Go to top of page

Managing uncertainties

This section analyses how the Australian Prudential Regulation Authority manages financial risks within its operating environment.

5.1 Contingent assets and liabilities

Significant contingent assets
APRA has no significant contingent assets as at the balance date (2019: Nil).

Quantifiable contingencies (APRA departmental)
APRA has no quantifiable contingencies as at the balance date (2019: Nil).

Unquantifiable contingencies (APRA departmental)
APRA has no unquantifiable contingencies as at the balance date (2019: 1).

Accounting policy

Contingent assets and contingent liabilities

Contingent assets and contingent liabilities are not recognised in the Statement of financial position but are reported in this note. They may arise from uncertainty as to the existence of an asset or liability, 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 the probability of settlement is greater than remote.

5.2 Financial instruments

Financial instruments

2020

2019

Notes

$'000

$’000

5.2A: Categories of financial instruments

Financial assets at amortised cost

Cash and cash equivalents

2.1A

72,828

71,678

Trade receivables

2.1B

2,071

4,579

Total financial assets at amortised cost

74,899

76,257

Total financial assets

74,899

76,257

Financial liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

2.3A

6,555

6,964

Leases

2.4

52,232

-

Total financial liabilities

58,787

6,964

Total financial liabilities

58,787

6,964

Accounting policy

Financial instruments

Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, APRA classified 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 APRA's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when APRA becomes a party to a 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 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 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 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).

5.2B: Net gains or losses on financial assets
There were no net gains or losses on financial assets.


5.2C: Net gains or losses on financial liabilities
There were no net gains or losses on financial liabilities.


5.2D: Fair value of financial instruments

Fair value of financial instruments

Carrying amount

Fair value

Carrying amount

Fair value

2020

2020

2019

2019

$'000

$'000

$'000

$'000

Financial assets

Trade receivables

2,071

2,071

4,579

4,579

Total financial assets

2,071

2,071

4,579

4,579

Financial Liabilities

Trade creditors and accruals

6,555

6,555

6,964

6,964

Leases

52,232

52,232

-

-

Total financial liabilities

58,787

58,787

6,964

6,964

5.3 Fair value measurements

Fair value measurements

Accounting policy

Fair value measurement

Accounting policies for fair value measurements of tangible non-financial assets are included in Note 2.2.

Fair value measurements at the end of the reporting period

2020

2019

Notes

$'000

$’000

Non-financial assets1

Leasehold improvements

2.2

13,668

15,304

Computer hardware and office equipment

2.2

5,195

4,808

Total non-financial assets

18,863

20,112

1 No non-financial assets were measured at fair value on a non-recurring basis as at 30 June 2020 (2019: nil).