and equipment, including assets under finance leases are carried at fair value less accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure the carrying amount of assets do not differ materially from the assets’ fair value as at reporting date. The regularity of valuation depends upon the volatility of movements in the market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under asset revaluation reserve, except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus or deficit. Revaluation decrements for a class of assets are recognised directly through the statement of comprehensive income 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 revalued amount.

Fair value for each class of asset is determined as follows:

• Land, which will continue to be used for research activity, is valued by independent valuers at fair value (highest and best use). Highest and best use is determined from the perspective of market participants. An entity’s current use of a non-financial asset is presumed to be its highest and best use unless market or other factors suggest otherwise. Land underwent a full revaluation as at 30 June 2018 by Jones Lang LaSalle (JLL).
• Buildings and leasehold improvements, which will continue to be used for research activities, are valued by independent valuers at fair value (highest and best use). Building valuations include plant, fit-outs, fixtures and fittings, which form an integral part of buildings. Buildings underwent a full revaluation as at 30 June 2018 by JLL.
• Plant and equipment which will continue to be used for research activities are valued by independent valuers at fair value (highest and best use). Plant and equipment assets were revalued as at 30 June 2019 by JLL.
• Properties held for sale are valued at the lower of its carrying amount and fair value less costs to sell. An assessment is undertaken annually of any properties held for sale.
• Heritage and cultural assets are valued by independent valuers at their depreciated replacement cost. Heritage assets underwent a full revaluation as at 30 June 2018 by JLL.

In addition to independent valuations conducted, CSIRO makes an internal assessment at balance date considering any major events, market changes or indicators of impairment that may impact on fair value. Jones Lang LaSalle (JLL) was engaged to undertake a materiality review of CSIRO’s land and buildings and plant and equipment assets and also perform a desktop valuation of the Ginninderra land asset as at 30 June 2020, outside of the three-year full valuation cycle, in consideration of the potential impacts of COVID-19 on the fair value of assets. After undertaking qualitative, quantitative and uncertainty analyses for the asset classes, JLL are of the opinion that there are no significant material differences between the carrying amounts and fair values for the CSIRO’s assets. JLL note that their valuation is subject to significant valuation uncertainty, considering that the outbreak of COVID-19 may potentially result in market uncertainty and volatility. The potential impact on the market (if any) is unknown at this stage, until the wider/global situation can be controlled. The extent of the impact on asset vales will be mixed across the various market sectors, not only limited to the actual sale/transaction process but may extend considerably beyond the normal sale period, depending on the nature, market sector and size of the property.

Depreciation and Amortisation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives 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. Land is not depreciated.

Depreciation/amortisation 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:

Buildings on freehold land: 40 to 80 years

Leasehold improvements: Lease term

Buildings under lease: Lease term

Passenger vehicles: 7 years

Agricultural and transport equipment: 8 to 20 years

Computing equipment: 2 to 5 years

Scientific equipment: 5 to 20 years

Furniture and office equipment: 5 to 15 years

Workshop equipment: 20 to 25 years

Research vessel: 25 years

Australia telescope: 15 to 58 years

Heritage and cultural assets: Indefinite

Impairment

All assets were assessed for impairment as 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.

The recoverable amount of an asset is the higher of its fair value less costs to sell 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 entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

There was no impairment recognised for the year ended 30 June 2020 with the exception of impairments disclosed in Note 1.1E.

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.

Heritage and Cultural Assets

Heritage and cultural items include buildings of historical or cultural significance. CSIRO has classified them as heritage and cultural assets as they are primarily used for purposes that relate to their cultural significance and original purpose. Heritage and cultural assets are stored and managed in ways to preserve their heritage and cultural value over time. Where conservation and preservation activities, specified in an asset's Heritage Management Plan, demonstrate that an asset will be maintained for an indefinite period, these items are considered to have indefinite useful lives and therefore, not subject to depreciation. Copies of the Heritage Management Plans may be obtained by contacting enquiries [at] csiro.au.

