Recognition and measurement Acquisition of assets Assets are recorded at cost at the time of acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Assets acquired at no cost, or for nominal consideration, are initially recognised as assets at their fair value at the date of acquisition. Fair value measurement of assets and liabilities The Corporation has adopted the following general policies relating to the determination of fair value of assets and liabilities. AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level in accordance with the following fair value measurement hierarchy:
The fair value of land is determined by reference to the market value of the land component of ABC property because it is possible to base the fair value on recent sales of comparable sites. The Corporation’s independent valuers detail these reference sites in valuation reports for respective properties. No observable market data is available for the ABC’s buildings, given their highest and best use as specialised broadcasting facilities. The fair value of these assets is based on depreciated replacement cost (Level 3 inputs). Plant and equipment assets are measured based on depreciated cost (Level 3 inputs). Intangibles (software for internal use) are measured at cost less subsequent accumulated amortisation and accumulated impairment losses. Generally, the fair value of the Corporation’s other financial assets and liabilities is deemed to be their carrying value as it approximates fair value. The fair value of long-term loans is the net present value of future discounted cash flows arising. The Corporation holds a freehold property classified as held for sale, which was tendered for sale in an open market as disclosed in Note 7C Assets classified as held for sale. The sale process has been administered at arm’s length by an independent agent. Apart from the asset held for sale, the Corporation does not hold any assets or liabilities measured at fair value that are valued using Level 1 inputs (i.e. with reference to quoted prices (unadjusted) in active markets for identical assets or liabilities). The carrying value of cash and cash equivalents, financial assets and non-interest-bearing financial liabilities (except for derivatives used for hedging) of the Corporation, are measured at amortised cost, which approximates their fair value. There have been no recurring fair value measurements transferred between the respective levels for assets and liabilities for the year ended 30 June 2021. Presentation in the financial statements The aforementioned is summarised in Note 5A Fair value measurement. Measurement of right-of-use assets and accompanying liability under AASB 16 Leases Leased right-of-use assets are capitalised at the commencement date of the lease and comprise the initial lease liability amount and initial direct costs incurred when entering into the lease, less any lease incentives received. On initial adoption of AASB 16 the Corporation adjusted the right-of-use 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 asset that shows indicators of impairment and an impairment loss is recognised against any right-of-use asset that is impaired. Leased right-of-use assets continue to be measured at cost after initial recognition in Commonwealth agency, general government sector and whole of government financial statements. Assumptions surrounding uncertainty – Lease liability Refer to the commentary in Note 9B Lease liability under the same heading.
Recognition and measurement Cash and cash equivalents Cash and cash equivalents are recognised at their nominal amounts and include:
Receivables Trade receivables 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. Receivables are included in current assets, unless they mature more than 12 months after the Statement of Financial Position date, in which case they are classified as non-current assets. Other receivables At 30 June 2021, Other receivables includes forward exchange contracts at fair value through surplus/(deficit) of $62,000 (2020 nil). The balance represents estimated future cash flows, based on market forward exchange rates at 30 June 2021 and the forward contract rate, discounted by the observable yield curves of the respective currencies. The above amount reflects a nil average depreciation (2020 1.1%) of the Australian dollar against those currencies for which forward exchange contracts have been taken out, where the market forward rate at 30 June 2021 is lower than the contracted rate. Impairment of financial assets Financial assets are assessed for impairment throughout each reporting period as outlined below:
If there is objective evidence that an impairment loss has been incurred for financial assets held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The loss is taken to the Statement of Comprehensive Income. The Corporation assesses the likelihood of recovery of those debts, factoring in past bad debts experience. Bad debts are written off when identified.
