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5. Managing Uncertainties

This section analyses how The University manages financial risks within its operating environment.

5.1 Contingent Assets and Liabilities

Consolidated

University

2019

2018

2019

2018

$'000

$'000

$'000

$'000

Note 5.1A: Contingent Assets

Guarantee

Purpose

UniLodge Australia Pty Ltd

Beneficiary of security guarantee for a service agreement

500

500

500

500

Lendlease Building Pty Limited

Beneficiary of security guarantee for a construction contract

5,736

11,472

5,736

11,472

AMA Project Pty Ltd

Beneficiary of security guarantee

for a construction contract

93

-

93

-

Spotless Facility Services Pty Ltd

Beneficiary of security guarantee for a construction contract

450

-

450

-

Richard Crookes Constructions Pty Limited

Beneficiary of security guarantee for a construction contract

2,650

5,300

2,650

5,300

Various Commercial Tenants

Beneficiary of a security guarantee for a Commercial Tenancy Lease

1,086

600

1,086

600

Hindmarsh Construction Pty Ltd

Beneficiary of security guarantee for a construction contract

367

783

367

783

Shaw Building Group Pty Ltd

Beneficiary of security guarantee for a construction contract

1,000

500

1,000

500

ISS Facility Services

Beneficiary of security guarantee for a service agreement

490

490

490

490

Rork Projects Pty Ltd

Beneficiary of security guarantee for a construction contract

22

-

22

-

Various Construction Providers

Beneficiary of security guarantee for a construction contract

-

1,025

-

1,025

12,394

20,670

12,394

20,670

Consolidated

University

2019

2018

2019

2018

$'000

$'000

$'000

$'000

Note 5.1B: Contingent Liabilities

The following guarantees have been provided:

Guarantee

Purpose

Safety, Rehabilitation and Compensation Commission

To cover future workers compensation outstanding claims

36,226

50,433

36,226

50,433

Unlisted Investments

Uncalled Capital relating to investment activities at the University

61,692

69,323

54,002

69,323

Burgmann College

To guarantee a bank loan

12,455

12,455

12,455

12,455

SHRIMP - Shandong

International Letter of Credit

-

2,800

-

-

RESOchron - Zinkerr

International Letter of Credit

-

726

-

-

RESOlution - Tubigen

Standard Letter of Credit

-

811

-

-

Various

Standard Letter of Credit

-

1,072

-

-

110,373

137,620

102,683

132,211

Unquantifiable contingencies

The University is currently involved in a number of legal matters in the ordinary course of business. The existence of such obligations will only be confirmed by future events not wholly within the control of the University. At the balance sheet date, the liability of the University in respect of these matters cannot be reliably estimated and therefore not included in the financial statements.

The University suffered a flood on 25 February 2018 and is making claims with our insurance companies. The amount of the claims cannot be reliably estimated at this time.

The University was the victim of a cyber attack in 2019 and is making claim with our insurance company. The amount of the claim cannot be reliably estimated at this time.

Accounting Policy

Unrecognised Financial Liabilities/Guarantees, not recognised in the Statement of Financial Position are disclosed in Contingent Liabilities above. At the time of completion of the financial statements, there was no reason to believe that these guarantees would be called upon, and recognition of a liability was therefore not required.

5.2 Financial Instruments

(a) Categories of Financial Assets and Financial Liabilities

Consolidated

University

2019

2018

2019

2018

$'000

$'000

$'000

$'000

Financial Assets

At amortised cost

Cash and cash equivalents

492,912

190,366

488,123

181,196

Short term deposits

60,000

515,000

60,000

515,000

Unlisted equities

2,496

452

2,496

452

Interest in related parties

-

-

7,200

7,200

Loans and receivables

107,499

106,398

106,306

102,304

At fair value through statement of other comprehensive income

Listed debt securities

147,833

145,517

147,833

145,517

Unlisted equities

47,001

-

47,001

-

At fair value through profit or loss

Listed equities

818,490

605,911

818,490

605,911

Unlisted equities

239,106

155,613

239,106

155,613

Listed debt securities

175,957

173,197

175,957

173,197

Discount securities

7,990

1,991

7,990

1,991

Derivative instruments

2,836

4,252

2,836

4,252

Carrying Amount of Financial Assets

2,102,120

1,898,697

2,103,338

1,892,633

Financial Liabilities

At amortised cost

Payables

193,869

232,939

186,906

218,087

Loans payable

277,663

282,743

277,663

282,743

Lease liabilities

17,563

5,873

17,499

5,873

At fair value through profit or loss

Derivative instruments

3,713

2,468

3,713

2,468

Carrying Amount of Financial Liabilities

492,808

524,023

485,781

509,171

Accounting Policy

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis.

