Overview

Objectives of the National Archives of Australia

The National Archives of Australia (the National Archives) is an Australian Government controlled not-for-profit entity. The National Archives' role is to preserve Australia’s most valuable government records, encourage their use by the public and promote good records management by Australian Government agencies.

The National Archives is structured to meet the single outcome as follows:

Outcome 1: To promote the creation, management and preservation of authentic, reliable and useable Commonwealth records and to facilitate Australians' access to the archival resources of the Commonwealth.

The National Archives Statement of Comprehensive Income and Statement of Financial Position represents the outcome statement as all Income, Expenditure, Assets and Liabilities related to Outcome 1 above.

The continued existence of the National Archives in its present form and with its present program is dependent on Government policy and on continuing funding by Parliament for the National Archives' administration and program.

The Basis of Preparation

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

The financial statements have been prepared in accordance with:
a) Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
b) Australian Accounting Standards and Interpretations - Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

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

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

New Accounting Standards

The following new standards were issued by the Australian Accounting Standards Board prior to the signing of the statement by the accountable authority and chief financial officer. They are applicable to the current reporting period and the impact on the Archives’ financial statements is outlined below.

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

The National Archives adopted AASB 15 and AASB 1058 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated; that is, it is presented as previously reported under the various applicable AASBs and related interpretations.

Under the new income recognition model the National Archives shall first determine whether an enforceable agreement exists and whether the promises to transfer goods or services to the customer are ‘sufficiently specific’. If an enforceable agreement exists and the promises are ‘sufficiently specific’ (to a transaction or part of a transaction), the National Archives applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, the National Archives considers whether AASB 1058 applies.

In relation to AASB 15, the National Archives elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The National Archives is required to aggregate the effect of all of the contract modifications that occur before the date of initial application.

In terms of AASB 1058, the National Archives 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.

Impact on transition
There was no material impact on transition to AASB 15 and AASB 1058. Revenue has been recognised at the correct stage of the transaction.

Application of AASB 16 Leases

The National Archives adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated; that is, it is presented as previously reported under AASB 117 and related interpretations.

The National Archives elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.

AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The National Archives applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:

• Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
• Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date;
• Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of assets as at the date of initial application; and
• Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.

As a lessee, the National Archives 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 National Archives recognises right-of-use assets and lease liabilities for most leases. The National Archives 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 National Archives recognised right-of-use assets and lease liabilities in relation to leases of office space, and automobiles, which had previously been classified as operating leases.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using the National Archives' incremental borrowing rate as at 1 July 2019. The Entity’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 on 1 July 2019 was 2.55%.

The right-of-use assets were measured as follows:
a) Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
b) All other leases: the carrying value that would have resulted from AASB 16 being applied from the commencement date of the leases, subject to the practical expedients noted above.

Impact on transition

On transition to AASB 16, the National Archives recognised additional right-of-use assets and additional lease liabilities, with the difference being seen in retained earnings. The impact on transition is summarised below:

Transitional disclosure

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

Taxation

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

Revenues, expenses and assets are recognised net of GST except:
a) where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
b) for receivables and payables.

Events After the Reporting Period

There was no subsequent event that had the potential to significantly affect the ongoing structure or financial activities of the National Archives.

The National Archives is continuing to monitor the impact of the COVID-19 pandemic on its own-source revenue and expenditure after the reporting period. It is too early to fully assess and quantify its potential financial impacts.

Financial performance

This section analyses the financial performance of the National Archives for the year ended 30 June 2020.

1.1 Expenses

Accounting Policy
Short-term leases and leases of low-value assets
The National Archives has elected not to recognise right-of-use assets and lease liabilities for short-term leases of assets that have a lease term of 12 months or less and leases of low-value assets (less than $10,000). The entity recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

1.2 Own-source revenue and gains

Accounting Policy
Revenue from the sale of goods and services is recognised when control has been transferred to the buyer:
a) An enforceable contract can be identified
b) Performance obligations can be identified
c) A transaction price can be determined
d) The transaction price can be allocated to each performance obligation
e) The performance obligations have been satisfied.

The National Archives' primary source of revenue from contracts with customers is from the provision of digitised records when requested by private or government customers. The fee is set by legislation and is on a cost recovery basis. A small amount of revenue is received from sales in the shop, and from venue hire and running of special tours.

