Go to top of page

Managing Uncertainties

This section analyses how AMSA manages financial risks within its operating environment

Note 5.1: Contingent Assets and Liabilities

Note 5.1: Contingent Assets and Liabilities

2020

2019

$’000

$’000

Claims for damages or costs

Contingent assets

Balance from previous period

28,083

3,896

New contingent assets recognised

720

27,117

Re-measurement

(11,455)

(891)

Assets realised

(109)

(2,031)

Rights expired

-

(8)

Total contingent assets

17,239

28,083

Contingent liabilities

Balance from previous period

-

-

New contingent liabilities recognised

27,200

-

Total contingent liabilities

27,200

-

Net contingent assets

(9,961)

28,083

Quantifiable contingencies

The contingent assets include insurance claims for cyclone damage to a number of aids to navigation of $1,605,000 (2019: $966,000) and pollution incidents of $15,664,000 (2019: $27,117,000). The estimate is based on the expected settlements for these claims.

The contingent liabilities include pollution incidents of $27,200,000 (2019: Nil). The estimate is based on the expected clean-up costs of the pollution incidents.

Unquantifiable contingencies

In the normal course of operations, AMSA is responsible for the provision of funds necessary to meet the clean-up costs arising from ship-sourced marine pollution, and in all circumstances is responsible for making appropriate efforts to recover costs of any such incidents. In accordance with the accounting policy on pollution incident costs, where quantifying a reasonable estimate of the cost to remediate ship sourced marine pollution has not been possible, no amount has been included.

Accounting Policy

Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

Accounting Judgement and Estimates

Contingent liability for pollution incidents

The contingent liability for pollution incidents represents a possible obligation whose existence will be confirmed only by the occurrence or non-occurrence of future uncertain events outside AMSA's control, resulting in significant uncertainty whether the contingent liability will crystallise into a provision in future years and result in the outflow of resources.

The uncertainty in estimating the contingent liability for pollution incidents results in a significant risk that a material adjustment to the contingent liability may be required in future years. The uncertainty arises due to the complex judgement required by management in the estimation of the clean-up costs for pollution incidents and limited experience with similar pollution incidents.

AMSA will seek to recover all costs incurred for pollution incidents.

Note 5.2: Financial Instruments

Note 5.2: Financial Instruments

2020

2019

Notes

$’000

$’000

Note 5.2A: Categories of financial instruments

Financial assets

Financial assets at amortised cost

Cash and cash equivalents

18,774

19,773

Investments

71,000

90,000

Receivables for goods and services

2.1A

45

339

Other receivables

2.1A

623

2,754

Total financial assets at amortised cost

90,442

112,866

Financial liabilities measured at amortised cost

Trade creditors

2.3A

21,632

28,559

Finance leases

2.4A

-

1,216

Lease liability

2.4A

128,156

-

Total financial liabilities measured at amortised cost

149,788

29,775

Note 5.2B: Net gains or losses on financial assets

Financial assets at amortised cost

Interest revenue

1,829

2,619

Reversal of impairment loss

66

84

Impairment loss allowance

(18)

(70)

Net gain on financial assets at amortised cost

1,877

2,633

The total interest income from financial assets not at fair value through profit and loss was $1,829,000 (2019: $2,619,000).

Note 5.2C: Net gains or losses on financial liabilities

Financial liabilities measured at amortised cost

Interest expense

1,642

93

Net loss on financial liabilities measured at amortised cost

1,642

93

The total interest expense from financial liabilities not at fair value through profit and loss was $1,642,000 (2019: $93,000).

Accounting Policy

Financial assets

AMSA classifies its financial assets as financial assets measured at amortised cost.

The classification depends on both AMSA's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when AMSA 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.

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 financial liabilities at amortised cost and are recognised and derecognised upon trade date.

Financial liabilities at amortised cost

Financial liabilities 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).