The ABC calculates an impairment loss allowance, based on historical rates of credit impairment, adjusted for any external factors likely to impact the rate of impairment. The carrying value of the impairment allowance loss is monitored against the value of debts likely to be considered at risk of being non-recoverable. At 30 June 2021, the balance of the impairment loss allowance is $97,000 (2020 $383,000). For the year ended 30 June 2021, this amount was sufficient to cover outstanding debt attributable to customers at risk of non-recoverability. At June 2021, no specific debts attributable to customers were identified as at risk of non-recoverability (2020 $360,000). Other investments Under AASB 9 Financial Instruments, term deposits with an original maturity date greater than 90 days are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. Surplus cash is invested into short-term investments with maturities at acquisition date of greater than three months. These investments are due to be recovered within twelve months. Reconciliation of opening and closing balances of ABC owned land, buildings, plant and equipment and intangibles at 30 June 2021 is as follows:
Useful lives of and measurement basis of asset classes
Land, buildings, plant and equipment and intangibles The measurement basis for land, buildings, plant and equipment and intangibles is set out in Note 5A Fair value measurement. Asset recognition threshold Purchases of land, buildings, plant, equipment and intangibles are recognised initially at cost in the Statement of Financial Position. Purchases costing less than $2,000 are expensed in the year of acquisition except where they form part of a project or group of similar items, which are significant in total. Revaluation Following initial recognition at cost, ABC owned land, buildings and plant and equipment are measured 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 materially vary 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 revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class, previously recognised through surplus/(deficit). Revaluation decrements for a class of assets are recognised directly through surplus/(deficit) except to the extent that they reverse a previous revaluation increment for that class. Any accumulated depreciation at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount. The ABC commissions an independent expert valuer to complete a comprehensive valuation of land and building assets every three years. This process was completed in the year ended 30 June 2020. The ABC’s Ultimo property (the Corporation’s highest value asset) was valued as of 30 June 2021 on a ‘desktop’ basis by the independent valuer. The valuation was materially aligned to the carrying amount of the asset and therefore no revaluation increment was recognised. Advice was also received that there were no material movements in Australian capital city commercial property markets during the year ended 30 June 2021. Based on this advice, it was determined that the carrying amount of the ABC’s land and building assets aligns with their fair value. No further property valuations were commissioned, and no asset revaluations were recognised other than the revaluation of the ABC’s Gordon Street land holding immediately prior to reclassification as an asset held for sale. Further details are disclosed in Note 7C Assets classified as held for sale. Impairment of non-current assets The aforementioned classes of assets have been and continue to be subjected to an assessment as to indicators of impairment under AASB 136 Impairment of Assets as at 30 June 2021. Impairment is assessed with consideration of the asset’s remaining service value. Disposals An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected. Reconciliation of opening and closing balances of the ABC's right-of-use assets at 30 June 2021 is as follows:
Recognition and measurement General principles Right-of-use assets are capitalised at the commencement date of the lease and comprise the initial lease liability amount and initial direct costs incurred when entering into the lease, less any lease incentives received. Following initial recognition, an impairment review is undertaken for any right-of-use asset that shows indicators of impairment and an impairment loss is recognised against any right-of-use asset that is impaired. Right-of-use assets continue to be measured at cost after initial recognition in Commonwealth agency, general government sector and Whole of Government financial statements. Land The ABC’s right-of-use land is measured at cost, in accordance with the requirements of the PGPA (Financial Reporting) Rule 2015. Buildings Right-of-use buildings largely consist of regional broadcasting offices and the ABC’s overseas reporting bureaux. Plant and equipment Right-of-use plant and equipment comprises:
Depreciation 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.
