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Financial Statements

Independent Audit Report

Statement by the Accountable Authorities, Chief Executive Officer and Chief Financial Officer

In our opinion, the attached financial statements for the year ended 30 June 2020 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(2) of the PGPA Act.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the Royal Australian Navy Central Canteens Board will be able to pay its debts as and when they fall due.

This statement is made in accordance with a resolution of the directors.

Signed

Signed

S Ottaviano

C Rice

Commondore, RAN

Commander, RAN

Director

Director

30 September 2020

30 September 2020

Signed

Signed

Mr A Hansard

Mr M J Doogan

Chief Executive Officer

Chief Financial Officer

30 September 2020

30 September 2020

Statement of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2020

2019/20

2018/19

Note

$'000

$’000

EXPENSES

Employee Benefits

2.1A

5,349

5,963

Suppliers

2.1B

7,311

7,225

Grants

2.1C

230

297

Depreciation

2.1D

595

420

Write Down and Impairment of Assets

2.1E

77

75

Total expenses

13,562

13,980

LESS: OWN SOURCE INCOME

Own-source revenue

Sale of Goods and Rendering of Services

2.2A

13,061

14,283

Interest

2.2B

62

85

Other Revenue

2.2C

457

104

Total own-source revenue

13,580

14,472

Total own-source income

13,580

14,472

Net cost of services

18

492

Surplus / (Deficit) attributable to the Australian Government

18

492

OTHER COMPREHENSIVE INCOME

Changes in asset revaluation reserves

1,629

-

Total comprehensive gain/(loss) attributable to the Australian Government

1,647

492

The above statement of comprehensive income is to be read in conjunction with the attached notes.

Statement of Financial Position

38AS AT 30 JUNE 2020

2019/2020

2018/ 2019

Note

$'000

$’000

ASSETS

Financial assets

Cash and Cash Equivalents

3.1A

3,613

3,946

Trade and Other Receivables

3.1B

508

373

Other Investments

42

42

Total financial assets

4,163

4,361

Non – financial assets

Land and Buildings

3.2A

15,682

14,335

Property, Plant and Equipment

3.2B

2,154

1,865

Computer Software

3.2C

38

34

Inventories

3.2E

389

378

Prepayments

201

178

Total non-financial assets

18,464

16,790

Total assets

22,627

21,151

LIABILITIES

Payables

-

262

Grants

3.3A

103

104

Other Payables

3.3B

1,113

1,053

Total payables

1,216

1,419

Provisions

Employee Provisions

4.1A

453

421

Total provisions

453

421

Total Liabilities

1,669

1,840

Net Assets

20,958

19,311

EQUITY

Contributed equity

1,616

1,616

Reserves

12,893

11,264

Retained surplus

6,449

6,431

Total Equity

20,958

19,311

The above statement of financial position is to be read in conjunction with the attached notes.

Statement of Changes in Equity

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020

Note

Retained Earnings

Asset Revaluation Surplus

Contributed Equity/ Capital

Total Equity

2019/2020

2018/2019

2019/2020

2018/2019

2019/2020

2018/2019

2019/2020

2018/2019

$’000

$'000

$’000

$'000

$’000

$'000

$’000

$'000

Balance carried forward from previous period

6,431

5,939

11,264

11,264

1,616

1,616

19,311

18,819

Opening balance

6,431

5,939

11,264

11,264

1,616

1,616

19,311

18,819

Comprehensive Income

Changes in asset revaluation reserves

-

-

1,629

-

-

-

1,629

-

(Deficit) for the period

18

492

-

-

-

-

18

492

Total comprehensive income

18

492

1,629

-

-

-

1,647

492

Closing balance

6,449

6,431

12,893

11,264

1,616

1,616

20,958

19,311

The above statement of changes in equity is to be read in conjunction with the attached notes.

