For the year ended 30 june 2020

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:

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 in accordance with 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.

Industry good company – Grains Australia Limited

On 11 December 2020 GRDC registered an industry goods company limited by guarantee (Grains Australia Limited) where GRDC is the only member. During FY 2020 GRDC paid for Grains Australia set up costs of $110.8k. The set-up costs are not material when assessed against GRDC’s FY 2020 total expenses of $218m. It is anticipated that the company will start trading from 1 September 2020 and its financial results consolidated in GRDC’s financial statements for 30 June 2021 and future years. At 30 June 2020 the company has no assets or liabilities.

New accounting standards

Adoption of New Australian Accounting Standard Requirements

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

The implementation of AASB 16 Leases, AASB 15 Revenue from Contracts with Customers and AASB 1058 Income of Not-For-Profit Entities has had a material effect on the financial statements for this financial year. No other new/revised/amending standards and/or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period had a material effect on GRDC’s financial statements.

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

GRDC 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 GRDC 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), GRDC applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, GRDC shall consider whether AASB 1058 applies.

In relation to AASB 15, GRDC elected to apply the new standard to all new and uncompleted contracts from the date of initial application. GRDC 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, GRDC 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.

Application of AASB 16 Leases

GRDC 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.

GRDC 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. GRDC 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, GRDC 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, GRDC recognises right-of-use assets and lease liabilities for most leases. However, GRDC 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, GRDC recognised right-of-use assets and lease liabilities in relation to leases of office space and motor vehicles, which had previously been classified as operating leases.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using GRDC’s incremental borrowing rate as at 1 July 2019. GRDC’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 1.0992%.

The right-of-use assets were measured as follows:

1. Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
2. Motor vehicles: 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, GRDC 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 GRDC’s 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

COVID-19

GRDC have reviewed the impact of COVID-19 on its financial statements for FY 2020 and although there have been some reductions to travel and accommodation costs associated with travel restrictions in place during FY 2020, there has been no material impact on the FY 2020 financial statements. The valuations of shareholdings in AGT and InterGrain in FY 2020 have also been reviewed by management and there has been no material change to the valuations due to COVID-19.

The effects of COVID-19 on the business will continue to be monitored and managed for future financial years. At this stage there are no changes expected to the future operations of GRDC other than a reduction in travel and accommodation costs due to restrictions currently in place in Australia and other parts or the world.

Taxation

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

Events after the reporting period

There was no subsequent event that had the potential to significantly affect the on-going structure and financial activities of the Corporation.

Comparatives

Adjustments have been made to comparatives to ensure consistency with 2019–20 disclosures.

The FY 2018–19 Lease Incentive closing balance of $863k was moved from note 2.5 to note 2.4 as it changed from a provision to an amount payable. The balance for Lease Incentives at 30 June 2020 is $Nil. The FY 2018–19 Total other payables balance of $4.45m in Note 2.4C was also restated as $5.317m to include the lease incentive of $863k. Other provisions FY 2018–19 balance at Note 2.5 Other Provisions was also restated as $542k with the move of the lease incentive to note 2.4C.

R&D for Profit has been split out from Research and Development at Note 1.1B for FY 2018–19 and FY 2019–20. Research and development have been restated in FY 2018–19 to be $171,769m and R&D for Profit has been shown separately in FY 2018–19 as $2,275m.

GST has been moved within Note 2.1B Trade and Other Receivables (Goods and Services) to Other receivables (Statutory receivables). FY 2018–19 has been restated to more accurately reflect this classification within Note 2.1B.

Intangibles depreciation in FY 2018–19 has been restated at Note 2.2 to be 6 years for Information management systems and 2.5 to 6 years for Other software as they were incorrectly stated in the prior year as 2.5 years and 6 years respectively. Other property, plant & equipment depreciation rates were also restated for FY 2019 to 2 to 12 years as they were incorrectly stated in the prior year as 3 to 12 years.

Research and Development in FY 2018–19 at Note 2.4B has been split into Research and development payables of $5.638m, and Accrued research and development of $33.122m (as per Note 2.4B) for greater transparency.

Note 3.2 Key Management Personnel Remuneration for FY 2019 has been restated due to prior period calculation error where annual leave taken by the Managing Director and the Deputy CEO was not considered in the calculations. There was also a classification error in FY 2019 where annual leave was incorrectly allocated to long-term employee benefits instead of other short-term employee benefits. These changes have resulted in short term employee benefits and other long-term benefits being reduced by $28k and $62k respectively, with a net reduction of key management personnel of $90k in the prior year.