Intangibles

Intangibles are internally developed and acquired software for internal use. These assets are carried at cost, less accumulated amortisation and impairment losses, except where the estimated cost of software is less than the $250,000 threshold and expensed in the year of acquisition. Software are amortised on a straight-line basis over their anticipated useful lives. The useful lives are 2 to 10 years (2019: 2 to 10 years). All software assets were assessed for indications of impairment as at 30 June 2020.

CSIRO does not recognise its internally generated intellectual property as an asset on the Balance Sheet as it does not meet the recognition and measurement requirements under AASB 138 Intangible Assets. CSIRO's Intellectual property includes patents, inventions, trademarks, plant breeder's rights and registered designs.

Properties Held for Sale

Properties which are expected to be recovered primarily through sale rather than through continuing use are classified as ‘properties held for sale’. Immediately before classification, the properties are remeasured in accordance with the Group’s accounting policies. Thereafter, at reporting date the properties are measured at the lower of their carrying amount and fair value less cost to sell.

Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are recognised in the Statement of Comprehensive Income.

No indicators of impairment were identified for investment properties.

Accounting Policy

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in which they arise.

Where an investment property is acquired at no cost or for nominal cost, its cost is deemed to be its fair value as at the date of acquisition.

Investment properties are derecognised either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or losses on disposal of an investment property are recognised in profit or loss in the year of disposal.

Investment properties were valued as at 30 June 2020 by JLL and they are of the opinion that there are no significant material differences between the carrying amounts of investment properties and fair value. JLL note that their valuation is subject to significant valuation uncertainty in the current environment, considering that the outbreak of COVID-19 may potentially result in market uncertainty and volatility. The potential impact on the market (if any) is unknown at this stage, until the wider/global situation can be controlled. The extent of the impact on asset values will be mixed across the various market sectors, not only limited to the actual sale/transaction process but may extend considerably beyond the normal sale period, depending on the nature, market sector and size of the property. Revaluation increments are recorded as a gain or loss in the Statement of Comprehensive Income. Rental income from investment properties is included in the lease income disclosed in Note 1.2 The Basis of Preparation and was $3.8m for 2020 (2019:$3.6m). Operating costs that are recoverable amounted to $1.15m (2019: $1.1m).

In accordance with AASB 15 CSIRO recognises contract assets (refer Note 2.1 Financial Assets). As the modified retrospective approach was applied on adoption of the new standard, the comparative information presented for 2019 is not restated. No indicators of impairment were identified for other non-financial assets.

2.3 Payables

Accounting Policy

Accounting policy for contract revenue received in advance is contained in Note 1.2 Revenue and Gains.

2.4 Interest Bearing Liabilities

Accounting Policy

Refer to the Overview section for accounting policy on leases.

3. People and Relationships

This section describes a range of employment and post employment benefits provided to our people and our relationship with other key people.

3.1 Employee Provisions

Accounting Policy

Liabilities for short-term employee benefits (as defined in AASB 119 Employee Benefits) and termination benefits due 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 rate expected to be paid on settlement of the liability.

Other long-term employee benefit liabilities are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.

Leave

The liability for employee benefits includes provisions for annual leave, long service leave and severance payments. 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 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 apply at the time the leave is taken, including the 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 at 30 June 2020 for long service leave and annual leave has been determined by the short hand method and reference to the work of the Australian Government Actuary (AGA). The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. A CSIRO plan of termination is binding when the following criteria are met:

• actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made;
• the plan identifies the number of employees whose employment is to be terminated; and
• the plan established the termination benefits that employees will receive.

Superannuation

Employees of CSIRO are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap). 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 by the Department of Finance as an administered item.

CSIRO makes employer contributions to the employee superannuation schemes at rates determined by an actuary to be sufficient to meet the cost to the Government of the superannuation entitlements of the Group’s employees. CSIRO 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 for the financial year.

3.2 Key Management Personnel Information

(a) Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of CSIRO, directly or indirectly, including any director of CSIRO. Those key management personnel along with their remuneration are reported in table below.

Performance payment amounts represent estimated amounts based on the contract amount allowable. Actual performance payments are decided by the Board following the end of financial year.