Cash Flow Statement

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2020

Note

2019/2020

2018/2019

$'000

$’000

OPERATING ACTIVITIES

Cash received

Goods and services

14,734

15,462

Canteen loans repaid

(11)

(21)

Net GST received

-

-

Total cash received

14,723

15,441

Cash used

Employees

(5,480)

(5,978)

Suppliers

(8,130)

(7,769)

Grants

(231)

(297)

Net GST paid

(645)

(815)

Total cash used

(14,486)

(14,859)

Net cash flows from operating activities

237

582

INVESTING ACTIVITIES

Cash received

Interest received

62

85

Total cash received

62

85

Cash used

Purchase of property, plant and equipment

(632)

(381)

Total cash used

(632)

(381)

Net cash flows (used by) investing activities

(570)

(296)

Net increase or (decrease) in cash held

(333)

286

Cash and cash equivalents at the beginning of the reporting period

3,946

3,660

Cash and cash equivalents at the end of the reporting period

3.1A

3,613

3,946

The above statement of cash flows is to be read in conjunction with the attached notes.

Notes to the Financial Statements

0NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020

1 OVERVIEW

The Royal Australian Navy Central Canteens Board (RANCCB) is an Australian Government controlled entity. It is a not-for-profit entity.

1.1 Objectives of The Royal Australian Navy Central Canteens Board

The Royal Australian Navy Central Canteens Board (RANCCB) was established by the Navy (Canteens) Regulations, 1954. These Regulations were repealed and replaced by the Navy (Canteen) Regulation 2016. This Regulation provides that the Directors shall, subject to and in accordance with the Regulations, apply monies and property of the Fund; provide grants, loans and benefits for members of the Royal Australian Navy and further provide grants to the Royal Australian Navy Relief Trust Fund (RANRTF).

The continued existence of the RANCCB is dependent upon the Chief of Navy requiring the provision of services elaborated above.

1.2 Basis of preparation of the Financial Statements

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

The financial statements and notes have been prepared in accordance with:

  • Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
  • 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 is in accordance with historical cost convention, except for certain assets 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 statement is presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified. Rounding may cause totals to differ from the sum of the components.

All new, revised or amended standards 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 entity’s financial statements.

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 entity expects to be entitled in exchange for those goods or services.

1.3 Taxation

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

1.4 Events after the Reporting Period

It is the opinion of the Directors that there has not been any matter or circumstance that has arisen since the end of the financial year that has significantly affected or may affect the Board’s operations, the result of those operations, or the Board’s state of affairs in the financial years following the period under review with the exception of COVID-19 as highlighted under Market Volatility - COVID 19 in the non-financial asset accounting policy note.

2019/2020

2018/2019

$'000

$’000

2.1

EXPENSES

2.1A: Employee benefits

Wages and salaries

4,552

5,105

Superannuation

470

489

Leave and other entitlements

327

328

Separation and redundancies

-

41

Total employee benefits

5,349

5,963

Accounting Policy

Employee benefit

Accounting policy for employee-related expenses is contained in the Employee Provisions Note.

2.1B: Suppliers

Direct Expenses

4,108

4,226

Administrative Expenses

1,618

1,539

Operating Expenses

1,408

1,294

Other Expenses

78

71

Total suppliers

7,212

7,130

Other Supplier Expenses

Workers compensation premiums

99

95

Total Other Supplier Expenses

99

95

Total Supplier Expenses

7,311

7,225

The expenses above include an audit fee of $80,000 (2018-19: $80,000) payable to the Australian National Audit Office for the audit of the financial statements.

