Note 5.3 Financial Instruments

5.3A Categories of financial instruments

  2016
$
2015
$
 
Financial Assets
Loans and receivables
    Cash and cash equivalents 820,339 677,619
    Receivables for goods and services 229 13,039
    Other receivables and claims recoveries 6,187 6,315
Total financial assets 826,755 696,973
 
Financial Liabilities
At amortised cost
    Trade creditors 3,310 3,069
    Workers' compensation payables 2,540 6,572
    Premium refund payable - 29,394
Total financial liabilities 5,850 39,035

 

Accounting Policy

Financial Assets

Comcare classifies its financial assets as loans and receivables.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon 'trade date'.

Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis except for financial assets that are recognised ‘at fair value through profit or loss'.

Loan and Receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loan and receivables’. Receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Comcare does not have any loans.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period.

Financial assets held at amortised cost. If there is objective evidence that an impairment loss has been incurred for receivables held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income.

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.

Other financial liabilities

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (irrespective of having been invoiced)

5.3B Net Gains or Losses on Financial Assets


Loans and receivables
2016
$'000
2015
$'000
Interest revenue 27,554 26,164
Net gains on loans and receivables 27,554 26,164
Net gains on financial assets 27,554 26,164

 

 

5.3C Net income and expense from financial liabilities

There was no income or expense from financial liabilities during the year (2015: Nil).

 

5.3D Fair value of financial instruments

The fair value of each class of Comcare's financial assets and financial liabilities equal their carrying amounts in both the current and immediately preceding reporting periods and none of these financial assets or liabilities are readily traded on organised markets in a standardised form.

  Carrying
amount
2016
$'000
Fair
value
2016
$'000
Carrying
amount
2015
$'000
Fair
value
2015
$'000
Financial assets 826,755 826,755 696,973 696,973
Total 826,755 826,755 696,973 696,973
Financial liabilities 5,850 5,850 39,035 39,035
Total 5,850 5,850 39,035 39,035

 

 

5.3E Credit risk

Comcare is exposed to minimal credit risk as the majority of its receivables are cash on deposit with banks. The major exposure to credit risk is the risk that arises from the potential default by a bank. This amount is equal to the total amount of cash at bank (2016: $820.3m and 2015: $677.6m). Comcare's current Investment Policy requires all investments to be placed with a financial institution with a Standard and Poor's and Moody's long-term rating. To mitigate credit risk, the Investment Policy restricts investment with any single financial institution to no more than 50% of the total investment portfolio.

As at 30 June 2016

  CREDIT RATING
  AAA
$'000
AA
$'000
A
$'000
A-1+
$'000
A-1
$'000
A-2
$'000
Not rated
$'000
Total
$'000
Cash and cash equivalents - 130,000 80,000 235,000 375,339 - - 820,339
Receivables - - - - - - 229 229
Other receivables - - - - - - 6,187 6,187

 

As at 30 June 2015

CREDIT RATING
AAA
$'000
AA
$'000
A
$'000
A-1+
$'000
A-1
$'000
A-2
$'000
Not rated
$'000
Total
$'000
Cash and cash equivalents - 295,000 40,000 207,619 135,000 - - 677,619
Receivables - - - - - - 13,039 13,039
Other receivables - - - - - - 6,315 6,315

Comcare holds no collateral to mitigate against credit risk.

 

Credit quality of financial instruments not past due or individually determined as impaired

  Not past due or
impaired
2016
$'000
Not past due or
impaired
2015
$'000
Past due or
impaired
2016
$'000
Past due or
impaired
2015
$'000
Cash and cash equivalents 820,339 677,619 - -
Receivables 137 12,811 92 229
Other receivables 842 1,871 5,345 4,444
Total 821,318 692,301 5,437 4,672

 

Ageing of financial assets that were past due but not impaired for 2016

  0 to 30
days
$'000
31 to 60
days
$'000
61 to 90
days
$'000
90+
days
$'000

Total
$'000
Receivables 59 5 4 23 91
Other receivables 18 119 108 4,081 4,326
Total 78 124 112 4,103 4,417

 

Ageing of financial assets that were past due but not impaired for 2015

  0 to 30
days
$'000
31 to 60
days
$'000
61 to 90
days
$'000
90+
days
$'000

Total
$'000
Receivables 9 2 6 114 131
Other receivables 656 353 67 2,408 3,484
Total 665 355 73 2,522 3,615

 

5.3F Liquidity Risk

Comcare's financial liabilities were trade creditors, workers' compensation payables and other payables. Comcare has negligible liquidity risk as it has substantial cash holdings to meet its short-term financial obligations at 30 June. Under Comcare's Investment Policy, investments are managed in a manner which maximises investment return while minimising risk ensures that accessibility of funds is maintained and cash flow requirements are met.

The following table illustrates the maturities for financial liabilities 2016

  On
demand
$'000
within 1
year
$'000
1 to 2
years
$'000
2 to 5
years
$'000
> 5
years
$'000

Total
$'000
Trade creditors - 3,310 - - - 3,310
Workers' compensation claims payable - 2,540 - - - 2,540
Premium refund payables - - - - - -
Total - 5,850 - - - 5,850

 

The following table illustrates the maturities for financial liabilities 2015

  On
demand
$'000
within 1
year
$'000
1 to 2
years
$'000
2 to 5
years
$'000
> 5
years
$'000

Total
$'000
Trade creditors - 3,069 - - - 3,069
Workers' compensation claims payable - 6,572 - - - 6,572
Premium refund payables - 29,394 - - - 29,394
Total - 39,035 - - - 39,035

Comcare has no derivative financial liabilities in either the current or prior years.

5.3G Market Risk

Currency Risk

Currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Comcare holds basic financial instruments that do not expose it to certain market risks. Comcare is not exposed to 'currency risk' or 'other price risk'.

Interest rate risk

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 only interest bearing item on the balance sheet is 'cash and cash equivalents'. 'Cash and cash equivalents' comprises investments in both term deposit accounts and standard banking transaction accounts. Those investments held in term deposit accounts bear interest at a fixed rate and will not fluctuate with changes in market interest rates. The daily cash balance in the standard banking transaction account is stated at a nominal amount and is not subject to interest rate risk.