This section describes how ASIC manages financial risks within its operating environment.
7.1 Contingent assets and liabilities
Balance from previous period
New contingent assets
Total contingent assets
Net contingent assets
Quantifiable contingencies (ASIC Departmental)
The above note contains 19 matters (2019: 20 matters) where a contingent asset is disclosed in respect of cases where ASIC has received an award of costs in its favour, however agreement with respect to the quantum payable to ASIC has not been reached. ASIC has estimated these matters represent a combined receivable of $5.526m (2019: $9.638m), which is disclosed as a contingent asset because realisation of this debt is not virtually certain.
Unquantifiable contingencies (ASIC Departmental)
ASIC is party to many civil litigation matters arising out of its statutory duty to administer and enforce laws for which it is responsible.
Like any corporate body, ASIC may from time to time be the subject of legal proceedings for damages brought against it or may receive notice indicating that such proceedings may be brought. In either case ASIC, like any other party to civil litigation, may be required to pay the other party’s costs if ASIC is unsuccessful.
Civil litigation brought, or threatened to be brought, against ASIC as a defendant
There are, at the date of this report, four matters of this type where proceedings are current. In these matters, ASIC denies liability and is of the view that, save for having to pay legal fees and other out-of- pocket expenses, it is likely that ASIC will:
- successfully defend the actions instituted; and
- not be required to pay any damages.
Conversely, ASIC, like any other party to civil litigation, may be entitled to recover costs arising out of such litigation if it is successful. In addition to the matters specifically referred to in this note, ASIC has legal action pending in a number of other matters, however, due to the uncertainty over the outcome of outstanding and pending court cases, duration of court cases and the legal costs of the opposing party, ASIC is unable to reliably estimate either its potential payments to, or potential cost recoveries from, opposing litigants. There may also be other matters where ASIC has received an award of costs in its favour, however no contingent asset has been disclosed as recovery of the debt is not probable. There may also be other matters where no contingency has been quantified because the costs awarded for or against ASIC are estimated to be less than $20,000 each.
Contingent liabilities and contingent assets 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 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 unlikely.
Significant accounting judgements and estimates
No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next reporting period.
Quantifiable administered contingencies – Banking Act, Life Insurance Act and Corporations Act administration
An actuarial assessment of the number of claims that are likely to be lodged with ASIC in respect to unclaimed monies was conducted by a registered actuary. ASIC adopted the registered actuary’s calculation for the likely claims payable, reported in Note 4.2B.
The contingent liability represents an estimate of the principal unclaimed monies that have been lodged with ASIC but where the likelihood of a successful claim is regarded as unlikely. No allowance has been made for the compounding interest, which is payable for a successful claim lodged from 1 July 2013 in accordance with legislated interest rates. The contingent liability has been calculated by deducting from the total principal balance, excluding interest, of unclaimed monies lodged but not yet claimed, the undiscounted amount of the provision for future refunds excluding any interest:
Banking Act 1959
Life Insurance Act 1995
Corporations Act 2001
Unquantifiable administered contingencies
There are no unquantifiable administered contingent liabilities.
Administered contingent liabilities represent a repayment estimate of unclaimed monies that are considered unlikely to be paid. There are no administered contingent assets as at 30 June 2020 (2019: nil).
7.2 Financial instruments
Cash and cash equivalents1
Total financial assets at amortised cost
Total financial liabilities at amortised cost
ASIC classifies its financial assets in the following categories:
- Cash and cash equivalents are measured at nominal amounts.
- Trade receivables are measured at amortised cost
The classification depends on both ASIC’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 impacted by the application of AASB 9. The application of AASB 9 has had no impact on the classification or carrying amount of Trade receivables.
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 the simplified approach.
The simplified approach for trade debtors 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 at amortised cost
Supplier 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).
Accounting judgement and estimates
No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of financial assets and liabilities within the next reporting period.
Net gain/(loss) on financial assets at amortised cost
7.3 Administered – financial instruments
Cash and cash equivalents1
Total financial assets at amortised cost
Total financial assets
The application of AASB 9 has had no impact on the classification or carrying amount of Administered trade receivables or liabilities.
7.4 Fair value measurement
ASIC deems transfers between levels of the fair value hierarchy to have occurred at the end of the reporting period. See Note 3.2A for further details on ASIC’s valuation policy and procedures.
Plant and equipment
Total non-financial assets
ASIC did not measure any non-financial assets at fair value on a non-recurring basis as at 30 June 2020.