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Note 5 - Managing uncertainties

5.1 Contingent Assets and Liabilities

Quantifiable Contingencies

At 30 June 2020, the ATSB had no quantifiable contingencies. (2019: Nil)

Unquantifiable Contingencies

At 30 June 2020, the ATSB had no unquantifiable contingencies. (2019: 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

2020

2019

$’000

$’000

5.2A: Categories of financial instruments

Financial assets at amortised cost

Cash and cash equivalents

145

152

Trade and other receivables

1

88

Total financial assets at amortised cost

146

240

Financial liabilities

Financial liabilities measured at amortised cost

Trade creditors

(47)

(292)

Finance leases

-

(119)

Total financial liabilities measured at amortised cost

(47)

(411)

Total financial liabilities

(47)

(411)

Accounting Policy

Financial assets

Financial liabilities

In accordance with AASB 9 Financial Instruments,the ATSB 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 ATSB'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 ATSB 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.

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 Assets at Amortised Cost

Financial Liabilities 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.

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).

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.

5.2B: Net gains or losses on financial liabilities

Financial liabilities measured at amortised cost

Interest expense

(102)

(6)

Net gains/(losses) on financial liabilities measured at amortised cost

(102)

(6)

The net interest expense from financial liabilities not at fair value through profit or loss is $101k (2019: $6k).

5.3 Fair Value Measurement

Accounting Policy

The ATSB has Heritage and Cultural, and Property, Plant and Equipment assets and the fair value for each asset is measured at market selling price, or depreciated replacement cost in isolated instances where no market prices or indicators are available for specialised, diagnostic equipment.

Following initial recognition at cost, property, plant and equipment are carried at fair value. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the asset's fair value as at the reporting date. The regularity of independent valuations depends on the volatility of movements in market values for the relevant assets.

The ATSB engaged Jones Lang LaSalle Public Sector Valuations Pty Ltd (JLL) to undertake a revaluation of all plant and equipment assets as at 30 April 2020 and confirm that the models developed comply with

AASB 13 Fair Value Measurement.

Revaluation adjustments were made on a class basis. Any revaluation increment was credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets were recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date was eliminated against the gross carrying amount of the asset and the asset was restated to the revalued amount.

The ATSB's property, plant and equipment assets under the fair value hierarchy, are valued at Level 3.

5.3 Fair value measurement

Fair value measurements at the end of the reporting period

Non-financial assets

Heritage and cultural

16

15

Property, plant and equipment

1,085

1,179

1,101

1,194

Visit

https://www.transparency.gov.au/annual-reports/australian-transport-safety-bureau/reporting-year/2019-20-30