Significant accounting estimates

Under AASB 9 Financial Instruments, shares in unlisted companies are required to be measured at fair value on initial application and then subsequently measured at fair value at the end of each reporting period. In FY 2019 and FY 2020 GRDC engaged EY to complete the revaluations of their shares in AGT and InterGrain, as well as the convertible note held with InterGrain. The valuation for FY 2020 was completed as a limited scope valuation due to the nature of information available to EY during the valuation process which effected the valuation range provided by EY. This was a change in scope of valuation from prior year where a complete valuation was undertaken. GRDC have reviewed and accepted the valuations as limited scope and have taken up the valuation adjustments from the lower end of the valuation range, consistent with last years approach, in the financial statements for FY 2020. Further details and fair value adjustments of the specific valuations can be seen at Note 2.1E.

Budget variance commentary

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 Corporation. The Budget is not audited. Explanations of major variance are provided below.

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

• The variance between budget and actual is greater than +/- 10% of the original budget and $10 million for a line item; or
• The variance between budget and actual is greater than 2% of the relevant sub-total (i.e. total expenses, total income, total assets or total liabilities) and $10 million for a line item, 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 Corporation.

• Major variance and explanations	Affected line items
  Statement of Comprehensive Income
  Total expenses were lower than budget by 2% due to a lower spend in Research and Development in anticipation of lower levies. This was offset by the introduction of AASB 16 resulting in an increase to Depreciation and amortisation of $2.3m above budget.	Research and development Depreciation and amortisation Expenses.
  The introduction of AASB 15 and 1058 has had a material effect on revenue this financial year. Revenue from contracts with customers was not budgeted for and has resulted in a $10.8m variance to budget, while Royalties and Grants income have also been affected by reclassification due to the implementation of standards.	Revenue from contracts with customers Royalties Grants income Total own-source revenue.
  (Deficit)/Surplus has a variance to budget of $33m which is made up of lower revenues received from government ($10.7m) and lower own sourced revenue ($26.8m). The lower revenues are partial offset by total expenses being lower by $5m. These variances are the result of drought conditions impacting on grain volumes which result in lower levies and government contributions to GRDC. Research development and extension was reduced to assist in the management of lower revenues.	Revenue from Government Industry contributions (Deficit)/Surplus
  Statement of Financial Position
  Cash and cash equivalents, as well as Investment’s in managed funds were up on budget at the end of the year by a combined $37.25m, which was offset by a variance of $24.2m in Trade and other receivables. These variances can be attributed to the difference between estimated and actual receipts and payments.	Cash and cash Equivalents Trade and other receivables Investments in managed funds
  Total financial assets were $70.8m or 40% higher than budget at the end of June 2020 predominately due to the higher than budgeted Other Investments of $67.67m. The increase in Other investments is the result of the implementation of AASB 9 Financial Instruments last financial year which could not be suitably estimated when the budget was produced, hence the variance.	Other investments Total financial assets
  Total non-financial assets were up on budget by $15.55m or 102%. This variance was mostly due to higher than budgeted Buildings of $14.7m with the introduction of AASB 16 Leases.	Buildings Total non-financial assets
  Leases variance to budget of $15.82m is due to the implementation of the new accounting standard AASB 16.	Leases Total liabilities
  Retained surplus variance of $69m reflects the increased value of Other investments not budgeted for during the year, as the impacts of the new accounting standard AASB 9 was not fully known at the time.	Retained surplus
  Cash Flow Statement
  Total cash received was lower than budgeted due to lower Industry contributions. Industry contributions variance to budget of $33m were due to a drought affected season for grain growers resulting in a lower output and hence a lower levy. Receipts from Government partially offset this variance due to $18.4m of payments received in FY 2020 that related to FY 2019.	Industry contributions Receipts from government Total cash received (Operating)
  Total cash used was down on budget by $14m largely due to a reduced Research and development budget in FY 2020. The Research and development budget reduced during the year to manage the reduction in revenue forecasted.	Research and development Total cash used (Operating)
  A higher amount of cash received from investments is due to a timing difference and the expected lower levies to be received in July and August 2020. $30m was drawn down in June 2020 instead of July 2020 to ensure adequate operational cashflows in July and August 2020.	Investments Purchase of investments Total cash received (investing) Total cash used (Investing)

1.1: Expenses

Accounting policy

Accounting policies for employee related expenses are contained in Note 3.1.

Accounting policy

Short-term leases and leases of low-value assets

The Corporation 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). GRDC recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The above lease disclosures should be read in conjunction with the accompanying notes 1.1C, 1.2G, 2.2A and 2.5.

Accounting policy

All borrowing costs are expensed as incurred.

