With the implementation of AASB 9 Financial Instruments for the first time in 2019, AFSA 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 AFSA’s business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when AFSA 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.
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 are classified as either financial liabilities “at fair value through profit or loss” or financial liabilities at amortised cost. Financial liabilities are recognised and derecognised upon “trade date”.
Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (irrespective of having been invoiced).