1. Overview

Objectives of the entity

The Director of National Parks is a Corporate Commonwealth Entity operating under the Environment Protection and Biodiversity Conservation Act 1999. It is a not-for-profit entity. The objective of the Director of National Parks is to manage Australia's protected areas. The Director of National Parks is structured to meet the following outcome:

Management of Commonwealth reserves as outstanding natural places that enhance Australia’s well-being through the protection and conservation of their natural and cultural values, supporting the aspirations of Aboriginal and Torres Strait Islander people in managing their traditional land and sea country, and offering world class natural and cultural visitor experiences.

The continued existence of the Director of National Parks in its present form and with its present programs is dependent on Government policy and continuing funding by Parliament for the Director of National Parks’ administration and programmes.

Basis of Preparation of the Financial Statements

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

The financial statements have been prepared in accordance with:

1. Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
2. Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and are in accordance with historical cost convention, except for certain assets at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

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

New Accounting Standards

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

AASB 15 and AASB 1058 became effective 1 July 2019 and replaced the requirements of AASB 118 Revenue (AASB 118) and AASB 1004 Contributions (AASB 1004).

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. AASB 15 replaces AASB 118 and moves from recognising revenue based on ‘risk and reward’ to meeting ‘performance obligations’. The core principle of AASB 15 is to ‘recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services’.

The Director of National Parks applies AASB 1058 in circumstances where AASB 15 or no other Australian Accounting Standards are applicable or where consideration paid for an asset is substantially below its fair value.

The Director of National Parks 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.

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

Impact on transition

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

The Director of National Parks has a number of Memorandum of Understandings and other revenue agreements. With the implementation of AASB 15, a number of the agreements fell under AASB 1058 and revenue was to be recognised on receipt. The movement of $0.489million reflects the total received regarding the above agreements in the 2019–20 financial year.

Application of AASB 16 Leases

AASB 16 became effective on 1 July 2019 and replaced AASB 117 Leases (AASB 117). The Director of National Parks 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 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

The Director of National Parks 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.

As a lessee, the Director of National Parks 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 Director of National Parks recognises right-of-use assets and lease liabilities for most leases. However, the Director of National Parks 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 Director of National Parks recognised right-of-use assets and lease liabilities in relation to leases of land, 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 Director of National Parks incremental borrowing rate as at 1 July 2019. The Director of National Parks 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 1.99%.

Impact on transition

On transition to AASB 16, the Director of National Parks 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 Director of National Parks' 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

Taxation

The Director of National Parks is exempt from all forms of taxation except fringe benefits tax (FBT) and the goods and services tax (GST).

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

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

Effects of COVID-19 major events impacting the Australian Government in 2019–20

In 2019–20, Australia has faced significant events that have led to unpredicted impacts on the financial statements of Australian Government entities. The events being, the summer bushfires throughout Australia and the worldwide Coronavirus (COVID-19) pandemic, which began to transpire around quarter three of this financial year.

COVID-19 has impacted on the activities of the Director of National Parks over the fourth quarter of 2019–20, leading to a decline in revenue due to the closure of international borders and enforced restrictions. It is anticipated this decline will continue into the next financial year.

Also, due to the severity of these events, the Australian Government announced several stimulus packages including financial assistance to businesses and families of those affected. The financial packages announced by the government that involved the Director of National Parks were in response to the extraordinary impact of the above events and amounted to over $11.959 million from 2019–20 to 2020–21. Payments for measures commencing in 2019–20 were made in quarter four. Payments will continue into the new financial year where applicable. The
2019–20 significant payments made by the department related to:

• · Waiving of entry fees to commonwealth operated national parks - $4.203 million; and
• · Tour operator licence and permit operator package - $0.386 million.

Events after the Reporting Period

There were no subsequent events that had the potential to significantly affect the ongoing structure and financial activities of the entity.

Departmental Major Budget Variances

The following tables provide a comparison of the original budget as presented in the 2019–20 Portfolio Budget Statements (PBS) to the 2019–20 final outcome as presented in accordance with Australian Accounting Standards for the Director of National Parks.

The Budget is not audited and does not reflect additional budget estimates provided in the 2019–20 Portfolio Additional Estimates Statements (PAES) or the revised budget provided as part of the 2019–20 Portfolio Budget Statements (PBS). However, major changes in budget have been explained as part of the variance analysis where relevant. The actuals are prepared in accordance with Australian Accounting Standards.

Variances are considered to be 'major' based on the following criteria:

• The variance between budget and actual is greater than 10% of the relevant category (Income, Expenses and Equity totals); and
• The variance between budget and actual is greater than $1 million of the relevant category.

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Cash Flow Statement

2. Financial Performance

Accounting Policy
Accounting policies for employee related expenses are contained in the People and Relationship section

¹The Director of National Parks has applied AASB 16 using the modified retrospective approach and therefore comparative information has not been restated and continues to be reported under AASB 17.

Accounting Policy
Revenue from the sale of goods is recognised when control has been transferred to the buyer. Each class of revenue has been assessed as to whether it falls under the scope of AASB 15, AASB 1004 or AASB 1058.

