(a) Cash and cash equivalents

Cash and cash equivalents include cash at bank and on hand as well as deposits held at call with financial institutions. The Company’s exposure to interest rate risk is discussed in Note 9(d) in 9. Financial and Capital Risk Management.

Reconciliation of loss after income tax to net cash inflow from operating activities

Reconciliation of movements of liabilities and equity to cash flows arising from financing activities

(b) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less expected credit loss provision raised for doubtful debts. Trade receivables are generally due for settlement within 45 days. The expected credit loss provision was nil at 30 June 2020. (30 June 2019: $nil).

(c) Prepayments

(d) Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid and are measured at amortised cost. The amounts are unsecured and are usually paid within 30 days of recognition.

(e) Borrowings

Non-interest-bearing liabilities

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(i) Deferred purchase obligation

As part of the AWD Program, ASC AWD and ASC Engineering Pty Limited, subsidiaries of ASC Pty Ltd at the time, entered into an agreement with the Commonwealth of Australia where the Commonwealth of Australia made a contribution to build a production facility required for the construction of the AWDs.

Under this arrangement, ASC AWD had an obligation to purchase the facility within three months of the acceptance of the last AWD by the Commonwealth at an amount equal to the lesser of the written down value of the facility at an agreed depreciation rate, and the fair market value determined by a licensed valuer. No loss is expected to be incurred in relation to this deferred purchase obligation. As of 26 March 2017, this obligation transferred to ANI as owner of the critical infrastructure of the Osborne South shipyard.

The financial liability was measured at fair value of $15.4 million at 30 June 2019, being the expected amount due on the estimated settlement date of 30 June 2020. On 29 July 2020, in a letter to ANI and ASC AWD, the Department of Defence clarified the term “Acceptance” to have the meaning: “means 28 November 2021, being the date that the Commonwealth expects to declare final acceptance of the last AWD.”

The financial liability has therefore been revalued to $13.1 million at 30 June 2020 and reclassified from current to non-current liabilities, in accordance with AASB 9 Financial Instruments.

(ii) Term loan

The term loan consists of an interest free 99-year loan to the Company from the Department of Manufacturing Industry, Small Business and Regional Development (SA), for expenditure on capital items and to assist with site development costs. The $0.2 million term loan is repayable in 2094 or at the option of the Company at any time prior to 2094. The term loan has been discounted to its present value of $0.004 million at 30 June 2020 (2019:$0.004 million) in accordance with AASB 9 Financial Instruments.

(f) Lease liability

The Port Adelaide office lease is accounted for under AASB 16 Leases. The adoption of this standard and transition impacts are further discussed in Note 16(e)(i) in 16. Other Significant Accounting Policies.