Public Transport Authority

Financial Instruments

a) Financial risk management objectives and policies

Financial instruments held by the PTA are cash and cash equivalents, restricted cash and cash equivalents, WATC borrowings, finance leases, receivables and payables. The PTA has limited exposure to financial risks. The PTA's overall risk management program focuses on managing the risks identified below.

Credit risk

Credit risk arises when there is the possibility of the PTA's receivables defaulting on their contractual obligations resulting in financial loss to the PTA.

The maximum exposure to credit risk at end of the reporting period in relation to each class of recognised financial assets is the gross carrying amount of those assets inclusive of any provisions for impairment as shown in the table at note 38 'Financial instruments disclosures' and note 21 'Receivables'.

Credit risk associated with the PTA's financial assets is minimal because the main receivable is the amounts receivable for services (holding account). For receivables other than government, the PTA trades only with recognised, creditworthy third parties. The PTA has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. In addition, receivable balances are monitored on an ongoing basis with the result that the PTA's exposure to bad debts is minimal. At the end of the reporting period there are no significant concentrations of credit risk.

Liquidity risk

Liquidity risk arises when the PTA is unable to meet its financial obligations as they fall due.

The PTA is exposed to liquidity risk through its trading in the normal course of business. The PTA has appropriate procedures to manage cash flows including drawdowns of appropriations by monitoring forecast cash flows to ensure that sufficient funds are available to meet its commitments.

The PTA has a short-term liquidity facility of $200 million on which it can draw down to fund temporary cash shortfall. The PTA is currently in a net current liability position but can convert its short term borrowings at any time as approval from the Western Australian.

Treasury Corporation (WATC) has been obtained. As such, this does not pose a liquidity risk to the PTA.

Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates and interest rates will affect the PTA's income or the value of its holdings of financial instruments.

The PTA's exposure to market risk for changes in interest relates primarily to the long-term debt obligations. The PTA's borrowings are all obtained through WATC and are repayable at fixed rates with varying maturities. The risk is managed by WATC through portfolio diversification and variation in maturity dates. The PTA earns interest on the daily balance of its bank account.

The PTA does not trade significantly in foreign currency and is not materially exposed to other price risks.

b) Categories of Financial Instruments

The carrying amounts of each of the following categories of financial assets and financial liabilities at the end of reporting period are:

	2014 $000	2013 $000
Financial Assets
Cash and cash equivalents	100,544	56,114
Restricted cash and cash equivalents	15,480	11,432
Loans and receivables (i)	958,715	1,015,888
Financial Liabilities
Financial Liabilities measured at amortised cost	1,838,226	1,640,684

(i) The amount of loans and receivables excludes GST recoverable from ATO (statutory receivable) and prepayments.

c) Financial Instrument Disclosures

Credit risk

The following table discloses the PTA’s maximum exposure to credit risk and the ageing analysis of financial assets. The PTA’s maximum exposure to credit risk at the end of reporting period is the carrying amount of the financial assets as shown below. The table discloses the ageing of financial asset that are past due but not impaired and impaired financial assets. The table is based on information provided to senior management of the PTA.

The PTA does not hold any collateral as security or other credit enhancement relating to the financial assets it holds.

Ageing analysis of financial assets

				Past due but not impaired
	Note	Carrying Amount $000	Not past due and not impaired $000	Up to 1 month $000	1 to 3 months $000	3 months to 1 year $000	1 to 5 years $000	More than 5 years $000	Impaired financial assets $000
2014
Cash and cash equivalents	34	100,544	100,544	0	0	0	0	0	0
Restricted cash and cash equivalents	19	15,480	15,480	0	0	0	0	0	0
Receivables (i)	21	12,869	8,959	2,686	1,076	148	0	0	0
Amounts receivable for services	22	945,846	945,846	0	0	0	0	0	0
		1,074,739	1,070,829	2,686	1,076	148	0	0	0
2013
Cash and cash equivalents	34	56,114	56,114	0	0	0	0	0	0
Restricted cash and cash equivalents	19	11,432	11,432	0	0	0	0	0	0
Receivables (i)	21	13,284	9,345	2,087	1,667	0	0	0	185 (ii)
Amounts receivable for services	22	1,002,604	1,002,604	0	0	0	0	0	0
		1,083,434	1,079,495	2,087	1,667	0	0	0	185

(i) The amount of receivables excludes GST recoverable from ATO (statutory receivable) and prepayments.

(ii) The carrying amount of the receivable before deducting the impairment was $492,000 in 2013. It is expected that $185,000 of the amount owing will be recovered.

Liquidity risk and interest rate exposure

The following table details the PTA’s interest rate exposure and the contractual maturity analysis of financial assets and financial liabilities. The maturity analysis section includes interest and principal cash flows. The interest rate exposure section analyses only the carrying amounts of each item.

Interest rate exposure and maturity analysis of financial assets and financial liabilities

(Click to enlarge table)

(i) The amount of receivables excludes GST recoverable from ATO (statutory receivable) and prepayments.

(ii) Variable interest rates represent the most recently determined rate applicable to the instrument at the end of reporting period.

(iii) The principal repayment of the WATC loans is based on a 25 year repayment schedule.

(Click to enlarge table)

(i) The amounts disclosed are the contractual undiscounted cash flows of each class of financial liabilities.

(ii) Variable interest rates represent the most recently determined rate applicable to the instrument at the end of reporting period.

(iii) The principal repayment of the WATC loans is based on a 25 year repayment schedule.

Interest rate sensitivity analysis

The following table represents a summary of the interest rate sensitivity of the PTA’s financial assets and liabilities at the end of the reporting period on the surplus for the period and equity for a 1% change in interest rates. It is assumed that the change in interest rates is held constant throughout the reporting period.

		-100 basis points		+100 basis points
2014	Carrying amount $000	Surplus $000	Equity $000	Surplus $000	Equity $000
Financial Assets
Cash and cash equivalents	100,544	(1,005)	(1,005)	1,005	1,005
Restricted cash and cash equivalents	15,480	(155)	(155)	155	155
Total increase/ (decrease)		(1,160)	(1,160)	1,160	1,160

		-100 basis points		+100 basis points
2013	Carrying amount $000	Surplus $000	Equity $000	Surplus $000	Equity $000
Financial Assets
Cash and cash equivalents	56,114	(561)	(561)	561	561
Restricted cash and cash equivalents	11,432	(114)	(114)	114	114
Total increase/ (decrease)		(675)	(675)	675	675

Fair Values

All financial assets and liabilities recognised in the Statement of Financial Position, whether they are carried at cost or fair value, are recognised at amounts that represent a reasonable approximation of fair value unless otherwise stated in the applicable notes.