Go to top of page

Notes to and forming part of the Financial Statements - Overview

Overview__________________________________________________________________

Objectives

The National Capital Authority (NCA) is an Australian Government controlled not-for-profit entity. The NCA is established under the Australian Capital Territory (Planning and Land Management) Act 1988 (the PALM Act). The Assistant Minister for Regional Development and Territories has administrative responsibility for the PALM Act.

The NCA performs the role of trustee of the National Capital and, in its capacity, serves the interests of the Australian Government, the nation and its people. The NCA has responsibility for:

  • Shaping the National Capital into the future;
  • Managing and enhancing the nationally significant parts of Canberra; and
  • Fostering awareness of Canberra as Australia’s National Capital.

The NCA’s mission: To advance the National Capital as a valued and respected place for all Australians by ensuring it is well planned, managed and promoted, consistent with its enduring national significance.

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 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 Australian Accounting Standards

All new/revised / amending standards and / or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect on the NCA’s financial statements.

Standard/Interpretation

Nature of change in accounting policy, transitional provisions, and adjustment to financial statements

AASB 15 Revenue from Contracts with Customers / AASB 2016-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities and AASB 1058 Income of Not-For-Profit Entities

AASB 15, AASB 2016-8 and AASB 1058 became effective 1 July 2019.

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the NCA expects to be entitled in exchange for those goods or services.

AASB 1058 is relevant in circumstances where AASB 15 does not apply. AASB 1058 replaces most of the not-for-profit (NFP) provisions of AASB 1004 Contributions and applies to transactions where the consideration to acquire an asset is significantly less than fair value principally to enable the NCA to further its objectives, and where volunteer services are received.

The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

AASB 16 Leases

AASB 16 became effective on 1 July 2019.

This new standard has replaced AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease,

Interpretation 115 Operating Leases—Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

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

The NCA 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 2018-19 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 NCA 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 NCA applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, the NCA shall consider whether AASB 1058 applies.

In relation to AASB 15, the NCA elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The NCA 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 NCA 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. Volunteer services have not been recognised in 2019-20.

Transitional Disclosure
The adoption of AASB 15 and AASB 1058 had no impact on the financial statements for the year ended 30 June 2020.

Application of AASB 16 Leases

The NCA 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 2018-19 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

The NCA 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 NCA 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
  • Apply 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 NCA 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 NCA recognises right-of-use assets and lease liabilities for most leases. However, the NCA 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 NCA recognised right-of-use assets and lease liabilities in relation to leases of office space, heavy equipment and automobiles, which had previously been classified as operating leases.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using the NCA’s incremental borrowing rate as at 1 July 2019. The NCA’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 1.89%.

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 of AASB 16

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

1 July 2019

$'000

Departmental

Right-of-use assets - property, plant and equipment

662

Lease liabilities

662

Retained earnings

92

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

1 July 2019

$'000

Minimum operating lease commitment at 30 June 2019

674

Undiscounted lease payments

674

Less: effect of discounting using the incremental borrowing rate as at the date of initial application

12

Lease liabilities recognised at 1 July 2019

662

Taxation

The NCA 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 except:

a) Where the amount of GST incurred is not recoverable from the Australia Taxation Office; and

b) For receivables and payables.

Reporting of Administered Activities

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

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

Compliance with Statutory Conditions

Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law. During 2012-13 the Department of Finance received additional advice that indicated there could be breaches of section 83 under certain circumstances with payments for long service leave, goods and services tax (GST) and payments under determinations of the Remuneration Tribunal. No breaches of section 83 have been identified.

Events After the Reporting Period

Departmental

No events have occurred after the reporting date that should be brought to account or noted in the 2019-20 Financial Statements.

The COVID-19 pandemic will continue to impact the NCA’s own source revenue, with reductions in revenue from events due to cancelled events and reductions in rent revenue due to the continuation of rent relief until at least the end of December 2020. It is difficult to estimate the total future financial impact due to the uncertainty of when COVID-19 restrictions will be fully lifted.

Administered

No events have occurred after the reporting date that should be brought to account or noted in the 2019-20 Financial Statements.

The COVID -19 pandemic will continue to impact NCA’s revenue from parking services, particularly while “working from home” arrangements are encouraged by the ACT Government. Rent revenue will continue to be impacted due to the continuation of rent relief until at least the end of December 2020. It is difficult to estimate the total future financial impact due to the uncertainty of when COVID-19 restrictions will be fully lifted.