Revenue is received from sponsorships and grants. In all cases, the agreements are enforceable and the transaction price can be readily determined. However, for some sponsorships, the performance obligations are not sufficiently identifiable and therefore cannot be classified as revenue from contracts with customers; these are classified as 'Other Revenue' (see note 1.2C). In other cases, the obligations are clearly detailed and the revenue can be classified as contracts with customers. Revenue is recognised when the money is spent as this is regarded as the point at which control of the funds pass.

The entity receives revenue from other agencies for temporary storage of their records until they are ready to transfer the records to permanent custody of the National Archives. Such revenue is recognised over the term of the storage, which is usually annually by financial year.

Occasionally, third parties hire exhibitions created by the National Archives; this revenue is recognised over the term of the loan.

The transaction price is the total amount of consideration to which the National Archives expects to be entitled in exchange for transferring the goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

The National Archives collects official Commonwealth government records, and the personal records of governors-general, prime ministers, ministers, federal and High Court judges and some senior Commonwealth public servants. Our collection grows through the transfer of records from the custody of government agencies and Commonwealth persons into the Archives. Once the records have been transferred into the Archives’ custody, they are recognised as revenue received free of charge at fair value as assessed by an independent valuer.

Accounting Policy
Resources Received Free of Charge
Resources received free of charge are recognised as revenue 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.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as revenue at their fair value when the asset qualifies for recognition, unless received from another Government agency or authority as a consequence of a restructuring of administrative arrangements.

Sponsorships - non-contracts
Revenue is received from sponsorships and grants. In all cases, the agreements are enforceable and the transaction price can be readily determined. However, for some sponsorships, the performance obligations are not sufficiently identifiable and therefore cannot be classified as revenue from contracts with customers; these are classified as 'Other Revenue' . In other cases, the obligations are clearly detailed and the revenue can be classified as 'Revenue from contracts with customers' (see note 1.2A).

Financial position

This section analyses the Archives' assets used to conduct its operations and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.

2.1 Financial assets

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 initially recognised at fair value and subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

Effective Interest Rate Method
The effective interest method is a method of calculating the amortised cost of a financial asset or liability and of allocating interest expense/income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts/payments through the expected life of the financial asset/liability, or, where appropriate, a shorter period.

Impairment of Financial Assets
Financial assets are assessed for impairment at the end of each reporting period based on expected credit losses and 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 on an amount equal to 12-month expected credit losses if risk has not increased.

A simplified approach for measuring trade receivables is used. This approach 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. The loss is recognised in the Statement of Comprehensive Income.

2.2 Non-financial assets

An annual assessment was undertaken internally to determine whether there are any indicators of impairment for Property, Plant and Equipment, Heritage and Cultural, Computer Software, and Other Intangibles asset classes. No indicators of impairment were found.

No intangible assets are expected to be sold or disposed of within the next 12 months.

Revaluations of non-financial assets
No revaluations have been undertaken in any asset class in 2019-20. The National Archives has performed an assessment as at 30 June 2020 for all assets and determined that the asset carrying amounts do not materially differ from their fair value.

Contractual commitments for the acquisition of property, plant, equipment and intangible assets
As at 30 June 2020, the Archives has contractual commitments for acquisition of intangible assets of $32,000, and acquisition of property, plant, equipment assets of $68,000.

Accounting Policy
Asset Recognition Threshold
Asset purchases are recognised initially at cost in the statement of financial position with an asset recognition threshold for Information Technology (IT) equipment of $1,000 (exc. GST) and a threshold of $2,000 (exc. GST) for all other assets. Where the cost of purchasing IT equipment and other assets is below the respective threshold, the amount is 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 Archives where there exists an obligation to restore the premises to its original condition. These costs are included in the value of the Archives' plant and equipment with a corresponding provision for the 'make good' recognised. (Refer to the provision for restoration obligations in note 2.5).

Lease Right-of-Use (ROU) Assets
Leased ROU assets are capitalised at the commencement date of the lease and comprise 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 the National Archives as separate asset classes to the corresponding assets owned outright, but are included in the same column in the reconciliation table as where the corresponding underlying assets would be presented if they were owned.

An impairment review is undertaken for any right-of-use asset that shows indicators of impairment and an impairment loss is recognised against any right-of-use asset which is impaired.