Assets classified as held for sale Assets classified as held for sale are recognised in the Statement of Financial Position at the lower of their carrying amount and fair value less costs to sell. In June 2021 the ABC entered into a contract of sale for its property at 8 Gordon Street Elsternwick Victoria. The contract is due to be settled in December 2021. As required under AASB 5 Non-current Assets Held for Sale and Discontinued Operations, the ABC remeasured the value of the asset immediately before it was reclassified as held for sale (with the value based on the contracted sale price) and a revaluation decrement of $1,750,000 was recognised. The asset was subsequently impaired by $48,000 based on the costs to sell. Inventories (general) Inventories held for resale are valued at the lower of cost and net realisable value. Inventories not held for resale are valued at the lower of cost, adjusted for any loss in service potential, identified and measured based on the existence of a current replacement cost that is lower than the original acquisition cost or other subsequent carrying amount. Produced programs Television programs are produced for domestic transmission and digital distribution. The cost of these programs includes co-production fees, direct salaries and expenses and production overheads allocated on a usage basis to the program. Production overheads not allocated to programs are expensed in the period in which they are incurred. External contributions received in respect of co-production of television programs are offset against production costs which are recorded as Inventories in the Statement of Financial Position. The amortisation of inventories is addressed in Note 3E Program amortisation. Write-down of inventory held for distribution When inventories held for distribution are distributed, the carrying amount of those inventories is recognised as an expense. The amount of any write-down of inventories for loss of service potential, and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories arising from a reversal of the circumstances that gave rise to the loss of service potential will be recognised as a reduction in the value of inventories recognised as an expense in the period in which the reversal occurs. Write-down of retail inventory The amount of any write-down of inventories to net realisable value and all losses of inventory are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories arising from an increase in the net realisable value will be recognised as an inventory expense reduction in the period in which the reversal occurs. Impairment of prepayments No indicators of impairment were found for prepayments.
Recognition and measurement Suppliers and other payables Supplier and other payables are recognised initially at fair value and subsequently measured at amortised cost. Note 8B Other payables contains no forward exchange contracts at fair value through surplus/(deficit) (2020 $144,000). Under the fair value measurement hierarchy, these are measured based on Level 2 inputs.
Recognition and measurement Loans Share of loans in joint operations represents the ABC’s 50% share of MediaHub’s loan balances with the with the Australia and New Zealand Banking Group Limited (the ANZ). At 30 June 2021, MediaHub had drawn loans under seven (2020 six) facilities with the ANZ, with an aggregate balance of $5,423,000 (2020 $4,459,000). The ABC’s share, as reflected in its Statement of Financial Position, is $2,711,000 (2020 $2,230,000). These facilities are generally repayable over five years. The facility is provided on an average variable interest rate to 30 June 2021 of 1.85% (2020 2%). Lease liability Note 9B Lease liability is the present value of future contractual payments, for the remaining life of the contracts. The present value of the lease liability is $579,173,000 (2020 $635,784,000). The life of the contracts includes extension options which the ABC is reasonably certain to exercise. The total cash outflow for leases for the year ended 30 June 2021 was $59,376,000 (2020 $60,365,000) The undiscounted value of future lease payments is $622,966,000 (2020 $680,838,000). The average discount rate, determined with reference to the Commonwealth Department of Finance incremental borrowing rates, issued quarterly, was approximately 1.10% (2020 1.11%). The incremental borrowing rate used for each lease approximated the start date for each lease. Assumptions surrounding uncertainty – Lease liability The valuation of the lease liability is influenced by the discount rate, as advised, on a quarterly basis, by the Commonwealth Department of Finance. The carrying balance of this item is reviewed regularly and an assessment is made of the potential impact of a change in discount rates on this balance upon any lease modifications or reassessments. For all new contracts entered into, the ABC considers whether the contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. Once it has been determined that a contract is, or contains a lease, the lease liability is initially measured at the present value of the lease payments unpaid at the commencement date, discounted using the interest rate implicit in the lease, if that rate is readily determinable, or the department’s incremental borrowing rate. The corresponding asset value, as disclosed in Note 7B ABC right-of-use assets, is initially measured based on the value of the liability. Subsequent to initial measurement, the liability is reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification to the lease. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset or profit and loss depending on the nature of the re-assessment or modifications.
Recognition and measurement Other provisions Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The provision for make good represents the estimated make good cost for leased properties at the end of the lease term. The estimated cost is based on management’s best estimate of the cost to make good each site, plus an allowance for inflation. During the year, the ABC provided nil further amounts (2020 nil) for remediation works to replace the external cladding on the Ultimo, NSW building, to ensure compliance with the current BCA Fire Safety Standards. For the year to 30 June 2021, expenditure incurred on this project was $3,431,000 (2020 $28,721,000), resulting in a balance in the provision of $461,000 (2020 $3,892,000). |
Which of the following is subsequently measured at the lower of cost and current replacement cost?
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