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Note 5: Non-financial assets

Note 5A: Reconciliation of the opening and closing balances of buildings, leasehold improvements, plant and equipment and intangibles

Buildings

$’000

Leasehold

improvements

$’000

Plant and

equipment

$’000

Intangibles

$’000

Total

$’000

As at 1 July 2019

Gross book value

9,889

2,915

40,459

53,263

Recognition of ROU Asset on initial Application of AASB16

14,299

14,299

Accumulated depreciation, amortisation and impairment

(6,878)

(1,534)

(32,756)

(41,168)

Total as at 1 July 2019

14,299

3,011

1,381

7,703

12,095

Additions

Purchase or internally developed

788

251

9,142

10,181

Right-of-use assets

1,553

1,553

Depreciation and amortisation

(1,611)

(791)

(6,099)

(8,501)

Depreciation on right-of-use assets

(6,185)

(6,185)

Revaluations and impairments recognised in other comprehensive income

181

181

Impairments recognised in other comprehensive income

(16)

(6)

(7,840)

(7,862)

Total as at 30 June 2020

9,651

2,363

841

2,906

15,761

Total as at 30 June 2020 represented by

Gross book value

15,852

10,677

3,166

49,601

79,296

Accumulated depreciation, amortisation and impairment

(6,201)

(8,314)

(2,325)

(46,695)

(63,535)

Total as at 30 June 2020

9,651

2,363

841

2,906

15,761

Revaluation of non-financial assets

All leasehold improvements were subject to a revaluation increase of $181,000 (2019: increase of $579,000). All revaluations were conducted in accordance with the revaluation policy stated below.

  1. There was a major impairment of Matesong campaign assets during the year of $7,814,000. The assets were produced in December 2019. An impairment test was conducted during the bushfire disaster that significantly impacted the Australian Tourism industry. Tourism Australia assessed that the campaign assets did not have enduring value to bring future benefit, therefore the assets were written off during the year.
  2. No leasehold improvements, plant and equipment or intangible assets are expected to be sold or disposed of within the next 12 months.

Accounting Policy

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. Financial 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, 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.

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 $5,000, 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 Tourism Australia where there exists an obligation to restore the property to its original condition. These costs are included in the value of Tourism Australia's leasehold improvements with a corresponding provision for the 'make good' recognised.

Lease Right of Use (ROU) Assets

Leased ROU assets are capitalised at the commencement date of the lease and comprise of 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 Tourism Australia as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

On initial adoption of AASB 16 Tourism Australia has adjusted the ROU assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any right of use lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition in Tourism Australia's financial statements.

Revaluations

Following initial recognition at cost, property, plant and equipment (excluding right-of-use assets) are carried at fair value (or an amount not materially different from 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.

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 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 is restated to the revalued amount.

No revaluation was performed in the current reporting period. A revaluation of leasehold improvements and make good was performed by B&A Valuers, an independent valuation and asset advisory firm in 2018-19. The revaluation was performed at 31 March 2019 and assessed by the depreciated replacement cost approach. As this method of valuation utilises unobservable inputs for assessment, they have been assigned level 3 input within the asset register. No other revaluations occurred at that time.

Depreciation

Depreciable property, plant and equipment and leasehold improvement assets are written-off to their estimated residual values over their estimated useful lives to Tourism Australia 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:

2020

2019

Leasehold improvements

Lease term

Lease term

Plant and equipment

3-10 years

3-10 years

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 are assessed for indicators of impairment at 30 June 2020. 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.

Derecognition

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

Intangibles

Tourism Australia's intangibles comprise of computer software internally developed, campaign production assets and trade marks.

These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Computer software is amortised on a straight-line basis over its anticipated useful life. The useful lives of Tourism Australia's software is three years (2019: three years) except where otherwise stated. All software assets have been assessed for indications of impairment as at 30 June 2020.

Campaign production assets are amortised on a straight- line basis over its anticipated useful life. The useful lives of campaign production assets is two to three years (2019: two to three years). All campaign production assets were assessed for indications of impairment as at 30 June 2020.

Trade marks are amortised on a straight-line basis over its anticipated useful life. The useful life of trade marks is estimated at ten years (2019: ten years). All trade marks were assessed for indications of impairment as at 30 June 2020.

Note 5B: Other non- financial assets

2020

$’000

2019

$’000

Prepayments

2,559

4,983

Lease incentive 1

553

Total other non-financial assets

2,559

5,536

  1. Tourism Australia has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.