(b) Senior Executive Staff Remuneration

During the reporting period ended 30 June 2020, CSIRO had twenty executives who meet the definition of senior executive staff. This note has been prepared on an accrual basis for substantive and long term acting senior management personnel during the period. Base Salary includes annual leave accrued in the period. Performance payment amounts represent estimated amounts based on the contract amount allowable. Actual performance payments are decided by the Board following the end of financial year.

(c) Remuneration of highly paid staff

Base salary includes annual leave accrued in the period.

Performance payment amounts represent estimated amounts based on the contract amount allowable. Actual performance payments are decided by the Board following the end of financial year.

3.3 Remuneration of Auditors

The Group’s auditor (except for the Fundacion) is the Australian National Audit Office (ANAO) who has appointed RSM to assist with the assignment since 2015-16. The Fundacion is audited by Ernst & Young Chile, who conduct both financial statement and project audits for the Fundación.

3.4 Remuneration of Board Members

The remuneration of the Chief Executive Officer, who is also a CSIRO Board Member is reported under Note 3.2 Key Management Personnel Information.

3.5 Meetings of the Board and Board Committees

During the financial year 2019-20, 9 Board meetings (4 out of session), 5 Board Audit & Risk Committee meetings, 4 Board People & Safety Committee meetings and 4 Board Science Excellence Committee Meetings were held. The number of meetings attended by each of the Board members was as follows:

3.6 Related Party Disclosures

(a) Controlled Entities
SIEF was established under the Science and Industry Endowment Act 1926. The principal activity of the SIEF Trust is to provide assistance to persons engaged in scientific research and in training of students in scientific research. The SIEF Trustee is the CSIRO Chief Executive and SIEF is a wholly controlled entity. The SIEF’s separate financial statements are reported in the CSIRO Annual Report.

The Fundación was established in October 2013. The Fundación is a controlled entity governed by a Board in accordance with the Constitution of the Fundación. The Fundación is working with industry and leading Chilean Universities to develop cutting-edge technologies to reduce the environmental impact of mining and increase productivity.

NICTA is Australia’s ICT Research Centre of Excellence and undertakes internationally recognised research in partnership with industry, government and researchers to create national benefit and wealth for Australia. NICTA is the parent entity of NICTA IPR Pty Ltd and a small number of minor proprietary limited companies that exist to hold intellectual property and commercialise research. CSIRO obtained full control of NICTA on 28 August 2015, when the members of the NICTA Board resolved to adopt a revised company constitution which provided CSIRO with effective control over NICTA.

CSIRO has established an Innovation Fund with Commonwealth funding support to invest in the development of early stage technology opportunities from the public research sector, to increase their translation into commercial opportunities to be taken up by Australian industry. The Fund has been established through a structure of entities whose purpose is to manage and operate the Fund. At 30 June 2020 a second Innovation Fund is in the process of being established, with new entities established but not yet operational in the 2019-20 year. The entities that comprose the Innovation Fund are:

• CSIRO Innovation Fund 1, LP is an incorporated limited partnership formed under the Partnership Act 1892 (NSW). It is registered by Innovation and Science Australia as an Early Stage Venture Capital Limited Partnership (ESVCLP). It was established in January 2017.
• CSIRO Management Partnership Pty LP is an incorporated limited partnership formed under the Partnership Act 1892 (NSW). It was established in January 2017 as a Venture Capital Management Partnership and acts as the General Partner of the CSIRO Innovation Fund 1, LP.
• CSIRO General Partner 2 Pty Ltd was established in December 2016 and is a small proprietary company limited by shares, which are solely held by CSIRO. This company acts as the general partner of CSIRO Management Partnership Pty LP.
• CSIRO Fund of Funds, LP is an incorporated limited partnership formed under the Partnership Act 1892 (NSW) and is registered by Innovation and Science Australia as an Australian Venture Capital Fund of Funds. It was established in May 2016.
• CSIRO General Partner Pty Ltd was established in May 2016 and is a small proprietary company limited by shares, which are solely held by CSIRO. It acts as the general partner of CSIRO Fund of Funds LP. It also acts as the trustee of CSIRO Innovation Holding Trust that was established in July 2018.
• CSIRO Financial Services Pty Ltd was established in December 2015 and is a small proprietary company limited by shares, which are solely held by CSIRO. The company has been issued an Australian Financial Services License by ASIC and acts as Manager of CSIRO Innovation Fund 1, LP.
• CSIRO Innovation Services Pty Ltd was established in October 2016 and is a small proprietary company limited by shares, which are solely held by CSIRO. It acts as trustee of a discretionary trust established to distribute some returns from CSIRO Innovation Fund 1, LP, and as trustee of a unit trust established to distribute some returns form CSIRO Innovation Follow-on Fund 1.
• CSIRO Innovation Holding Trust is a trust established in July 2018 to distribute returns from CSIRO Innovation Fund 1, LP according to an agreed distribution policy administered by CSIRO Innovation Services Pty Ltd.
• CSIRO Follow-on Services Pty Ltd was established in April 2018 and is a small proprietary company limited by shares, which are solely held by CSIRO. It serves as trustee of the CSIRO Innovation Follow-on Fund 1, a managed investment trust.
• CSIRO Innovation Follow On Fund 1 was established October 2018 and is structured as a Managed Investment Trust, formed to provide follow-on investment to companies supported by CSIRO Innovation Fund 1, LP.
• CSIRO Innnovation Fund Discretionary Trust was established in January 2017 to hold and distribute some of the returns from CSIRO Innovation Fund 1, LP according to an agreed distribution policy administered by CSIRO Innovation Services Pty Ltd.
• CSIRO Follow-on Sponsor Trust was established in June 2019 for the purpose of distributing carried interest from the CSIRO Innovation Follow-on Fund 1.
• CSIRO Innovation Fund 2, LP is an incorporated limited partnership formed under the Partnership Act 1892 (NSW). It is registered by Innovation and Science Australia as an Early Stage Venture Capital Limited Partnership (ESVCLP). It was established in March 2020.
• CSIRO Follow-on Services 2 Pty Ltd was established in March 2020 to serve as trustee of CSIRO Innovation Follow-on Fund 2, which is yet to be established and will be setup as a managed investment trust.
• CSIROGP Fund 2 Pty Ltd was established in March 2020 to serve as the General Partner of CSIRO Innovation Fund 2, LP.
• CSIRO Management Partnership 2, LP was established in March 2020 for the purposes of distributing some of the returns from CSIRO Innovation Fund 2, LP.
• CSIRO Custodial Services Pty Ltd was established in April 2020 for the purpose of providing custodial services under an Australian Financial Services Licence to the Innovation Fund entities.

All of the above Innovation Fund related companies are under the sole control of the CSIRO as at 30 June 2020. The above entities (with the exception of CSIRO Financial Services Pty Ltd; CSIRO Innovation Services Pty Ltd; and CSIRO Custodial Services Ptd Ltd) sit outside the General Government Sector.

CSIRO USA LLC and CSIRO Innovations LLC were established in February 2017 to support the establishment of a CSIRO presence in the United States. Both entities are incorporated within Delaware and are wholly controlled by the CSIRO.

(b) Related party relationships

The entity is an Australian Government controlled entity. Related parties to this entity are the Board, Key Management Personnel including the Portfolio Minister and Executive, 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 entity, it has been determined that there are no related party transactions to be separately disclosed.

4. Managing Uncertainties

This section analyses how CSIRO manages financial risk within its operating environment.

4.1 Contingent Assets and Liabilities

A natural disaster (hailstorm) occurred on 20^th January 2020 impacting the CSIRO Black Mountain site and operations. At 30 June 2020 the insurance claim for business interruption and costs incurred had not been settled and no monies had been received. Included in the above insurance claims contingent asset amount is $13.9m for the hailstorm claim.

Depending on the materiality of risks involved with certain commercial transactions, CSIRO has requested bank guarantees where necessary to mitigate risks, notably where substantial advance payments were made.

In June 2019, the Commonwealth Director of Public Prosecutions filed four charges in the Magistrates’ Court of Victoria, alleging the Commonwealth Scientific and Industrial Research Organisation failed in its duties under the Work Health and Safety Act 2011 in relation to an incident that occurred in a Melbourne research facility in 2017. If found to be guilty, each charge carries a maximum penalty of $1,500,000.

