The carrying amount of the financial assets and liabilities is a reasonable approximation of fair value due to their short term nature.
Classification of financial assets on the date of initial application of AASB 9
There was no change in the carrying amounts as no transition adjustment was required.
With the implementation of AASB 9 Financial Instruments for the first time in the 2019 financial year, the Group classifies its financial assets at amortised cost.
The classification depends on both the Group’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:
the financial asset is held in order to collect the contractual cash flows; and
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 Assets
Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the simplified 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.
Changes in accounting policies resulting from the adoption of AASB 9 have been applied from 1 July 2018. The Group has used an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Differences in carrying amounts of financial assets and financial liabilities resulting from the adoption of AASB 9 are recognised in retained surplus as at 1 July 2018.
Accordingly, the information presented for 2018 does not generally reflect the requirements of AASB 9, but rather those of AASB 139.
On transition the Group has not identified any impact and therefore no adjustment was recognised in retained surplus.
Financial liabilities are classified as 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.
Suppliers 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).