Lease right-of-use assets continue to be recognised at cost after initial recognition in the financial statements.

Revaluations
Following initial recognition at cost, heritage and cultural and plant and equipment assets (excluding right-of-use assets) are carried at fair value (or an amount not materially different from fair value) less accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets' fair values as at the reporting date. The regularity of independent valuations depends 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 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 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 and Amortisation
Depreciable property, plant and equipment assets and intangibles (excluding the digital collection in other intangibles assets) are written-off to their estimated residual values over their estimated useful lives to the Archives using, in all cases, the straight-line method of depreciation.

Depreciation and 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 and amortisation rates applying to each class of depreciable asset are based on the following useful lives:

Accounting Policy (continued)

The depreciation rates for right-of-use assets are based on the commencement date, to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

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 loss recognised 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 Archives were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition
Non-financial assets are derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Heritage and Cultural Assets
The national archival collection includes records in a wide variety of media including files and card records, account books and ledgers, architectural models, photographs, films and video tapes, optical disks and computer tapes. High value records are stored in specially designed temperature and humidity controlled environments (where required).

Curatorial and preservation policies for heritage and cultural assets can be accessed at:
http://www.naa.gov.au/about-us/organisation/op-policies.aspx

Intangibles
The Archives' intangibles comprise internally developed software for internal use, purchases of licensed software and a digitised collection that is both internally and externally digitised.

Significant accounting estimates and judgements
The fair value of plant and equipment has been taken to be the depreciated replacement cost or market value of similar assets as assessed by an independent valuer every three years.

The fair value of heritage and cultural assets is based on market observations as assessed by an independent valuer every three years. The Archival Collection is diverse with many objects being iconic with limited markets for comparison. Values for the sample are determined by reference to the archival materials markets. The Archives has made significant estimates in measuring the impact of provenance to the value of collection objects. A sampling methodology is adopted for some collection categories whereby a sample of objects is selected from each collection category and an average value applied to the entire collection category. Furthermore some collection categories are valued with reference to the value by shelf metre or file size.

Effective 1 July 2012 the intangible digital collections are not amortised as their useful lives have been determined as indefinite. The useful lives of these collections are reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment for that collection.

The National Archives has assesed that there is no material impact on fair values of assets as at 30 June 2020 as a result of COVID-19.

2.3 Payables

Accounting Policy
Suppliers and other payables are initially measured at fair value net of transaction costs.

2.4 Interest bearing liabilities

Accounting Policy
Refer Overview section for accounting policy on leases.

2.5 Other Provisions

Accounting Policy
Restoration provisions are recognised when the Archives has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be incurred to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Restoration provisions are discounted using the government bond rate that reflects the risks specific to the liability. The increase in the provisions due to the passage of time (unwinding the discount) is recognised as a finance cost.

As the restoration provisions relate to assets at fair value, any increment/decrement from changes in the estimate of costs required to remediate is recognised in other comprehensive income except to the extent that it reverses an increment/decrement previously recognised in profit or loss.

Accounting Judgements and Estimates
The Archives has made an estimate of the cost to make good or remediate its storage and accommodation premises to bring them back to the condition and orientation they were prior to occupancy by the Archives. The make good provision is informed by independent valuation and was last assessed by a qualified independent valuer (Jones Lang LaSalle Advisory Services Pty Ltd).

Funding

This section identifies the Archives' funding structure.

3.1 Appropriations

People and relationships

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

4.1 Employee provisions

Accounting policy

Liabilities for annual leave and long service leave expected to be settled within twelve months are measured at their nominal amounts.

Leave liabilities expected to be settled after twelve months are measured at the present value of the estimated future cash outflow.

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 Archive'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 using present value techniques in accordance with the shorthand method as per FRR 24.1(a) 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.

Superannuation
The Archives' staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other complying 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 Archives 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 Archives 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 and is recognised in other payables.

4.2 Key management personnel remuneration

Key Management Personnel
Key management personnel are those persons who have authority and responsibilities for planning, directing and controlling the activities of the National Archives directly or indirectly. The National Archives has determined the key management personnel to be the Executive Leadership Team and Portfolio Minister.

The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister's remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the entity.

4.3 Related party disclosures

5.1 Aggregate assets and liabilities