Fair value

The fair values of investments and other financial assets are based on quoted prices in an active market. If the market for a financial asset is not active (and for unlisted securities), the University establishes fair value by using valuation techniques, that maximise the use of relevant data. These include reference to the estimated price in an orderly transaction that would take place between market participants at the measurement date. Other valuation techniques used are the cost approach and the income approach based on the characteristics of the asset and the assumptions made by market participants.

(b) Net Income and Expense from Financial Assets

Consolidated

University

2019

2018

2019

2018

$'000

$'000

$'000

$'000

At amortised cost

Interest

16,065

22,861

16,065

22,757

Exchange gains/(loss)

2,307

4,861

2,307

4,861

At fair value through statement of other comprehensive income

Interest

3,890

1,784

3,890

1,784

Dividend

214

166

214

166

Gains/(losses) on disposal

1,026

868

1,026

868

Gains/(losses) recognised in equity

47,812

(1,053)

47,812

(1,053)

At fair value through profit or loss

Interest

5,861

2,887

5,861

2,887

Dividend

45,568

55,329

45,568

55,329

Gains/(losses)

160,734

(48,485)

160,734

(48,485)

Exchange gains/(losses)

(1,273)

34,962

(1,273)

34,962

Net gains from financial assets

282,204

74,180

282,204

74,076

(c) Net Income and Expense from Financial Liabilities

Consolidated

University

2019

2018

2019

2018

$'000

$'000

$'000

$'000

At amortised cost

Borrowing expense

(11,794)

(12,447)

(11,794)

(12,447)

Net losses from financial liabilities

(11,794)

(12,447)

(11,794)

(12,447)

d) Fair Value

Valuation method used for determining the fair value of financial instruments

The following table identifies for those assets and liabilities carried at fair value (above), as to whether fair value was obtained by reference to market prices (Level 1) or by valuation techniques that employs observable market transactions (Level 2), or by using non- observable market inputs to determine fair value (Level 3).

Consolidated

Valuation technique utilising

2019

Market Values

Market Inputs

Non-Market Inputs

(Level 1)

(Level 2)

(Level 3)

Total

$'000

$'000

$'000

$'000

Financial Assets

At fair value through statement of other comprehensive income

Listed debt securities

-

147,833

-

147,833

Unlisted equities

-

-

47,001

47,001

At fair value through other comprehensive income

Listed equities

818,489

-

-

818,489

Unlisted equities

-

238,953

153

239,106

Listed debt securities

-

175,957

-

175,957

Discount securities

-

7,989

-

7,989

Derivative instruments

167

2,670

-

2,837

Total financial assets carried at fair value

818,656

573,402

47,154

1,439,212

Financial Liabilities

Fair value through profit or loss

Derivative instruments

816

2,897

-

3,713

Total financial liabilities carried at fair value

816

2,897

-

3,713

Consolidated

Valuation technique utilising

2018

Market Values

Market Inputs

Non-Market Inputs

(Level 1)

(Level 2)

(Level 3)

Total

$'000

$'000

$'000

$'000

Financial Assets

At fair value through statement of other comprehensive income

Listed debt securities

-

145,517

-

145,517

At fair value through other comprehensive income

Listed equities

605,911

-

-

605,911

Unlisted equities

1,241

153,752

620

155,613

Listed debt securities

-

173,197

-

173,197

Discount securities

-

1,991

-

1,991

Derivative instruments

2,031

2,221

-

4,252

Total financial assets carried at fair value

609,183

476,678

620

1,086,481

Financial Liabilities

Fair value through profit or loss

Derivative instruments

357

2,111

-

2,468

Total financial liabilities carried at fair value

357

2,111

-

2,468

University

Valuation technique utilising

2019

Market Values

Market Inputs

Non-Market Inputs

(Level 1)

(Level 2)

(Level 3)

Total

$'000

$'000

$'000

$'000

Financial Assets

At fair value through statement of other comprehensive income

-

Listed debt securities

-

147,833

-

147,833

Unlisted equities

-

-

47,001

47,001

Fair value through profit or loss

Listed equities

818,489

-

-

818,489

Unlisted equities

-

238,953

153

239,106

Listed debt securities

-

175,957

-

175,957

Discount securities

-

7,989

-

7,989

Derivative instruments

167

2,670

-

2,837

Total Financial Assets

818,656

573,402

47,154

1,439,212

Financial Liabilities

Fair value through profit or loss

Derivative instruments

817

2,896

-

3,713

Total financial liabilities carried at fair value

817

2,896

-

3,713

University

Valuation technique utilising

2018

Market Values

Market Inputs

Non-Market Inputs

(Level 1)

(Level 2)

(Level 3)

Total

$'000

$'000

$'000

$'000

Financial Assets

At fair value through statement of other comprehensive income

Listed debt securities

-

145,517

-

145,517

At fair value through other comprehensive income

Listed equities

605,911

-

-

605,911

Unlisted equities

1,241

153,752

620

155,613

Listed debt securities

-

173,197

-

173,197

Discount securities

-

1,991

-

1,991

Derivative instruments

2,031

2,221

-

4,252

Total Financial Assets

609,183

476,678

620

1,086,481

Financial Liabilities

Fair value through profit or loss

Derivative instruments

357

2,111

-

2,468

Total financial liabilities carried at fair value

357

2,111

-

2,468

Consolidated

University

2019

2018

2019

2018

$'000

$'000

$'000

$'000

(e) Reconciliation of Financial Assets Categorised as Level 3

Level 3 Financial Assets

Opening balance

620

429,480

620

429,480

Total gains or losses

Through profit or loss

-

11,983

-

11,983

Through Statement of Comprehensive Income

46,534

-

46,534

-

Reclassification

-

(114,300)

-

(114,300)

Purchases

-

241

-

241

Sales

-

(326,784)

-

(326,784)

Closing balance

47,154

620

47,154

620

Gains/(losses) for assets held 31 December

46,534

11,983

46,534

11,983

(f) Credit Risk

Credit risk is defined as "the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation."

Receivables

Loans and Receivables balances are monitored on an ongoing basis. The credit risk exposure on The University’s receivables can be found at Note 2.1B.

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (i.e., by geographical region, product type, customer type and rating). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than one year and are not subject to enforcement activity. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in the notes above.

The University evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the University in accordance with the University’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed on an annual basis, and may be updated throughout the year subject to approval of the Finance Committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through a counterparty’s potential failure to make payments.

The University invests only in quoted debt securities with very low credit risk.

The University recognised a provision for expected credit losses (ECL) on its debt instruments at fair value through OCI and short term cash deposits at amortised cost of $258,000 as at 31 December 2019 (2018; $251,000).

There are no significant financial assets that have had renegotiated terms that would otherwise, without that renegotiation, have been past due or impaired.

The University’s maximum exposure to credit risk for the components of the statement of financial position at 31 December 2019 and 2018 is the carrying amounts as illustrated in Note 2.1 except for derivative financial instruments. The University’s maximum exposure relating to financial derivative instruments is noted in the liquidity table below.

The University is party to guarantees as identified in Note 5.1 'Contingent Assets and Liabilities'. The maximum exposure to credit risk, if the University was called upon to meet the obligations, is the amount disclosed in Note 5.1.

The University does not hold any collateral or other credit enhancement facilities against these assets or contingent liabilities.

(g) Liquidity Risk

The following tables illustrate the maturities for financial liabilities:

Consolidated

Within 1 year

1 - 5 years

Greater than 5 years

Total

2019

$'000

$'000

$'000

$'000

Suppliers

47,197

-

-

47,197

Other payables

118,786

27,886

-

146,672

Interest bearing liabilities

5,221

34,795

237,648

277,663

Lease liabilities

7,154

10,216

193

17,563

Other financial liabilities

3,380

332

-

3,713

Total

181,738

73,229

237,841

492,808

2018

Suppliers

48,831

-

-

48,831

Other payables

159,211

27,534

-

186,745

Interest bearing liabilities

4,818

31,882

246,044

282,744

Lease liabilities

2,032

3,840

-

5,872

Other financial liabilities

2,175

293

-

2,468

Total

217,067

63,549

246,044

526,660

University

2019

Suppliers

44,690

-

-

44,690

Other payables

114,330

27,886

-

142,216

Interest bearing liabilities

5,221

34,795

237,648

277,664

Lease liabilities

7,090

10,216

193

17,499

Other financial liabilities

3,380

332

-

3,712

Total

174,711

73,229

237,841

485,781

2018

Suppliers

45,035

-

-

45,035

Other payables

152,535

27,534

-

180,069

Interest bearing liabilities

4,818

31,882

246,044

282,744

Lease liabilities

2,032

3,840

-

5,872

Other financial liabilities

2,175

293

-

2,468

Total

206,595

63,549

246,044

516,188

Liquidity risk is defined as the risk that the University would not be able to settle or meet those obligations that are settled by delivering cash or another financial asset, on time or at a reasonable price. The University adopts an active cash management strategy.

The University's investment portfolio allocation profile is determined by the Finance Committee and is structured to ensure sufficient funds are held in investments that can be converted to cash to meet its obligations as they fall due. Equities, other Listed Securities, Cash and Short-term debt securities constitute the significant component of the University's financial instruments. The liquidity risk of Unlisted Securities is managed through holding a diversified portfolio of assets with known investment horizons, different expected exit dates, and ensuring the total exposure of this class is maintained at a level whereby forced sales will not be required.

(h) Market Risk

Market risk is defined as "the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices" and includes interest rate risk, foreign currency risk and "other price risks". Other price risks are further defined as "the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market".

(h)(i) Foreign Exchange Risk

The University derives its revenue streams principally in Australian dollars. Payments to overseas denominated currency sources for the supply of goods and services provided to the University is considered immaterial and as such foreign exchange risk in these transactions is considered insignificant.

The University holds investments in most major overseas markets and as such has exposure to the major currencies. The mix and weighting of currency holdings approximates those utilized in the Trade Weighted Index/AUD calculation and as such the Trade Weighted Index is considered an appropriate measurement for Currency Risk. The University monitors the value of the Australian dollar relative to other major currencies and when the value is considered to be out of alignment with fundamental value common risk management approaches, including forward currency contracts are adopted.

The following table, (iv), demonstrates the sensitivity to a reasonably possible change in the AUD/Trade Weighted Index with all other variables held constant, on the University’s income and the University’s equity.

(h)(ii) Interest Rate Risk

Interest rate risk is the risk that the realisable value of a financial instrument will fluctuate due to the changes in market interest rates. The University's exposure to the risk of changes in market interest relates primarily to long-term investments and bank loans with variable interest rates. The University's outstanding Indexed Annuity Bonds is linked to Consumer Price Index movements.

The University's interest rate risk arises from the investment in cash, fixed and floating interest and short term money market securities. The portfolio consists of a combination of fixed coupon interest payments with repayment of principal on maturity, discounted securities with principal repaid upon maturity and floating rate notes. The portfolio is fully invested in AUD denominated securities. All counterparties are rated as investment grade.

The following table (iv), demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant

(h)(iii) Other Price Risk

The University Loans payable 'Indexed Annuity Bond' is repayable by quarterly instalments that are indexed in alignment with the Australian Consumer Price Index (CPI). The real yield payable on the Bonds is 3.235% with an effective CPI base of 30 September 2004. The calculation of the outstanding liability is based on the historic movement in CPI from the base period to 30 September of the reporting year (3.350% per annum).

The following table, (iv), demonstrates the sensitivity to possible changes in CPI annual rates, with all other variables held constant. The table demonstrates the sensitivity to possible changes in interest rates, foreign exchange rates and market rates.

(h)(iv)Summarised Sensitivity Analysis – Consolidated

The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk, foreign exchange risk, and other price risk.

31 December 2019

Carrying Amount

Interest rate risk

Foreign exchange risk

Market risk

Australian CPI risk

-0.6%

+0.6%

-11.5%

+11.5%

-10.0%

+10.0%

-10.0%

+10.0%

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Financial Assets

At amortised cost

Cash and cash deposits

Domestic

511,963

(3,072)

(3,072)

3,072

3,072

-

-

-

-

-

-

-

-

-

-

-

-

Overseas

40,951

(246)

(246)

246

246

4,709

4,709

(4,709)

(4,709)

-

-

-

-

-

-

-

-

Unlisted equities

2,496

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

At fair value through statement of other comprehensive income

Listed debt securities

147,833

(887)

(887)

887

887

-

-

-

-

-

-

-

-

-

-

-

-

Unlisted equities

47,001

(4,700)

(4,700)

4,700

4,700

Fair value through profit or loss

Listed debt securities

Domestic

175,957

(1,056)

(1,056)

1,056

1,056

-

-

-

-

-

-

-

-

-

-

-

-

Overseas

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Discount securities

7,989

(48)

(48)

48

48

-

-

-

-

-

-

-

-

-

-

-

-

Domestic

401,306

-

-

-

-

-

-

-

-

(40,131)

(40,131)

40,131

40,131

-

-

-

-

Overseas

417,183

-

-

-

-

47,976

47,976

(47,976)

(47,976)

(41,718)

(41,718)

41,718

41,718

-

-

-

-

Domestic

186,194

-

-

-

-

-

-

-

-

(18,619)

(18,619)

18,619

18,619

-

-

-

-

Overseas

52,912

-

-

-

-

6,085

6,085

(6,085)

(6,085)

(5,291)

(5,291)

5,291

5,291

-

-

-

-

Derivative instruments

2,836

-

-

-

-

326

326

(326)

(326)

-

-

-

-

-

-

-

-

Financial Liabilities

At amortised cost

Loans payable

277,663

-

-

-

-

-

-

-

-

-

-

-

-

(136)

(136)

136

136

Fair value through profit or loss

Derivative instruments

Domestic

1,190

-

-

-

-

137

137

(137)

(137)

-

-

-

-

-

-

-

-

Overseas

2,522

290

290

(290)

(290)

Total increase/(decrease)

(5,309)

(5,309)

5,309

5,309

59,523

59,523

(59,523)

(59,523)

(110,459)

(110,459)

110,459

110,459

(136)

(136)

136

136

31 December 2019

Carrying Amount

Interest rate risk

Foreign exchange risk

Market risk

Australian CPI risk

-0.6%

+0.6%

-11.5%

+11.5%

-10.0%

+10.0%

-10.0%

+10.0%

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Financial Assets

At amortised cost

Cash and cash deposits

Domestic

596,752

(3,581)

(3,581)

3,581

3,581

-

-

-

-

-

-

-

-

-

-

-

-

Overseas

108,614

(652)

(652)

652

652

12,491

12,491

(12,491)

(12,491)

-

-

-

-

-

-

-

-

Unlisted equities

452

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

At fair value through statement of other comprehensive income

Listed debt securities

145,517

(873)

(873)

873

873

-

-

-

-

-

-

-

-

-

-

-

-

Fair value through profit or loss

Listed debt securities

Domestic

170,814

(1,025)

(1,025)

1,025

1,025

-

-

-

-

-

-

-

-

-

-

-

-

Overseas

2,383

(14)

(14)

14

14

274

274

(274)

(274)

-

-

-

-

-

-

-

-

Discount securities

1,991

(12)

(12)

12

12

-

-

-

-

-

-

-

-

-

-

-

-

Listed equities

Domestic

314,292

-

-

-

-

-

-

-

-

(31,429)

(31,429)

31,429

31,429

-

-

-

-

Overseas

291,618

-

-

-

-

33,536

33,536

(33,536)

(33,536)

(29,162)

(29,162)

29,162

29,162

-

-

-

-

Unlisted equities

Domestic

119,441

-

-

-

-

-

-

-

-

(11,944)

(11,944)

11,944

11,944

-

-

-

-

Overseas

36,172

-

-

-

-

4,160

4,160

(4,160)

(4,160)

(3,617)

(3,617)

3,617

3,617

-

-

-

-

Derivative instruments

4,252

-

-

-

-

489

489

(489)

(489)

-

-

-

-

-

-

-

-

Financial Liabilities

At amortised cost

Loans payable

282,743

-

-

-

-

-

-

-

-

-

-

-

-

(163)

(163)

163

163

Fair value through profit or loss

Derivative instruments

2,468

-

-

-

-

284

284

(284)

(284)

-

-

-

-

-

-

-

-

Total increase/(decrease)

(6,157)

(6,157)

6,157

6,157

51,234

51,234

(51,234)

(51,234)

(76,152)

(76,152)

76,152

76,152

(163)

(163)

163

163

(h)(v) Summarised Sensitivity Analysis – University

The following table summarises the sensitivity of the University’s financial assets and financial liabilities to interest rate risk, foreign exchange risk, and other price risk.