Unquantifiable contingencies

As disclosed in the Overview Note, a financial provision for the estimated costs in restoring and decontaminating land where a legal or constructive obligation has arisen has been recognised on the Statement of Financial Position. For cases where there is no legal or constructive obligation, the potential costs have not been assessed and are unquantifiable contingencies. CSIRO has no other identified unquantifiable contingencies to report.

Accounting Policy

Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position. They may arise from uncertainty as to the existence of a liability or asset, or represent a liability or asset 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.

4.2 Financial Instruments

Accounting Policy

Financial Assets

The entity classifies its financial assets under AASB 9 Financial Instruments 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.

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.

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 a 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 or Loss (FVTPL)

Financial assets are classified as financial assets at fair value through profit or loss where the financial assets either don't 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. CSIRO values it’s equity investment portfolio in listed companies, unlisted companies and in Uniseed Trust as FVTPL. CSIRO Innovation Fund values it’s equity investment portfolio in unlisted companies as FVTPL.

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 de-recognition 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 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 (and irrespective of having been invoiced).

4.3 Fair value measurement

The above disclosure represents the consolidated financial position of the Group.

Significant Accounting Judgements and Estimates

In the process of applying the accounting policies listed in this note, CSIRO has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:

• Properties classified as ‘properties held for sale’ are measured at the lower of the carrying amount and fair value less costs to sell (level 1 inputs), ‘investment properties’ has been taken to be the market value (level 2 inputs), of similar properties as determined by an independent valuer;
• The fair value of land which will continue to be used for research activities, and buildings held for specialised purposes and where there is no readily available market price has been taken to be Fair Value- Highest and Best Use (level 3 inputs), as determined by an independent valuer;
• The fair value of plant and equipment has been taken to be Fair Value – Highest and Best Use (level 2 and 3 inputs) as they mainly comprise of specialised research equipment. Fair value is determined by an independent valuer; and
• The fair value of listed companies is assessed at market value (level 1 inputs); whereas unlisted companies and commercial vehicles are assessed at fair value using the best information available (level 1 and 3 inputs). For investments in unlisted companies where there is no readily available market pricing, the fair value has been determined by applying valuation techniques in line with the generally accepted valuation guidelines 'International Private Equity and Venture Capital Valuation Guidelines (IPEV).' Where recent transactions for the unlisted companies' equity have taken place, these equity transaction prices are used to value CSIRO's investment. For unlisted companies that have not had any recent equity transactions, other IPEV valuation techniques are used such as discounted cash flows and share of net assets. Investments in special purpose entities are either valued at cost of share of net realisable assets since a reliable estimate of fair value cannot be established. These entities have been set up primarily to gain access to research facilities/networks, or to provide services to owners. Hence, there is not 'active market' for these equity investments.

No accounting assumptions and estimates have been identified that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period.

5.1 Aggregate Assets and Liabilities

5.2 Cooperative Research Centres (CRCs)

All CRCs have been classified as joint operations as the purpose is for the pursuit of collaborative scientific research where participants share in the scientific outcomes and outputs of the CRCs. In the event that CRC research results in a move to commercialisation, a separate legal entity is established and the CSIRO’s share of the new entity is treated either as subsidiary, joint venture or associate in the Statement of Financial Position as appropriate.

CRC grants provide successful applicants with access to grant funds for up to 10 years for collaborations from industry, research and community sectors to solve industry problems and improve the competitiveness, productivity and sustainability of the Australian industries. CRC-P grants support short term industry-led collaborations to develop important new technologies, products and services that deliver tangible outcomes.

CSIRO’s total cash and in-kind contribution (e.g. staff and use of assets) to CRCs from its own resources was $15.2 million and to CRC-Ps $3.2 million. Contributions made by CSIRO are expensed as incurred and these are included in the Statement of Comprehensive Income.

CSIRO was a participant in the following CRCs during 2019-20:

CSIRO was a participant in the following CRC-Ps during 2019-20: