Basis of the Preparation of the Financial Statements
The financial statements are general purpose financial statements and 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 consolidated 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 prepared in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.
Based on continued appropriation from Government as the primary funding source of the National Library of Australia (NLA), management expects to continue operations as a going concern for the foreseeable future.
Principles of Consolidation
The consolidated financial statements are those of the economic entity, comprising the NLA (parent entity) and the NLA's Trust Accounts. The NLA's Trust Accounts comprise of funds originally received by way of gifts, bequests and assignments. Eight of the nine Trust accounts have no beneficiaries with equitable interests. The NLA derives benefit in the use of these Trust assets consistent with the purposes of the individual trusts and objectives of the NLA and enables the NLA to meet its objectives of providing services within its functions prescribed by the National Library Act 1960. Details of the Trust Accounts can be found at Note 6.2. The accounts of the NLA's Trust Accounts are prepared using the accounting policies consistent with those of the NLA. The effects of transactions and balances between entities are eliminated in full.
The NLA holds one Trust account which is not included within the financial statements of the NLA as this Trust has a beneficiary and is not deemed to be controlled by the NLA. Details of this Trust account can be found at Note 6.3.
Impact of COVID-19
The NLA has been impacted by the COVID-19 pandemic with reduction of publications and bookshops sales and digitisation services due to the closure of public spaces in the library. Management has assessed the impact on the financial statements including the potential for movements in the fair value of non-current assets. Other than the above impacts to NLA's operations, COVID-19 is not expected to have a significant impact on transactions and balances recorded in the financial statements.
New Australian Accounting Standards
Other than the below, no other new or revised or amended standards and/or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period had material effect and are not expected to have a future material effect on the NLA's financial statements. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.
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 on 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 NLA 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 NLA to further its objectives.
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.
Application of AASB 15 Revenue from Contracts with Customers / AASB 1058 Income of Not-For-Profit Entities
The NLA 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 NLA 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 NLA applies the general AASB 15 principles to determine the appropriate revenue recognition.
In relation to AASB 15, the NLA elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The NLA is required to aggregate the effect of all of the contract modifications that occur before the date of initial application.
Impact on transition
The impact on transition is summarised below:
1 July 2019
Total adjustment recognised in retained earnings
The Library has identified several donation agreements that have sufficiently specific performance obligations to meet the revenue recognition requirements under AASB 15 / AASB 1058. The NLA also has contracts with customers for Grant revenues for the acquisition or construction of non-financial assets that will be controlled by the NLA and can only be recognised once performance obligations have been met.
Application of AASB 16 Leases
The NLA 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 NLA 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 NLA 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 a lessee, the NLA 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 NLA recognises right-of-use assets.
On adoption of AASB 16, the NLA 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 the NLA’s incremental borrowing rate as at 1 July 2019. The NLA’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 0.965%.
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 NLA 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
Right-of-use assets - property, plant and equipment
The following table reconciles the Departmental minimum lease commitments disclosed in the NLA's 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:
1 July 2019
Minimum operating lease commitment at 30 June 2019
Less: short-term leases not recognised under AASB 16
Undiscounted lease payments
Less: effect of discounting using the incremental borrowing rate as at the date of initial application
Lease liabilities recognised at 1 July 2019
The NLA is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).