Go to top of page

Managing uncertainties

This section analyses how the OAIC manages financial risks within its operating environment.

5.1 CONTINGENT ASSETS AND LIABILITIES

Quanitifiable contingencies

As at 30 June 2018 the OAIC had no quantifiable contingent liabilities.

Unquantifiable contigencies

As at 30 June 2019 the Australian Information Commissioner (AIC) was a respondent to three (3) matters in the Federal Court of Australia and a respondent in one matter in the Federal Circuit Court.

The four (4) matters before the federal courts in which the AIC was a respondent are Administrative Decisions (Judicial Review) Act 1977 reviews of decisions to finalise privacy complaints and Information Commissioner reviews on FOI requests.

Although the federal courts may award costs, the AIC’s exposure to a costs order is highly unlikely in all matters, based on current legal advice. It is not possible to estimate the amounts of payment(s) that may be required in relation to the matters where a costs order may materialise at the conclusion of the matter.

The AIC is also a respondent to four matters in the Administrative Appeals Tribunal, one (1) of which is in relation to a determination made by the AIC under s 52 of the Privacy Act 1988, one (1) of which is in relation to a direction given by the AIC under s 26WR of the Privacy Act 1988, one (1) of which was relation to a declaration made by the AIC under s 89K of the Freedom of Information Act 1982, and one (1) other in relation to an FOI request decision made by the OAIC. However, as the Tribunal is a ‘no costs’ jurisdiction consideration of contingent liabilities is not necessary in these matters.

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

2019

2018

$’000

$’000

5.2A: CATEGORIES OF FINANCIAL INSTRUMENTS

Financial assets under AASB 139

Receivables

Cash on hand and at bank

589

Trade and other receivables

651

Total receivables

589

Total financial assets

589

Financial assets under AASB 9

Financial assets at amortised cost

Cash on hand and at bank

601

Trade and other receivables

698

Total financial assets at amortised cost

1,299

Total financial assets

1,299

Financial liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

1,131

1,174

Total financial liabilities measured at amortised cost

1,131

1,174

Total financial liabilities

1,131

1,174

Classification of financial assets on the date of initial application of AASB 9

AASB 139 original classification

AASB 9 new classification

AASB 139 carrying amount at
1 July 2018

AASB 9 carrying amount at
1 July 2018

Financial assets class

Note

$'000

$'000

Cash and cash equivalents

3.1A

Held-to-maturity

Amortised cost

589

589

Trade and other receivables

3.1B

Held-to-maturity

Amortised cost

651

651

Total financial assets

1,240

1,240

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB 9

AASB 139 carrying amount at 30 June 2018

Reclassification

Remeasurement

AASB 9 carrying amount at 1 July 2018

$'000

$'000

$'000

$'000

Financial assets at amortised cost

Held to maturity

– Cash and cash equivalents

589

589

Loans and receivables

Trade and other receivables

651

651

Total amortised cost

1,240

1,240

1 There is no change in the carrying amounts based on measurements under AASB 139 and transition to AASB 9.

Accounting policy

Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the entity 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

c) financial assets measured at amortised cost.

The classification depends on both the entity’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:

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.

Effective interest method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Financial assets at fair value through other comprehensive income (FVOCI)

Financial assets measured at fair value through other comprehensive income are held with the objective of both collecting contractual cash flows and selling the financial assets and the cash flows meet the SPPI test.

Any gains or losses as a result of fair value measurement or the recognition of an impairment loss allowance is recognised in other comprehensive income.

Financial assets at fair value through profit or loss (FVTPL)

Financial assets are classified as financial assets at fair value through profit or loss where the financial assets either doesn’t meet the criteria of financial assets held at amortised cost or at FVOCI (i.e. mandatorily held at FVTPL) or may be designated.

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.

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 fair value through profit or loss

Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

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).

5.3 FAIR VALUE MEASUREMENT

The following tables provide an analysis of assets and liabilities that are measured at fair value.

The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Accounting policy

The OAIC considers the fair value hierarchy levels at the end of the reporting period. There were no transfers in or out of any levels during the reporting period.

Fair value measurements at the end of the reporting period

2019
$'000

2018
$'000

Category
(Level 1, 2 or 3)

Valuation technique(s) and inputs used

Non-financial assets1

Market approach. Market replacement cost less estimate of written down value of asset used.

Infrastructure, plant and equipment

643

977

2

1 There was no non-financial assets where the highest and best use differed from its current use during the reporting period.