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

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
2. the cash flows are solely payments of principal and interest 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.

Impairment of financial assets

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

Non-Financial Assets

Acquisition of Non-Financial Assets

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. 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.

Donations/contributions of Assets

Donations/contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition.

Heritage and cultural items yet to be formally accepted into the collection are not recognised as assets in the financial statements as the cost of these items cannot be reliably measured until they are evaluated and accepted into the collection.

Purchased heritage and cultural items are valued at the amounts determined by the valuer for the same category. The increase (or decrease) attributable is taken to the asset revaluation reserve on initial recognition.

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

Revaluation of Non-Financial Assets

Following initial recognition at cost, property, plant and equipment are carried at 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 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.

On 30 June 2019, an independent valuer, Jones Lang LaSalle Incorporated (JLL), conducted the revaluations and a revaluation adjustment was made to non-financial assets. JLL reviewed the 30 June 2019 values of heritage and cultural assets as at 30 June 2020 and determined no adjustments to the values were necessary.

Significant accounting judgements and estimates

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

Expected useful lives are estimated in the calculation of accumulated depreciation and amortisation and the associated expense.

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 restated to the revalued amount.

Depreciation

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

During 2019-20 there was a change to the depreciation policy for collection items. Except for magnetic tape, collection items are no longer depreciated (indefinite useful life). Through proper management, care and preservation, the rate of asset deterioration is reduced to such an extent that depreciation is regarded as negligible.

Impairment

All assets were assessed for impairment at 30 June 2020 and no impairment was identified. 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 NFSA were deprived of the asset, its value in use is taken to be its current replacement cost.

Derecognition

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

Heritage and Cultural Assets

The NFSA has a historic and culturally significant collection representing moving image and sound production from its earliest days to the present. Drama, actuality and documentary, creative arts, social and scientific history, comedy, experimental and unique amateur audiovisual records are all represented. Formats span the analogue era, from the nitrate film and wax cylinders of the earliest days through to the many format iterations of the twentieth century (acetate and vinyl discs, audiotape, CDs, polyester film, broadcast video tape and various home movie formats). Into the digital age, the collection includes the latest digital files produced by today’s media creators and professionals. Documentation and artefacts also form a large part of the collection, including stills, scripts, posters, manuscript collections, media industry oral history interviews, costumes and vintage equipment.

In addition to the heritage and cultural assets disclosed in the financial statements, the NFSA also holds items on deposit on behalf of the owners and items which have yet to be accepted into the collection. The items held on deposit are not recognised as assets in the financial statements as the NFSA does not control these items. The items yet to be formally accepted into the collection are not recognised as assets in the financial statements as the cost of these items cannot be reliably measured until they are evaluated and accepted into the collection.

Preservation of the collection is fundamental to its permanent availability to all Australians. The NFSA's Collection Policy 2017 sets out the guiding principles for the development, preservation and sharing of the collection. The Collection Policy 2017 can be found on the NFSA's website at https://www.nfsa.gov.au/corporate-information/publications/collectionpolicy.

Intangibles

The NFSA's intangibles comprise purchased and internally developed software for internal use. These assets are 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 NFSA's software are 3 to 5 years (2019: 3 to 5 years).

All software assets were assessed for indications of impairment as at 30 June 2020.

Inventories

Inventories held for sale in the NFSA's online shop are valued at the lower of cost and net realisable value.

Inventories held for distribution, for example raw materials, chemicals and tapes, are valued at cost, adjusted for any loss of service potential.

Costs incurred in bringing each item of inventory to its present location and condition are assigned as follows:
a) raw materials and stores – purchase cost on a first-in-first-out basis
b) finished goods and work-in-progress – cost of direct materials and labour plus attributable costs that can be allocated on a reasonable basis.

Suppliers

Financial Liabilities

Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial Liabilities at Amortised Cost

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).

Leases

The NFSA 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 NFSA 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.

The NFSA has elected to apply optional practical expedients in the intial adoption of AASB 16 to:

• 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
• Rely 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
• 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 NFSA 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. AASB 16 requires the recognition of right-of use assets and lease liabilities for most leases. However, the NFSA has elected not to recognise right-of-use assets and lease liabilities for some short-term leases with a lease term of 12 months or less.

On adoption of AASB 16, the NFSA recognised right-of-use assets and lease liabilities in relation to leases of buildings 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 NFSA's incremental borrowing rate as at 1 July 2019. The NFSA'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 2.8%.

The right-of-use assets were measured as 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.

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

Other Provisions

Provision for restoration obligations

The NFSA currently has lease agreements for the leasing of premises which have provisions requiring the NFSA to restore the premises to their original condition at the conclusion of the lease. The NFSA has made a provision to reflect the present value of this obligation.