Note 55. Financial Instruments – Territorial

Details of the significant policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, with respect to each class of financial asset and financial liability are disclosed in Note 46: Summary of Significant Accounting Policies - Territorial

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Directorate has all of its Territorial financial assets and financial liabilities held in non‑interest bearing arrangements.  This means that the Directorate is not exposed to movements in interest rates, and, as such does not have any interest rate risk.  

A sensitivity analysis has not been undertaken for the interest rate risk of the Directorate as it is not exposed to movements in interest rates.        

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.  The Directorate’s credit risk is limited to the amount of the financial assets held less an allowance for impairment losses.

The Directorate’s Territorial financial assets mostly consist of Cash and Cash Equivalents.

Credit risk is managed by the Directorate for cash at bank by holding bank balances with the ACT Government’s banker, Westpac Banking Corporation (Westpac).  Westpac holds a AA- issuer credit rating with Standard and Poors.

Liquidity Risk

Liquidity risk is the risk that the Directorate will be unable to meet its financial obligations as they fall due.  The Directorate’s only Territorial financial obligation relates to an advance received from the Territory Banking Account where there is no requirement to repay the advance within the next twelve months.  The Directorate’s exposure to liquidity risk is therefore insignificant.

Price Risk

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, whether these changes are caused by factors specific to the individual financial instrument or its issuer, or by factors affecting all similar financial instruments traded in the market. 

The Directorate holds no investments on behalf of the Territory that are subject to price risk and as a result, is not considered to have any price risk.  Accordingly, a sensitivity analysis has not been undertaken.

Fair Value of Financial Assets and Liabilities

The carrying amounts and fair values of financial assets and liabilities at balance date are:

  Carrying
Amount
2015
$'000
Fair
Value
2015
$'000
Carrying
Amount
2014
$'000
Fair
Value
2014
$'000
Financial Assets        
Cash and Cash Equivalents 242 242 268 268
Total Financial Assets 242 242 268 268
         
Financial Liabilities        
Advance from the Territory Banking Account 350 350 300 300
Total Financial Liabilities 350 350 300 300
         
  (108) (108) (32) (32)

The following table sets out the Directorate’s maturity analysis for financial assets and liabilities as well as the exposure to interest rates, including the weighted average interest rates by maturity period as at 30 June 2015.  All financial assets and liabilities, excluding Advance from the Territory Banking Account, which are non‑interest bearing will mature in 1 year or less.  All amounts appearing in the following maturity analysis are shown on an undiscounted cash flow basis.

 

 

Note
no.

Weighted
Average
Interest
Rate

Floating
Interest
Rate
$'000

Fixed Interest Maturing In:

Non-
Interest
Bearing
$'000

Total
$'000

1 Year
or Less
$'000

Over 1 Year
to 5 Years
$'000

Over
5 Years
$'000

Financial Instruments

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

51

 

-

-

-

-

242

242

Total Financial Assets

 

 

-

-

-

-

242

242

 

 

 

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

Advance from the Territory Banking

  Account

53

 

-

-

-

-

350

350

Total Financial Liabilities

 

 

-

-

-

-

350

350

 

 

 

 

 

 

 

 

 

Net Financial Assets / (Liabilities)

 

 

-

-

-

-

(108)

(108)

The following table sets out the Directorate’s maturity analysis for financial assets and liabilities as well as the exposure to interest rates, including the weighted average interest rates by maturity period as at 30 June 2014.  All financial assets and liabilities, excluding Advance from Territory Banking Account, which are non‑interest bearing will mature in 1 year or less. All amounts appearing in the following maturity analysis are shown on an undiscounted cash flow basis.

 

Note
no.

 

Weighted
Average
Interest
Rate

 

Floating
Interest
Rate
$'000

 

Fixed Interest Maturing In:

Non-
Interest
Bearing
$'000

 

Total
$'000

 

 

1 Year
or Less
$'000

Over 1 Year
to 5 Years
$'000

Over
5 Years
$'000

Financial Instruments

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

51

 

-

-

-

-

268

268

Total Financial Assets

 

 

-

-

-

-

268

268

 

 

 

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

Advance from the Territory Banking

  Account

53

 

-

-

-

-

300

300

Total Financial Liabilities

 

 

-

-

-

-

300

300

 

 

 

 

 

 

 

 

 

Net Financial Assets / (Liabilities)

 

 

-

-

-

-

(32)

(32)

Carrying Amount of Each Class of Financial Asset and Financial Liability

2015
$'000

2014
$'000

Financial Liabilities

 

 

Financial Liabilities Measured at Amortised Cost

350

300

Fair Value Hierarchy

The Directorate does not have any financial assets or financial liabilities on behalf of the Territory at fair value.  As such no Fair Value Hierarchy disclosures have been made.