Own-source revenue

Disaggregation of revenue from contracts with customers

Revenue from contracts with customers has been broken down into three categories: Major product/service line illustrating revenue from royalties, grants for research and development, and revenue received from advertising in Groundcover online and print. Revenue has also been broken down by type of customer illustrating that the revenues come from multiple sources including Australian Government, State and Territory Governments and non-government entities. The revenue is also split to show the amount of revenue received over time and point in time.

Accounting policy

Revenue from the sale of goods is recognised when control has been transferred to the buyer. AASB 15 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance contracts and financial instruments. AASB 1058 applies to transactions where the consideration to acquire an asset is significantly less than fair value and principally to enable GRDC to further its objectives, and the receipt of volunteer services, with some exceptions.

The following is a description of principal activities from which GRDC generates its revenue:

Royalties are in scope of AASB 15 and recognised at a point in time. Revenue from royalties is recognised when GRDC is entitled and it can be reliably measured. There has been no change to how Royalties are currently recognised. Under AASB 15, the royalty arrangement would be considered a licence for intellectual property. Sales based on usage royalties promised in exchange for a licence to IP are recognised only when the later of the following occurs: subsequent sale or usage occurs; and performance obligations have been satisfied.

GRDC receives grants to complete specific research and development performance obligations. Each grant has been separately considered to determine whether it satisfies the AASB requirements to be accounted for as revenue from a contract with a customer, or whether AASB 1058 applies in full. Where the agreement creates an enforceable obligation for GRDC to transfer a specific good or service to a customer, AASB 15 applies. GRDC has determined that many of its grants are to deliver specific performance obligations, and therefore AASB 15 applies. In such cases, revenue is recognised as (or when) the performance obligation is satisfied. Where no sufficiently specific performance obligation can be identified, GRDC applies AASB 1058 and recognising income immediately on receipt.

Advertising income revenue for FY 2020 is recognised, under AASB 15, when the advertising is published (point in time) which is consistent with the FY 2019 treatment of advertising revenue previously under AASB 118.

Publications revenue for FY 2020 is recognised under AASB 15 at a point in time when the publications are sold which is consistent with the FY 2019 treatment of publications revenue previously under AASB 118.

The transaction price is the total amount of consideration to which GRDC 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. GRDC will adopt the practical expedient when adopting the AASB 15.

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

Project refunds are recognised upon receipt of the refund when it relates to prior years expenditure and when the funds accrued are no longer required for the completion of the project.

Accounting policy

Royalties are recognised when they can be reliably measured and when they are entitled to be received by the Corporation. With the adoption of AASB 15 and AASB 1058 Royalties are now shown at Note 1.2A for FY 2020.

Accounting policy

Grants income is revenue paid to the Corporation for the purpose of funding specific research and development projects. With the adoption of AASB 15 and AASB 1058 Grant Income and the updated accounting policy can be seen at Note 1.2A for FY 2020.

Accounting policy

Dividend income is recognised when the right to receive payment is established.

Operating leases

GRDC sublets 130m² of the Canberra Office to a government department, Prime Minister and Cabinet. The initial 12 months lease expired during the financial year and is now on a month by month basis. Rent is invoiced and received at the beginning of the month to reduce the risk of non-payment.

Accounting policy

Revenue from Government

Revenue paid to the Corporation under Section 32 of the Primary Industries Research and Development Act 1989, representing no more than 0.5% of the gross value of production of grains, is for the purpose of funding research and development activities. Revenues from Government (under AASB 1058) are recognised as control is gained. This approach is consistent with the application of AASB 1004 in the prior year.

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.

Accounting policy

Revenue paid to the Corporation under Section 30 of the Primary Industries Research and Development Act 1989, where a research levy is attached to grain producers’ output, is for the purpose of providing funds for research and development. Industry contributions (under AASB 1058) are recognised as control is gained. This approach is consistent with the application of AASB 1004 in the prior year.

1.3: (Losses)/gains through other comprehensive income

2.1: Financial assets

Accrued interest

The interest rates range from 0% to 0.40% (2019: 0.40% to 1.50%) and the frequency of payments is monthly. There was no interest accrued at 30 June 2020 as the cash at bank was below the threshold that attracts interest.

AASB 15

The contract assets represent GRDC’s right to consideration in exchange for goods or services that GRDC has transferred to a customer, which will become receivable upon satisfaction of the performance obligation and invoicing (that is — they will require something more than the passage of time to become receivable).

No impairment loss allowance was recognised for trade and other receivables in FY 2020.

1 At the end of the reporting period, the Corporation had a loan receivable totalling $1.37m. The loan was made to an entity in which the Corporation is an equity holder. Loan interest accrued at the end of June 2020 is $240,637.13 and the loan matures on 15 July 2022.

