This section analyses how the Australian Bureau of Statistics manages the financial risks within its operating environment.

5.1 Contingent Assets and Liabilities

The ABS did not have any contingent assets or liabilities at 30 June 2019 for departmental and administered (2018: Nil).

5.2 Financial Instruments

Accounting Policy

Assessment of Impact of AASB 9 Financial Instruments

The ABS reviewed its financial assets and liabilities categories against AASB 9 Financial Instruments (AASB 9) requirements, including the Solely Payments of Principal and Interest test and the Business Model assessment to determine the appropriate classification for recognition and measurement purposes. The outcome of this assessment is that AASB 9 has no significant impact on the classification or assessment of financial assets and liabilities held by the ABS. Cash and cash equivalents, goods and services receivable, suppliers and other payables will continue to be classified and measured at amortised cost.

The ABS has adopted the Expected Credit Losses model in assessing the impairment of its goods and services receivable.

Financial Assets

With the implementation of AASB 9 for the first time in 2019, the ABS classifies its financial assets in the following categories:

a) financial assets at fair value through profit or loss;

b) financial assets at fair value through other comprehensive income; and

c) financial assets measured at amortised cost.

The classification depends on both the ABS’s business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the entity becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

The ABS classifies and recognises its financial assets, and financial liabilities at amortised cost.

Comparatives have not been restated on initial application.

Financial Assets at Amortised Cost

Financial assets included in this category need to meet two criteria:

1. the financial asset is held in order to collect the contractual cash flows; and

2. the cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest method.

Effective Interest Method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12-month expected credit losses if risk has not increased.

The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

Financial Liabilities

Financial liabilities are classified as either financial liabilities at ‘fair value through profit or loss’ or other financial liabilities.

Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial Liabilities at Amortised Cost

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

All payables are expected to be settled within 12 months except where indicated.