The Director of National Parks will individually review each contract to ascertain if the contracts terms are sufficiently specific and subsequently if the performance obligations are required by the contract. If a contract falls under the scope of AASB 15 and if the performance obligations are required by an enforceable contract and they are sufficiently specific to enable the Director of the National Parks to determine when they have been satisfied. In relation to AASB 1058, detail timing of recognition in regard to whether a transaction gives rise to a performance obligation, liability or contribution by owners.

The following is a description of principal activities from which the Director of National Parks generates its revenue:

The transaction price is the total amount of consideration to which the Director of National Parks 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.

Accounting Policy
Interest revenue is recognised using the effective interest method.

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.

3. Financial Position

Accounting Policy
Cash is recognised at its nominal amount. Cash and cash equivalents include:
a) cash on hand; and
b) 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.

All investments are expected to be recovered within 12 months.

Accounting Policy
Investments are recognised at their nominal amounts and interest is credited to revenue as it accrues. Interest is recognised by applying the effective interest rate.

All receivables are expected to be received in less than 12 months.

Accounting Policy
Financial assets

Trade receivables, loans and other receivables that are held for the purpose of collecting the contractual cash flow where cash flows are solely payments of principal and interest, that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

Accrued revenue is expected to be recovered within 12 months.

No indicators of impairment were found for accrued revenue.

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 revenues 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 entity’s accounts immediately prior to the restructuring.

Asset Recognition Threshold

Purchases of infrastructure plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $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).

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.

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 Director of National Parks has adjusted the ROU assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any right of use lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition in Commonwealth agency, GGS and Whole of Government financial statements.

Revaluations

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

Following initial recognition at cost, infrastructure, plant and equipment (excluding ROU assets) are carried at fair value (or an amount material 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 materially differ from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets. A formal revaluation was conducted in the 2019–20 financial year.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reverse a previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Impairment

All assets 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 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 Director of National Parks were deprived of the asset, its value in use is taken to be its current replacement cost.

Depreciation

Depreciable infrastructure, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Director of National Parks 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.

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:

Derecognition

An item of infrastructure, 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

The Director of National Parks has various heritage and cultural items which have not been recorded as assets in the financial statements, due to the difficulties associated with the reliable measurement of these items. The items include Aboriginal archaeological sites, living collections in the Australian National Botanical Gardens and historic buildings which are managed as ruins.

The Director of National Parks has adopted, through consultation with boards of management, where relevant, appropriate curatorial and preservation policies for these items. The Director of National Park's curatorial and preservation policies can be found in the Plan of Management for each national park at http://www.parksaustralia.gov.au

Intangibles

The Director of National Parks' intangibles comprise internally developed and purchased software for internal use and water entitlements. Internally developed 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 Director of National Parks' software are 4 to 5 years (2018–19: 4 to 5 years). All software assets were assessed for indications of impairment as at 30 June 2020. Internally developed software is carried at cost less accumulated amortisation and accumulated impairment losses.

Water entitlements are carried at cost where there is no active market. When an active market exists, they are carried at fair value. These assets are assessed as having an indefinite useful life.

4. Funding

5. People and relationships

Accounting Policy
The legal entity of the Director of National Parks has only one employee, being the Director himself. However, under an arrangement with the Department of Agriculture, Water and the Environment (previously it was the former Department of the Environment and Energy prior to the MoG changes took place on 1 February 2020), the Director of National Parks has a number of employees of the Department of Agriculture, Water and the Environment that are assigned to assist the Director. For the purpose of these Financial Statements, such employees are treated as employees of the Director of National Parks.

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

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.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the entity’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has 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.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The Director of National Parks 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.

Superannuation

The Director of National Parks' staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

The CSS and PSS are defined benefit schemes for the Australian Government. The 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 Director of National Parks makes employer contributions to the employees' defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The entity accounts for the contributions as if they were contributions to defined contribution plans.

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

6. Managing uncertainties

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 existing liability or asset in respect of which settlement is not probable or the amount cannot be reliably measured. Contingent assets are reported when settlement is probable but not virtually certain and contingent liabilities are recognised when settlement is greater than remote.

Accounting Policy

Financial assets

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

• financial assets at fair value through profit or loss;
• financial assets at fair value through other comprehensive income; and
• financial assets measured at amortised cost.

The classification depends on both the Director of National Parks’ business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the Director of National Parks 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 assets expire or are transferred upon trade date.

Comparatives have not been restated on initial application.

Financial Assets at Amortised Cost

Financial assets in this category need to meet two criteria:

• the financial asset is held in order to collect the contractual cash flows; and
• 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 meets 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 do not meet the criteria of financial assets held at amortised cost or FVOCI (i.e. mandatorily held at FVTPL) or may be designated.

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

Impairment 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 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).

Note 6.3: Fair Value Measurement

Accounting Policy
A revaluation is conducted in 2019-20 in accordance with the Asset Accounting and Management Policy stated at Note 3.2A. The Director of National Parks has a policy of having non-financial assets revalued every three years unless there are significant changes in economic and physical indicators.

The Director of National Parks deems transfers between levels of the fair value hierarchy to have occurred when there has been a significant change in the volume or level of activity for the asset and where observable and unobservable inputs change due to the lack or presence of market- corroborated inputs. This is assessed once every 12 months with a formal revaluation undertaken once every three years.

7. Other Information