31 December 2019

Carrying Amount

Interest rate risk

Foreign exchange risk

Market risk

Australian CPI risk

-0.6%

+0.6%

-11.5%

+11.5%

-10.0%

+10.0%

-10.0%

+10.0%

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Financial Assets

At amortised cost

Cash and cash deposits

Domestic

507,174

(3,043)

(3,043)

3,043

3,043

-

-

-

-

-

-

-

-

-

-

-

-

Overseas

40,951

(246)

(246)

246

246

4,709

4,709

(4,709)

(4,709)

-

-

-

-

-

-

-

-

Unlisted equities

2,496

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Interest in related parties

7,200

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

At fair value through statement of other comprehensive income

Listed debt securities

147,833

(887)

(887)

887

887

-

-

-

-

-

-

-

-

-

-

-

-

Unlisted equities

47,001

(4,700)

(4,700)

4,700

4,700

Fair value through profit or loss

Listed debt securities

Domestic

175,957

(1,056)

(1,056)

1,056

1,056

-

-

-

-

-

-

-

-

-

-

-

-

Overseas

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Discount securities

7,989

(48)

(48)

48

48

-

-

-

-

-

-

-

-

-

-

-

-

Listed equities

Domestic

401,306

-

-

-

-

-

-

-

-

(40,131)

(40,131)

40,131

40,131

-

-

-

-

Overseas

417,183

-

-

-

-

47,976

47,976

(47,976)

(47,976)

(41,718)

(41,718)

41,718

41,718

-

-

-

-

Unlisted equities

Domestic

186,194

-

-

-

-

-

-

-

-

(18,619)

(18,619)

18,619

18,619

-

-

-

-

Overseas

52,912

-

-

-

-

6,085

6,085

(6,085)

(6,085)

(5,291)

(5,291)

5,291

5,291

-

-

-

-

Derivative instruments

2,836

-

-

-

-

326

326

(326)

(326)

-

-

-

-

-

-

-

-

Financial Liabilities

At amortised cost

Loans payable

277,663

-

-

-

-

-

-

-

-

-

-

-

-

(136)

(136)

136

136

Fair value through profit or loss

Derivative instruments

Domestic

1,190

-

-

-

-

137

137

(137)

(137)

-

-

-

-

-

-

-

-

Overseas

2,522

290

290

(290)

(290)

Total increase/(decrease)

(5,280)

(5,280)

5,280

5,280

59,523

59,523

(59,523)

(59,523)

(110,459)

(110,459)

110,459

110,459

(136)

(136)

136

136

31 December 2019

Carrying Amount

Interest rate risk

Foreign exchange risk

Market risk

Australian CPI risk

-0.6%

+0.6%

-11.5%

+11.5%

-10.0%

+10.0%

-10.0%

+10.0%

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

Result

Equity

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Financial Assets

At amortised cost

Cash and cash deposits

Domestic

587,582

(3,525)

(3,525)

3,525

3,525

-

-

-

-

-

-

-

-

-

-

-

-

Overseas

108,614

(652)

(652)

652

652

12,491

12,491

(12,491)

(12,491)

-

-

-

-

-

-

-

-

Unlisted equities

452

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Interest in related parties

7,200

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

At fair value through statement of other comprehensive income

Listed debt securities

145,517

(873)

(873)

873

873

-

-

-

-

-

-

-

-

-

-

-

-

Fair value through profit or loss

Listed debt securities

Domestic

170,814

(1,025)

(1,025)

1,025

1,025

-

-

-

-

-

-

-

-

-

-

-

-

Overseas

2,383

(14)

(14)

14

14

274

274

(274)

(274)

-

-

-

-

-

-

-

-

Discount securities

1,991

(12)

(12)