2.1C: Grants

Public sector:

Australian Government Entities (related entities)

103

105

Non profit organisation

127

192

Total Grants

230

297

2.1D: Depreciation

Buildings

185

133

Property, plant and equipment

410

287

Total depreciation

595

420

2.1E: Write-Down and Impairment of Assets

Asset write-down and impairments from Property, Plant and Equipment Inventory

27

-

Inventory

48

75

Impairment of Financial Instruments

2

-

Total write-down and impairment of assets

77

75

2019/2020

2018/2019

$'000

$'000

2.2

REVENUE

2.2A: Sales of goods and rendering of services

Provision of goods

9,058

9.151

Rendering of services

4,003

5,132

Total sale of goods and rendering of services

13,061

14,283

Accounting Policy

Revenue

Revenue from the sale of goods is recognised when:

a) the risks and rewards of ownership have been transferred to the buyer;

b) the entity retains no managerial involvement or effective control over the goods;

Receivables for goods and services, which have 30/60 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.

2.2B: Interest

Deposits

62

85

Total interest

62

85

Accounting Policy

Interest

Interest is recognised using the effective interest method.

2.2C: Other Revenue

Donations

46

5

Insurance Claims Received

312

-

Resources received free of charge

99

99

Total other revenue

457

104

The Navy (Canteen) Regulation 2016 states the purpose of the RANCCB is to provide welfare and amenities to the members of the Navy through the provision of funding otherwise unfunded welfare activities and the payments of grants to the Royal Australian Navy Relief Trust Fund. In order to assist with the provision of services, RAN allows the RANCCB the use of buildings at Navy establishments across Australia to the value of $99,000 in 2019-20, (2018-19: $99,000).

Accounting Policy

Resources Received Free of Charge

Resources received free of charge are recognised as revenue when, and 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.

Sale of Assets

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

2019/2020

2018/2019

$'000

$'000

3.1

FINANCIAL ASSETS

3.1A: Cash and Cash Equivalents

Cash on hand or on deposit

3,613

3,946

Total cash and cash equivalent

3,613

3,946

Accounting Policy

Cash is recognised at its nominal amount. Cash and cash equivalents includes:

a) cash on hand;

b) demand deposits in bank accounts with an original maturity of 12 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

3.1B: Trade and Other receivables

Goods and services

30

27

Total receivables for goods and services

30

27

Other receivables:

Canteen loans

66

55

Interest

5

15

Levies

23

9

Other receivables

399

280

Total trade and other receivables (gross)

523

386

Less impairment allowance account for Goods and services

15

13

Total trade and other receivable (net)

508

373

Trade receivable are non-interest bearing and are generally on 60 days terms for Navy Merchandise, the Canteens and monthly arrears for storage van owners at the holiday parks. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. The impairment loss for 2019-20 was $0 (2018-19: an impairment loss of $0) has been recognised by the RANCCB.

Accounting Policy

Financial Assets

Trade receivables, loans and other receivables that have fixed or determinable payments and that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method less impairment.

2019/2020

2018/2019

$'000

$'000

3.2

NON FINANCIAL ASSETS

3.2A: Land and building

Land at Fair Value

6,154

7,795

Buildings on freehold land:

Fair value

9,528

6,673

Accumulated depreciation

-

(133)

Total land and buildings on freehold land

15,682

14,335

3.2B: Plant and equipment

Plant and equipment:

Fair value

2,154

2,408

Accumulated depreciation

-

(543)

Total Plant and equipment

2,154

1,865

3.2C: Computer software

Computer software

Fair value

38

51

Accumulated depreciation

-

17

Total Plant and equipment (non-current)

38

34

All revaluations were conducted in accordance with the revaluation policy under the Asset Accounting Policy section. Valuations were made on the basis of open market value. Any revaluation adjustments are charged to the Asset Revaluation Reserve in equity.

