Managing uncertainties
This section analyses how the Australian Pesticides and Veterinary Medicines Authority manages financial risks within its operating environment
5.1: Contingent Assets and Liabilities |
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Quantifiable Contingencies |
The APVMA has no quantifiable contingent liabilities relating to litigation costs. (2017‐18: nil) |
Unuantifiable Contingencies |
The APVMA had no unquantifiable contingencies. (2017‐18: nil) |
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. |
5.2 Financial Instruments |
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5.2A: Categories of financial instruments |
2019 $'000 |
2018 $'000 |
Financial Assets under AASB 139 |
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Loans and receivables |
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Cash and cash equivalent |
2 269 |
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Other sundry debtors |
529 |
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Total Loans and receivables |
2 798 |
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Financial Assets under AASB 9 |
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Financial assets at amortised cost |
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Cash and cash equivalents |
8 918 |
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Other sundry debtors |
214 |
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Total Financial assets at amortised cost |
9 132 |
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Total Financial assets |
9 132 |
2 798 |
Financial liabilities |
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Financial liabilities measured at amortised cost |
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Other liabilities |
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Trade creditors and accruals |
2 633 |
3 023 |
Other payables |
6 463 |
2 146 |
Total financial liabilities measured at amortised cost |
9 096 |
5 169 |
Total financial liabilities |
9 096 |
5 169 |
Classification of Financial assets on the date of initial application of AASB 9 |
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Financial Asset category |
Cash and cash equivalents |
Total financial assets |
AASB 139 classification |
Loans and receivables |
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AASB 9 new classification |
Amortised cost |
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AASB 139 carrying amount at 1 July 2018 |
2,798 |
2,798 |
AASB 9 carrying amount at 1 July 2018 |
2,798 |
2,798 |
There were no changes to the carrying amounts of financial assets on the initial application of AASB 9. |
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5.2B: Net gains or losses on financial assets |
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Financial assets at amortised cost |
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Interest revenue |
48 |
34 |
Net gain/(loss) from financial assets |
48 |
34 |
5.2C: Net gains and losses on financial liabilities |
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Financial liabilities measured at amortised cost |
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Lease liability (increase)/decrease |
167 |
(751) |
Net gain/(loss) from financial assets |
167 |
(751) |
5.2D: Fair value of financial instruments |
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The net fair values of cash and cash equivalents, trade receivables and other receivables approximate their carrying amounts. The net fair values for trade creditors and other liabilities are approximated by their carrying amounts. AASB 9 contains the requirement for interest revenue to be calculated using the effective interest rate method. Interest revenue recognised by the APVMA is interest received on its bank account. The change in relevant standards and definitions do not have an impact on interest revenue recognised by the APVMA. |
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Accounting Policy Financial assets With the implementation of AASB 9 Financial Instruments for the first time in 2019, the entity 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 entity'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. 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 Asset 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. |
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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 Fair Value Through Profit or Loss Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. 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). |
5.3: Fair Value Measurements |
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Accounting Policy Non‐financial assets Initial recognition Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in an exchange and any liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate. Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of a restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring. Revaluations Property, plant and equipment are then carried at fair value once they have been revalued in accordance with policy. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values at reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets. Assets are presently revalued on a three year cycle. If there are any major impacts on any asset group, the effect is assessed and the asset's valuation will be adjusted. As the asset groups are quite stable, any impacts are minimal. All assets (except for intangibles) were revalued as at 30 June 2016 by an independent valuer. For the 2018‐19 reporting period, a revaluation exercise was not conducted as the majority of assets acquired were commissioned in June 2019. Management has deferred the revaluation exercise until the 2019‐20 financial year reporting period. |
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Valuation method |
2019 $'000 |
2018 $'000 |
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Non-financial assets |
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Leasehold improvements |
Depreciated replacement cost adjusted for impairment |
2 858 |
500 |
Property, plant and equipment |
Depreciated replacement cost adjusted for impairment |
1 297 |
818 |
4 155 |
1 318 |
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https://www.transparency.gov.au/annual-reports/australian-pesticides-and-veterinary-medicines-authority/reporting-year/2018-2019-39