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 and measured at amortised cost using the effective interest method adjusted for any loss allowance.

Accounting policy

Jointly controlled entities

Interests in jointly controlled entities in which the entity is a venture (and so has joint control) are accounted for using the equity method. Under the equity method, investments in the associates are carried in GRDC’s statement of financial position at cost as adjusted for post-acquisition changes in GRDC’s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment. There was no goodwill to include in the carrying value this financial year. After the application of the equity method, GRDC determines whether it is necessary to recognise any impairment loss with respect to the net investment in associates. No impairment loss was recognised this financial year.

Individually managed funds

The funds are available at call. Interest rates will vary to reflect varying market interest rates.

Ministerial approval

The Corporation has received approval under paragraph 59(1)(b)(iii) of the Public Governance, Performance and Accountability Act 2013 to hold the investments listed above.

Accounting policy

Managed funds are valued at Fair Value Through Other Comprehensive Income (FVOCI). Full details of GRDC’s accounting policies for investments in managed funds are contained in Note 5.1A.

At 1 July 2019 GRDC also held 38,337 shares at zero value in Grain Foods Innovations Pty Ltd (a company in liquidation). In August 2019 GRDC received a final distribution of $1,297.71 and Grain Foods Innovations Pty Ltd was deregistered on 5 December 2019.

On 11 December 2020 GRDC registered an industry goods company limited by guarantee (Grains Australia Limited) where GRDC is the only member. Further information on this company can be found in the Overview section on page 7.

Accounting policy

Accounting policies for other investments are contained in Note 5.1A.

2.2: Non-financial assets

2.2A — Reconciliation of the opening and closing balances of property, plant and equipment and intangibles

Reconciliation of the opening and closing balances of property, plant and equipment and intangibles — 2020

Revaluations of non-financial assets

A revaluation of buildings immediately prior to the classification as Held for Sale was conducted during FY 2018 by an independent valuer, Herron Todd White. No revaluations were required or took place in FY 2020 as the building previously Held for Sale was sold in FY 2020.

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. Non-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 Corporation where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Corporation’s leasehold improvements with a corresponding provision for the ‘make good’ recognised.

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 GRDC 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. No impairment was recognised for ROU assets in FY 2020.

Revaluations

Following initial recognition at cost, 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 enough frequency to ensure that the carrying amounts of assets did 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.

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 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 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 is restated to the revalued amount.

Depreciation

Depreciable property, plant and equipment assets are written down to their estimated residual values over their estimated useful lives to the Corporation using, in all cases, the straight-line method of depreciation.

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 the end of the useful life of the ROU asset or the end of the lease term. Other property, plant & equipment depreciation rates were restated for FY 2019 to 2 to 12 years as they were incorrectly stated in the prior year as 3 to 12 years.

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 it’s carrying amount.

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

There were no impairments to GRDCs assets in FY 2020.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further economic benefits are expected from its use or disposal.

Intangibles

The Corporation’s intangibles comprise software and intellectual property. 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 as follows:

All intangible assets were assessed for indications of impairment as at 30 June 2020. Information management system depreciation in FY 2018–19 has been restated to be 6 years for Information management systems and 2.5 to 6 years for Other software as they were incorrectly stated in the prior year as 2.5 years and 6 years respectively.

Development costs

Research costs are expensed when incurred. An intangible asset arising from development expenditure is only recognised when technical feasibility studies identify that the expenditure will deliver future economic benefits and these benefits can be measured reliably. Other development expenditure is recognised in the Statement of Comprehensive Income as an expense when incurred.

Following initial recognition of development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.

All Other Non-Financial Assets are expected to be recovered in no more than 12 months.

No indicators of impairment were found for non-financial assets.

2.3: Assets held for sale

At 30 June 2019 the Corporation had an arrangement to sell Level 1, 40 Blackall Street, Barton which was due to expire on 30 January 2020. In December 2019 the sale of the land and buildings was completed, and ownership changed hands to the buyer. At 30 June 2020 GRDC no longer owns Level 1, 40 Blackall Street, Barton and does not have any other assets held for sale.

Accounting policy

Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than continuing use and a sale is highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell. Assets classified as held for sale are not depreciated or amortised.

2.4: Payables

Settlement is usually made within 30 days apart from those payables with specific settlement terms after 30 days.

Accounting policy

Accounting policies for payables are contained in Note 5.1A. Refer to Note 1.2F regarding the Corporation’s accounting policy on grant income.

2.5: Leases

Total cash outflow for leases for the year ended 30 June 2020 was $2,041,000.

