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Note 13: Financial Instruments

Consolidated

2020

2019

$

$

13A Categories of financial instruments

Financial assets at amortised cost

Cash and cash equivalents

13,689,597

35,114,732

Trade and other receivables

2,433,992

1,960,419

Other financial assets - loans, bond deposits and fixed term deposits

19,787,935

2,142,761

Total financial assets at amortised cost

35,911,524

39,217,912

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss

13,209,870

10,945,387

Other financial assets - loans

-

95,299

Total financial assets at fair value through profit or loss

13,209,870

11,040,686

Total financial assets

49,121,394

50,258,598

Financial Liabilities

Financial liabilities measured at amortised cost

Trade and other payables

674,575

585,672

Deferred Revenue - Government Grants

7,756,277

8,968,573

Total financial liabilities measured at amortised cost

8,430,852

9,554,245

13B Net gains or losses on financial assets

Financial assets at amortised cost

Interest revenue

390,203

867,959

Net gains on financial assets at amortised cost

390,203

867,959

Financial assets at fair value through profit or loss

Distributions received

547,278

-

Fair value (loss)/gain

(354,973)

195,387

Net gains on financial assets at fair value through profit or loss

192,305

195,387

13B Financial risk management objectives

Capital management
The Group manages its capital to ensure that it will be able to continue as a going concern while meeting its social responsibility for food security through the optimisation of debt and grant funding.
The capital structure of the Group consists of issued share capital and retained earnings as disclosed in the statement of changes in equity.
The Group is not subject to externally imposed capital requirements. Operating cash flows are used to operate and expand the Group’s operations as well as to make routine outflows of tax.
The nature of services provided contribute to the high liquidity risk underlying the financial instruments.
The Group is dependent on ongoing government support to provide food security and quality stores within remote communities.

Financial risk management objectives
The Group has formalised risk management processes in place. A risk register is kept updated for all risks identified for the Group. It lends money to stores that it manages on approval from the Stores Assessment
Committee, which is a sub committee of the Board of Directors. Loans are provided at a discounted rate of interest.
The Store Assessment Committee’s purpose is to review the viability of new stores proposed for
management agreements to evaluate required establishment and support funds. This committee assists in mitigating liquidity risk prior to entering into a new contract. In some instances the stores are unable to repay the loans and these amounts are then funded from grant income received from the Group’s immediate parent and ultimate parent entity, the Australian Government.
The capital structure of the Group consists of debt and unexpended grant funding in note 8B.

Market Risk
Other price risk
The Group is exposed to equity price risk arising from equity investments. The Group invested in portfolio which are held for trading purpose. The management has considered the impact of the price changes on its investment to be minimal.

Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group only deals with stores that it manages, related parties, funding bodies or credit worthy counter parties such as Metcash. Metcash supply inventory to the Outback Stores Group. It therefore is in a position to ensure that it minimises its exposure to credit risk. As at 30 June 2020, the Group’s maximum exposure to credit risk without taking into account any collateral or other credit enhancements is equivalent to the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position and maximum amount the entity would have to pay if the financial guarantee is called upon irrespective of the likelihood of the guarantee being exercised.

Foreign currency risk management
The Group has minimum foreign exchange exposure and does not manage any implicit risk.

Interest rate risk
The Group’s activities expose it to the financial risks of changes in interest rates. The Group has a treasury function policy and interest rate risks are managed by investing in short term interest bearing deposits, and lending to stores using varied maturity periods. Periods include up to ten years and are provided to stores at a discounted rate of interest.
There has been no change to the Group’s exposure to market risks except for the exposure to the price risk related to the investment in financial assets at fair value through profit or loss. The manner in which the risk is measured and managed are detailed below.

Interest rate risk management
Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Group is exposed to interest rate risk from term deposits and loans provided to remote community stores. Currently there is a treasury function policy and interest rate risk is managed by investing in short term interest bearing deposits and lending to stores over the period of agreed management contracts. Term deposits and trading accounts are held in pre-approved financial institutions only.

The following table illustrates the maturities for interest bearing financial assets subject to interest rate risk.

Consolidation

Weighted Average effective interest rate

Less than 1 month

1-3 months

3 months to 1 year

1-5 years

5+ years

Total

%

$

$

$

$

$

$

2020

Short term deposits (fixed interest rate)

0.95%

-

5,000,000

18,835,000

-

-

23,835,000

Other cash & cash equivalents (variable interest)

0.15%

-

-

8,689,597

-

-

8,689,597

Store loans (fixed interest rate)

5.85%

-

-

140,715

812,220

-

952,935

-

5,000,000

27,665,312

812,220

-

33,477,532

2019

Short term deposits (fixed interest rate)

1.30%

-

8,500,000

840,000

-

-

9,340,000

Other cash & cash equivalents (variable interest)

0.90%

-

-

25,774,732

-

-

25,774,732

Store loans (fixed interest rate)

5.92%

-

-

80,865

1,633,780

-

- 1,714,645

Bond deposits

5.48%

-

-

-

523,415

-

523,415

-

8,500,000

26,695,597

2,157,195

-

37,352,792

Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall due. Ultimate responsibility for liquidity risk management exists with the Board of Directors.
The Group manages liquidity risk by maintaining adequate reserves and banking facilities (term deposits) to meet forecast cash flows taking into account maturity profiles of financial assets and liabilities.
The following table illustrates the maturities for financial liabilities attributable to liquidity risk. The tables have been drawn based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

Consolidation

Less than 1 month

1-3 months

3 months to 1 year

1-5 years

5+ years

Total

$

$

$

$

$

$

2020

Trade and other payables

-

674,575

-

-

-

674,575

Deferred revenue

-

-

7,756,277

-

-

7,756,277

-

674,575

7,756,277

-

-

8,430,852

2019

Trade and other payables

-

585,672

-

-

-

585,672

Deferred revenue

-

-

8,968,573

-

-

8,968,573

-

585,672

8,968,573

-

-

9,554,245

13C Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market prices.
The fair value of other financial assets and liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.
Unless where otherwise stated, the directors consider the financial assets and financial liability carrying amount to also be its fair value.

Fair value hierarchy as at 30 June 2020

Financial assets

Level 1

$

Level 2

$

Level 3

$

Total

$

Financial assets at fair value through profit or loss

Investment in managed funds

13,209,870

-

-

13,209,870

Total

13,209,870

-

-

13,209,870

Fair value hierarchy as at 30 June 2019

Financial assets

Level 1

$

Level 2

$

Level 3

$

Total

$

Financial assets at fair value through profit or loss

Investment in managed funds

10,945,387

-

-

10,945,387

Loans

-

-

95,299

95,299

Total

10,945,387

95,299

11,040,686

The categorisation of fair value measurements into the different levels of the fair value hierarchy depends on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement. Level 3 inputs are unobservable inputs for the asset and liability.