12

12

-

-

-

-

-

-

-

-

-

-

-

-

Listed equities

Domestic

314,292

-

-

-

-

-

-

-

-

(31,429)

(31,429)

31,429

31,429

-

-

-

-

Overseas

291,618

-

-

-

-

33,536

33,536

(33,536)

(33,536)

(29,162)

(29,162)

29,162

29,162

-

-

-

-

Unlisted equities

Domestic

119,441

-

-

-

-

-

-

-

-

(11,944)

(11,944)

11,944

11,944

-

-

-

-

Overseas

36,172

-

-

-

-

4,160

4,160

(4,160)

(4,160)

(3,617)

(3,617)

3,617

3,617

-

-

-

-

Derivative instruments

4,252

-

-

-

-

489

489

(489)

(489)

-

-

-

-

-

-

-

-

Financial Liabilities

At amortised cost

Loans payable

282,743

-

-

-

-

-

-

-

-

-

-

-

-

(163)

(163)

163

163

Fair value through profit or loss

Derivative instruments

2,468

-

-

-

-

284

284

(284)

(284)

-

-

-

-

-

-

-

-

Total increase/(decrease)

(6,101)

(6,101)

6,101

6,101

51,234

51,234

(51,234)

(51,234)

(76,152)

(76,152)

76,152

76,152

(163)

(163)

163

163

5.3 Fair Value Measurement

5.3.1 Fair Value Measurements

The University measures and recognises the following assets and liabilities at fair value on a recurring basis:

  • Financial assets at fair value through profit or loss;
  • Derivative financial instruments;
  • Financial assets at fair value through other comprehensive income;
  • Investments in equity instruments designated at fair value through other comprehensive income;
  • Land, buildings and infrastructure; and
  • Plant and equipment (Artworks and Rare Library Materials only)

Fair value disclosures relating to financial assets and liabilities at fair value through profit or loss are provided in Note 5.2 Financial Instruments.

Accounting Policy

The fair value of assets and liabilities must be measured for recognition and disclosure purposes.

The University classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.

The fair value of assets or liabilities traded in active markets (such as publicly traded derivatives, and listed equity instruments) is based on quoted market prices for identical assets or liabilities at the end of the reporting period (level 1). The quoted market price used for assets held by the University is the most representative of fair value in the circumstances within the bid-ask spread.

The fair value of assets or liabilities that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The University uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments (level 2) are used for long-term debt instruments held. Other techniques that are not based on observable market data (level 3) such as estimated discounted cash flows, are used to determine fair value for the remaining assets and liabilities. The fair value of interest-rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the end of the reporting period. The level in the fair value hierarchy is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

Fair value measurement of non-financial assets is based on the highest and best use of the asset. The University considers market participants use of, or purchase price of the asset, to use it in a manner that would be highest and best use.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the University for similar financial instruments.

5.3.2 Fair Value Hierarchy

The University categorises assets and liabilities measured at fair value into a hierarchy based on the level of inputs used in measurement:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices within Level 1 that are observable for the asset or liability either directly or indirectly; and

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

(i) Recognised Fair Value Measurements

Fair value measurements recognised in the Statement of Financial Position are categorised into the following levels:

Consolidated 2019

Total

Level 1

Level 2

Level 3

Recurring Fair Value Measurements

Non-Financial Assets

$'000

$'000

$'000

$'000

Land, Buildings and Infrastructure

1,362,432

-

123,568

1,238,864

Plant and Equipment

69,881

-

69,881

-

Total Non-Financial Assets

1,432,313

-

193,449

1,238,864

2018

Recurring Fair Value Measurements Non-Financial Assets

Land, Buildings and Infrastructure

1,368,848

-

111,432

1,257,416

Plant and Equipment

64,895

-

64,895

-

Total Non-Financial Assets

1,433,743

-

176,327

1,257,416

University

Total

Level 1

Level 2

Level 3

2019

$'000

$'000

$'000

$'000

Recurring Fair Value Measurements

Non-Financial Assets

Land, buildings and infrastructure

1,350,530

-

136,268

1,214,262

Plant and equipment

69,881

-

69,881

-

Total Non-Financial Assets

1,420,411

-

206,149

1,214,262

2018

Recurring Fair Value Measurements

Non-Financial Assets

Land, buildings and infrastructure

1,355,148

-

110,532

1,244,616

Plant and equipment

64,895

-

64,895

-

Total Non-Financial Assets

1,420,043

-

175,427

1,244,616

(ii) Reconciliation of Fair Value Items to Balance Sheet

Consolidated

Notes

Total

Recognised at Cost

Recognised at Fair Value

2019

$'000

$'000

$'000

Recurring Fair Value Measurements

Non-Financial Assets

Land, buildings and infrastructure

2.1I

1,808,261

445,829

1,362,432

Plant and equipment

2.1I

206,482

136,601

69,881

Total Non-Financial Assets

2,014,743

582,430

1,432,313

2018

Recurring Fair Value Measurements

Non-Financial Assets

Land, buildings and infrastructure

2.1I

1,803,243

434,395

1,368,848

Plant and equipment

2.1I

153,346

88,451

64,895

Total Non-Financial Assets

1,956,589

522,846

1,433,743

University

Notes

Total

Recognised at Cost

Recognised at Fair Value

2019

$'000

$'000

$'000

Recurring Fair Value Measurements

Non-Financial Assets

Land, buildings and infrastructure

2.1I

1,796,359

445,829

1,350,530

Plant and equipment

2.1I

205,886

136,005

69,881

Total Non-Financial Assets

2,002,245

581,834

1,420,411

2018

Recurring Fair Value Measurements

Non-Financial Assets

Land, buildings and infrastructure

2.1I

1,789,543

434,395

1,355,148

Plant and equipment

2.1I

152,244

87,349

64,895

Total Non-Financial Assets

1,941,787

521,744

1,420,043

There were no transfers between levels 1 and 2 for recurring fair value measurements during the year.

For transfers in and out of level 3 measurements see table below.

The University's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period

5.3.3 Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

The following table is a reconciliation of the consolidated level 3 items for the year ended 31 December 2019:

Level 3 Fair Value Measurements 2019

Land, Buildings and Infrastructure

Plant and Equipment

Investment Properties

Total

$'000

$'000

$'000

$'000

Opening balance

1,257,416

-

-

1,257,416

Acquisitions

15,070

-

-

15,070

Total gains/(losses) on revaluation

5,109

-

5,109

Accumulated depreciation movement

(38,731)

-

-

(38,731)

Closing balance

1,238,864

-

-

1,238,864

(i) Valuation Inputs, Processes and Relationships to Fair Value for Items Categorised in Level 2 & Level 3

Land

Land (Level 2)

The land of the University has been classified as level 2. The valuation of these parcels of land was based on the condition, location, land area and restrictions on sale or use of the asset (if any).

Key unobservable inputs:

Prices of comparable assets sold within a reasonable timeframe of 31 December 2019.

Interrelationship between key unobservable inputs and fair value measurement:

The estimated fair value increases (decreases) as the value of comparable assets increases (decreases).

Buildings and infrastructure

Buildings and infrastructure (Level 3)

The buildings and infrastructure of the University are considered specialised assets for which there is no active and liquid market and as such have been valued using the cost approach (current replacement cost). This is based on the current construction costs per square metre to replace the asset.

Key unobservable inputs:

Replacement cost per square metre of a modern equivalent asset using published construction data such as Rawlinsons Australia Construction Handbook 2016 encompassing Civil Works and Building costs. Colliers also has a database built up from research of building and site improvement costs. Actual costs of improvements identified during valuation exercises and also through research and contact with suppliers and builders have also been collated.

Interrelationship between key unobservable inputs and fair value measurement:

The estimated fair value increases (decreases) as the estimated replacement cost per square metre increases (decreases).

Commercial property (Level 2)

The commercial property has been valued using the market approach. The valuation model is based on a price per square metre for buildings derived from observable market data in active and transparent market.

Key observable inputs:

Prices per square metre. Premium (discount) on the quality of the building and lease terms.

Plant and equipment

Artworks (Level 2)

The artwork collection has been valued using the market approach. The valuation model looks at specifically comparable sales or sales information including sales of works by artists with a similar standing.

Key observable inputs:

Prices of identical works sold in the market where multiple prints exist.

Prices of similar works or works by artists of a similar standing sold in the market where the items are one off pieces.

Rare Library Materials (Level 2)

The rare library collection has been valued using the market approach. The valuation model looks at Australian and international sales information.