Accounting policy

Refer Overview section for accounting policy on leases.

2.6: Other provisions

3.1: Employee provisions

Accounting policy

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 applied at the time the leave is taken, including the Corporation’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 using the Australian Government shorthand method. 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 Corporation 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 Corporation’s staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS Accumulation Plan (PSSap), or other Superannuation funds held outside of the Australian Government.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap and other superannuation schemes are defined contribution schemes.

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.

For CSS and PSS members, the Corporation makes contributions based on the rates determined by an actuary to be sufficient to meet the current costs to the Government. The Corporation accounts for the contributions as if they were contributions to defined contribution plans.

For AustralianSuper and other approved superannuation schemes, the Corporation contributes a minimum of 9.5% of superannuable salaries.

As at 30 June 2020, superannuation contributions payable was $NIL (2019: $NIL).

3.2: Key management personnel remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of GRDC, directly or indirectly, including any director (whether executive or otherwise) of that entity. The Corporation has determined the key management personnel to be the Directors, including the Managing Director, and the Deputy CEO. Key management personnel remuneration is reported in the table below:

Related party relationships:

The Corporation is an Australian Government controlled entity. Related parties to this Corporation are Directors, Key Management Personnel including the 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.

Several directors of the Corporation and their close family members hold directorships with other organisations. Any transactions between the Corporation and those organisations or any dealings between the Corporation and the Directors and their close family members individually are conducted using commercial and arms-length principles.

The Corporation made payments of $701,075 (2019: $ 1,018,424) to Charles Sturt University. The Corporation receipted funds from Charles Sturt University of $Nil (2019: $54,691). At the time of payment and receipt of funds, a Director of the Corporation was a Director of the Charles Sturt University, Functional Grain Centre.

The Corporation made payments of $1,448 (2019: $20,890) to the Australian Farm Institute. At the time of payment, a Director of the Corporation was an Executive Director of the Australian Farm Institute.

The Corporation made payments of $6,538 (2019: $31,246) to Dairy Australia. At the time of payment, a Director of the Corporation was a Director of Dairy Australia. Transactions have been conducted on normal commercial terms.

The Corporation made payments of $Nil (2019: $11,000) to Rural Business Support. At the time of payment, a Director of the Corporation was the Chair of Rural Business Support.

The Corporation made payments of $5,500 (2019: $Nil) to Australasian Grain Science Association Inc. At the time of payment, a Director of the Corporation was the Chair of the Australasian Grain Science Association Inc.

The Corporation made payments of $125,400 (2019: $Nil) to Sugar Research Australia. The Corporation receipted funds from Sugar Research Australia of $57,200 (2019: $Nil). At the time of payment and receipt of funds, a Director of the Corporation was a Director of Sugar Research Australia.

All transactions have been conducted on normal commercial terms and no loans were made to the Directors or Director-related entities during the reporting period or in FY 2019–20.

4.1 Unquantifiable contingencies

At 30 June 2020 the Corporation has engaged legal representation in relation to an ongoing intellectual property matter. The Corporation was successful at trial and the matter is now going to appeal. It is not currently possible to determine the amount of cash inflows resulting from this matter. Cash outflows are highly unlikely to occur because costs are not awarded in the jurisdiction where the litigation is underway, and the Corporation is not defending an allegation that would result in damages. In any event, the Corporation maintains a professional indemnity insurance policy. The Corporation believes if unsuccessful in defence of any proceedings related to this issue, insurance will indemnify for damages or judgments $Nil (2019: $NIL).

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.

5.1: Financial instruments

Accounting policy

Financial assets

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

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

The classification depends on both the Corporation’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 Corporation 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 doesn’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.

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).

There was no net gains or losses on financial liabilities.

Accounting policy

The Corporation measures its managed fund investments using Level 1 inputs, that is, using quoted prices in active markets for identical assets that the Corporation can access at measurement date.

The share in unlisted companies are valued at fair value each year, in line with AASB 9 Financial Instruments, using Level 2 and Level 3 inputs.

Valuations of non-financial assets 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 depends upon the volatility of movements in market values for the relevant assets. Non-financial assets are measured using a range of Level 2 and Level 3 inputs.

The Corporation measures its Leasehold improvements using Level 3 inputs at the reporting date, using the Depreciated replacement cost valuation methodology.

The Corporation measures its Other property, plant and equipment using Level 2 inputs, using adjusted market transactions as a basis.

Immediately prior to the reclassification as assets held for sale, the Corporation revalued its land and building using Level 2 inputs. The inputs included the Capitalisation Approach and the Direct Comparison approach, on a rate per square metre of floor area.