IBA’s financial statements must be read in the context of its enabling legislation, the Aboriginal and Torres Strait Islander Act, and the impact of Australian Accounting Standards, particularly in respect to the valuation of its financial assets.
The Aboriginal and Torres Strait Islander Act requires that funds available under the New Housing Fund including interest earnings, are to be used exclusively for housing loans. Consequently, income earned from the New Housing Fund is not available for operational expenses but rather utilised for new home loans under that Fund.
The financial statements for the New Housing Fund are provided separately under Note 16 .
Australian Accounting Standards require that the financial assets of IBA be recorded at their fair value. Loans in relation to the housing and business loans portfolio are issued at concessional interest rates. A market valuation requires discounting the portfolio value to equate interest earned to market yield for comparable risk including the impact of expected credit loss. The annual incremental discount is a non-cash item, recorded in the Statement of Comprehensive Income under both Finance costs for the discount expenditure at inception, and Unwinding of concessional discount as the loan is repaid during its expected term to discharge.
For the investment portfolio, valuation at fair market value results in cyclical movements in property and business valuations being recorded in the Statement of Comprehensive Income.