4.1A Categories of financial instruments
Financial assets at amortised cost
Cash on hand or on deposit
Trade and other receivables
Total financial assets at amortised cost
Total financial assets
Financial liabilities measured at amortised cost
Suppliers and trade creditors
Payable to Government
Other payables (salaries)
Total financial liabilities measured at amortised cost
Total financial liabilities
The Corporation's investments are held to maturity, and are not held for sale. No financial asset was pledged, nor held as collateral, in 2020 (2019: Nil).
The Corporation has established financial risk management policies to identify and analyse the risks faced by the Corporation in maximising its return on investments.
With the implementation of AASB 9 Financial Instruments for the first time in 2019, the Corporation classified its financial assets as 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 Corporation becomes a party to the contract and, as a consequence, has a legal right to receive and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.
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.
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.
A 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 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 amortised cost
Financial liabilities 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).
4.2 Fair Value Measurement
The following tables provide an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the Statement of Financial Position do not apply the fair value hierarchy.
Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations is dependent upon the volatility of movements in market values for the relevant assets.
4.2A Fair value measurement
The Corporation deems transfers between levels of the fair value hierarchy to have occurred at the end of the reporting period in line with AASB 13 Fair Value Measurement.
Fair value measurements at the end of reporting period(i)
Buildings on freehold land
Other plant and equipment
Total fair value measurements of non-financial assets in the Statement of Financial Position
Significant inputs utilised by the Corporation are derived and evaluated as follows:
Land and Buildings
Land – Price per square metre/per hectare
The Artarmon and Craigieburn land assets have been measured using the market approach by reference to similar transactions within the surrounding locality. The adopted price per square metre has been determined based on professional judgement regarding the comparability of transactions to the subject asset. The existing use of the property at Artarmon is currently considered to be its highest and best use.
The land asset at Craigieburn is not currently used at its highest and best use. The Corporation valued the land at its highest and best use (i.e. a residential subdivision) as at 30 June 2020. The asset is subject to an encumbrance (lease) until 2028, which is a restriction that would pass to a market participant. The fair value measurement has therefore considered this restriction in the valuation.
Buildings – Market Rental and Capitalisation Rate
The income capitalisation approach has been adopted to determine the fair value of the buildings asset class. Under the income capitalisation approach the net market rental is capitalised at an appropriate yield as determined from comparable sales transactions. The analysis and selection of an appropriate market rental and yield from evidence with varying degrees of comparability to the subject property is determined based on professional judgement.
Plant and Equipment – Consumed economic benefit/Obsolescence of asset
Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the depreciated replacement cost (DRC) approach. Under the DRC approach the estimated cost to replace the asset is calculated and then adjusted to take into account its consumed economic benefit/asset obsolescence (accumulated depreciation). Consumed economic benefit/asset obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration.
The weighted average is determined by assessing the fair value measurement as a proportion of the total fair value for the class against the total useful life of each asset.