3.2 Non-Financial Assets

3.2D: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles (2020)

Land

Buildings

Total Land & Buildings

Other PP & E

Computer Software

Total

Item

$'000

$'000

$'000

$'000

$'000

$'000

As at 1 July 2019

Gross book value

7,795

6,673

14,468

2,408

51

16,927

Accumulated depreciation/amortisation and impairment

-

(133)

(133)

(543)

(17)

(693)

Net book value 1 July 2019

7,795

6,540

14,335

1,865

34

16,234

Additions by

Purchases during the year

-

101

101

509

23

633

Disposals

-

(13)

(13)

(14)

-

(27)

Revaluations and impairments

(1,641)

3,085

1,444

177

8

1,629

Depreciation/amortisation expense

-

(185)

(185)

(383)

(27)

(595)

Net book value 30 June 2020

6,154

9,528

15,682

2,154

38

17,874

Net book value as of 30 June 2020 represented by:

Gross book value

6,154

9,528

15,682

2,154

38

17,874

Accumulated depreciation/amortisation and impairment

-

-

-

-

-

-

Total as at 30 June 2020

6,154

9,528

15,682

2,154

38

17,874

Accounting Policy

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 $500, 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).

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.

With the absence of records reflecting the cost of the RANCCB holiday parks at acquisition date, the allocation of costs between land, buildings and other plant and equipment at acquisition date and subsequent additions to land and buildings; management has relied upon land records, where available, to determine the allocation of revaluation surpluses. Revaluation surpluses have been allocated in the first instance to land and the residual apportioned between buildings and other infrastructure plant and equipment based on the carrying costs of those assets. The RANCCB holiday parks were acquired between the early 1970s to mid-1980s.

Revaluations

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 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.

For the purpose of determining the fair value of land, buildings and property, plant and equipment, management has relied on third party independent evaluators. Asset valuations were undertaken in June 2020 by Opteon Property Group and Acumentis.

The valuations were prepared in accordance with the International Valuation Standards and other applicable Valuation Standards as well as applicable financial reporting standards such as: AASB 13, AASB 116 and AASB 136. The assets have been valued on a stand-alone basis as single assets using:

Level 2 Inputs that are observable for the asset (or liability), either directly or indirectly; and

Level 3 Inputs for the asset (or liability) where relevant observable inputs are not available, i.e. situations in which there is little, if any, market activity.

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 reversed 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.

Market Volatility – COVID-19

The market is being impacted by uncertainty caused by the COVID-19 pandemic. As at the date of the valuation assessments, the valuers have stated that there is market uncertainty resulting in valuation uncertainty. The assessments are therefore reported on the basis of ‘valuation uncertainty’. Consequently, less certainty exists than normal and a higher degree of caution should be attached to valuation assessments than normally would be the case. The valuations at 30 June 2020 can be relied upon as at the date of valuation. Given the unknown future impact that COVID-19 might have on asset markets, the value assessed may change significantly and unexpectedly over a relatively short period of time.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the entity 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:

Description 2020 2019

Buildings From 5 to 50 Years From 5 to 50 Years

Property, Plant and Equipment From 2 to 10 Years From 2 to 10 Years

Impairment

All assets were assessed for impairment at 30 June 2019. 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 of 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 entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost. No indicators of impairment were found for property, plant and equipment.

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. No property plant or equipment is expected to be sold or disposed of within the next 12 months.

Intangibles

Intangibles comprise externally 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 RANCCB software are 3 years (2017-18 3 years).

All software assets were assessed for indications of impairment as at 30 June 2019.

Leasehold improvements

The fair value of leasehold improvements have been taken to be the market value of similar properties as determined by an individual valuer. In some instances, entity buildings are purpose-built and may in fact realise more or less in the market.

2019/2020

2018/2019

$'000

$'000

3.2E: Inventories

Inventories held for sale:

Finished goods

389

378

Total inventories

389

378

Accounting Policy

Inventory

Inventories held for sale are valued at the lower of cost and net realisable value.

Inventories held for distribution 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 average cost basis; and

b) finished goods and work-in-progress – cost of direct materials and labour plus attributable costs that can be allocated on a reasonable basis.

Inventories acquired at no cost or nominal consideration are initially measured at current replacement cost at the date of acquisition.

