38 Financial instruments
a) Financial risk management objectives and policies
Financial instruments held by the PTA are cash and cash equivalents, foreign exchange forward contracts, borrowings, 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
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 debt is minimal. There are no significant concentrations of credit risk.
Liquidity risk
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.
Cash flow interest rate risk
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 Western Australian Treasury Corporation (WATC) and are 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.
Foreign exchange risk
The PTA was exposed to foreign exchange risk arising from currency exposure to the Euro during the year. Forward contracts transacted with WATC were used to manage these risks. The purpose of the foreign currency contracts was to protect against the risk that eventual dollar outflows in respect of purchases in foreign currency might be adversely affected by changes in exchange rates.
b) Categories of financial instruments
In addition to cash, the carrying amounts of each of the following categories of financial assets and financial liabilities at the end of the reporting period are as follows:
|
2010 |
2009 |
|
|---|---|---|
|
Financial assets |
||
|
Cash and cash equivalents |
54,055 |
61,237 |
|
Amounts receivable for services |
741,100 |
578,793 |
|
Receivables (i) |
9,927 |
10,723 |
|
Financial liabilities |
||
|
Payables |
81,935 |
80,974 |
|
Other current liabilities |
1,879 |
2,180 |
|
Western Australian Treasury Corporation (WATC) loans |
1,158,229 |
1,073,527 |
|
Commonwealth loans |
2,721 |
3,108 |
(i) The amount of receivables excludes GST recoverable from ATO (statutory receivable) and prepayments.
c) Financial instrument disclosures
Credit risk and interest rates exposures
The following table discloses the PTA’s maximum exposure to credit risk, interest rate exposures 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 financial assets that had to have their terms renegotiated that would have otherwise resulted in them being past due or impaired.
Interest rate exposures and ageing analysis of financial assets (i)
| Interest rate exposure | Past due but not impaired | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Weighted average effective interest rate % | Carrying Amount | Fixed interest rate | Variable interest rate (ii) | Non-interest bearing | Up to 3 months | 3-12 months | 1-2 years | 2-5 years | more than 5 years | Impaired financial assets | ||
| Financial Assets | Note | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | |
2010 |
||||||||||||
|
Cash and cash equivalents |
4.17 |
54,055 |
0 |
54,055 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
Receivables (i) |
9,927 |
0 |
0 |
9,927 |
462 |
0 |
0 |
0 |
0 |
0 |
||
|
Amounts receivable for services |
741,100 |
0 |
0 |
741,100 |
0 |
0 |
0 |
0 |
0 |
0 |
||
|
805,082 |
0 |
54,055 |
751,027 |
462 |
0 |
0 |
0 |
0 |
0 |
|||
2009 |
||||||||||||
|
Cash and cash equivalents |
5.5 |
61,237 |
0 |
61,237 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
Receivables (i) |
10,723 |
0 |
0 |
10,723 |
614 |
19 |
1 |
0 |
0 |
0 |
||
|
Amounts receivable for services |
578,793 |
0 |
0 |
578,793 |
0 |
0 |
0 |
0 |
0 |
0 |
||
|
650,753 |
0 |
61,237 |
589,516 |
614 |
19 |
1 |
0 |
0 |
0 |
|||
(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.
Liquidity risk
The following table details the contractual maturity analysis for financial liabilities. The contractual maturity amounts are representative of the undiscounted amounts at the end of reporting period. The table includes interest and principal cash flows. An adjustment has been made where material.
Interest rate exposures and maturity analysis of financial liabilities
| Interest rate exposure | Maturity date | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Weighted average effective interest rate % | Carrying Amount | Fixed interest rate | Variable interest rate (ii) | Non-interest bearing | adjustment for discounting | Total Nominal Amount | Up to 3 months | 3-12 months | 1-2 years | 2-5 years | more than 5 years | ||
| Financial Liabilities | Note | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | |
2010 |
|||||||||||||
|
Payables |
81,935 |
0 |
0 |
81,935 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
|
Other current liabilities |
1,879 |
0 |
0 |
1,879 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
|
WATC Loans (iii) |
5.37 |
1,158,229 |
1,158,229 |
0 |
0 |
(629,865) |
1,788,094 |
158,665 |
138,683 |
106,589 |
306,423 |
1,077,734 |
|
|
Commonwealth Loans |
5.93 |
2,721 |
2,721 |
0 |
0 |
(802) |
3,523 |
0 |
547 |
502 |
1,327 |
1,147 |
|
|
1,244,764 |
1,160,950 |
0 |
83,814 |
(630,667) |
1,791,617 |
158,665 |
139,230 |
107,091 |
307,750 |
1,078,881 |
|||
2009 |
|||||||||||||
|
Payables |
80,974 |
0 |
0 |
80,974 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
|
Other current liabilities |
2,180 |
0 |
0 |
2,180 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
|
WATC Loans (iii) |
4.81 |
1,073,527 |
1,073,527 |
0 |
0 |
(546,836) |
1,620,363 |
44,827 |
231,771 |
89,696 |
265,453 |
988,616 |
|
|
Commonwealth Loans |
5.93 |
3,108 |
3,108 |
0 |
0 |
(983) |
4,091 |
0 |
567 |
547 |
1,429 |
1,548 |
|
|
1,159,789 |
1,076,635 |
0 |
83,154 |
(547,819) |
1,624,454 |
44,827 |
232,338 |
90,243 |
266,882 |
990,164 |
|||
|
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 | ||||
|---|---|---|---|---|---|
| 2010 | Carrying amount $000 | Surplus $000 | Equity $000 | Surplus $000 | Equity $000 |
|
Financial Assets |
|||||
|
Cash and cash equivalents |
54,055 |
(541) |
(541) |
541 |
541 |
|
Total increase/(decrease) |
(541) |
(541) |
541 |
541 |
|
| -100 basis points | +100 basis points | ||||
| 2009 | Carrying amount $000 | Surplus $000 | Equity $000 | Surplus $000 | Equity $000 |
|
Financial Assets |
|||||
|
Cash and cash equivalents |
61,237 |
(612) |
(612) |
612 |
612 |
|
Total increase/(decrease) |
(612) |
(612) |
612 |
612 |
|
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.