3.3

PAYABLES

3.3A: Grants

Grants - Australian Government entities

103

104

Total grants

103

104

3.3B: Other Payables

Prepayments from customers

724

507

Accrual expenses

188

185

Salaries and wages

91

83

Superannuation

9

8

GST payable

101

197

Other payables

-

73

Total other payables

1,113

1,053

4.1

PROVISIONS

4.1A: Employee Provisions

Leave

454

421

Total employee provisions

454

421

Accounting policy

Employee Provisions

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 will be applied at the time the leave is taken, including the entity’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The entity 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 entity's staff are members of other superannuation funds held outside the Australian Government. Contributions are made by the RANCCB to employee superannuation funds and are charged as expenses when incurred.

The liability for superannuation recognised as at 30 June 20 represents outstanding contributions.

Accounting judgements and estimates

For the purpose of determining employee entitlements assumptions have been made on future increases in wages and salaries, future on cost rates and employee departure and period of service.

5.1 KEY MANAGEMENT PERSONNEL

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The entity has determined the key management personnel to be the Minister and Cabinet and Board of Directors who are appointed by the Chief of the Defence Force under the Navy (Canteen) Regulation 2016. In accordance with the Regulation, members of the Defence Force serving on the Board are restricted from receiving remuneration.

The total number of Directors disclosed above are 7 (FY18/19: 7).

5.2 RELATED PARTY DISCLOSURES

The entity is an Australian Government controlled entity. Related parties to this entity are Directors, Key Management Personnel and other Australian Government entities. The Chief of Navy has been delegated by the Chief of the Defence Force to appoint the Board.

Directors

The following persons were directors of RANCCB during the financial year:

Commodore M Miko (Chairman) - part year

Commodore S Ottaviano (Chairman) – part year

Captain J Metzl - part year

Captain C Ryan

Commander C Okely

Commander C Rice

Commander N Mann

Lieutenant Commander M Clarke – part year

Warrant Officer W Nicol

Transactions with directors or director-related entities

There were no transactions with directors or director-related parties in FY19/20 (FY18/19: $Nil). Directors who have a conflict or feel they may be perceived as having a conflict are required to excuse themselves from voting and from taking part in the deliberations.

Other transactions with directors or director-related entities

There were no other transactions with directors or director-related entities.

6.1 CONTINGENT ASSETS AND LIABILITIES

There are no contingent assets or liabilities as at 30 June 2020 (30 June 2019: $Nil).

2019/2020

2018/2019

6.2

FINANCIAL INSTRUMENTS

$'000

$'000

6.2A Categories of financial instruments

Financial assets at amortised cost

Deposits

3,061

2,993

Cash with Banks and on hand

552

953

Goods and Services

15

14

Canteen Loans

66

55

Interest Receivable

5

15

Other Receivables

422

289

Total financial assets at amortised cost

4,121

4,319

Financial assets at fair value through other comprehensive income

Post Office License

42

42

Total financial assets at fair value through other comprehensive income

42

42

Total financial assets

4,163

4,361

Financial Liabilities

Financial liabilities measured at amortised cost

Trade Creditors

-

262

Grants payable

103

104

Other payables

1,113

1,053

Total financial liabilities measured at amortised cost

1,216

1,419

Total financial liabilities

1,216

1,419

2019/2020

$’000

2018/2019

$’000

6.2B Net gain or loss on financial instruments

Financial assets at amortised cost

Interest revenue

62

85

Heading

2020

2019

$'000

$'000

7.1 Fair Value Measurements

Non-financial assets - Recurring fair value

Land and Buildings

15,682

14,335

Property, Plant and Equipment

2,154

1,865

Total Non-financial assets - Recurring fair value

17,836

16,200

Heading

2020

2019

$'000

$'000

8.1 Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

4,711

4,875

More than 12 months

17,916

16,276

Total assets

22,627

21,151

Liabilities expected to be settled in:

No more than 12 months

1,424

1,626

More than 12 months

245

214

Total liabilities

1,669

1,840