37 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, 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

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 allowance for impairment as shown in the table at note 37 “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 were 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 their 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.

b) Categories of financial instruments

The carrying amounts of each of the following categories of financial assets and financial liabilities at the end of the reporting period are:
	2012 $000	2011 $000
Financial assets
Cash and cash equivalents	48,138	66,608
Restricted cash and cash equivalents	33,579	28,239
Loans and receivables (i)	1,042,214	915,146
Financial liabilities
Financial liabilities measured at amortised cost	1,416,569	1,341,827

(i) The amount of loan 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 assets 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.

Aged 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
2012
Cash and cash equivalents	33	48,138	48,138	0	0	0	0	0	0
Restricted cash and cash equivalents	19	33,579	33,579	0	0	0	0	0	0
Receivables (i)	21	14,077	12,656	474	309	484	0	0	154
Amounts receivable for services	22	1,028,137	1,028,137	0	0	0	0	0	0
		1,123,931	1,122,510	474	309	484	0	0	154
2011
Cash and cash equivalents	33	66,608	66,608	0	0	0	0	0	0
Restricted cash and cash equivalents	19	28,239	28,239	0	0	0	0	0	0
Receivables (i)	21	11,917	10,938	439	523	9	0	0	8
Amounts receivable for services	22	903,229	903,229	0	0	0	0	0	0
		1,009,993	1,009,014	439	523	9	0	0	8

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

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 exposures and maturity analysis of financial assets and financial liabilities

			Interest rate exposure					Maturity dates
	Note	Weighted average effective interest rate %	Carrying Amount $000	Fixed interest rate $000	Variable interest rate (ii) $000	Non-interest bearing $000	Nominal Amount $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
2012
Financial Assets
Cash and cash equivalents	33	4.68	48,138	0	48,138	0	48,138	48,138	0	0	0	0
Restricted cash and cash equivalents	19	4.68	33,579	0	33,579	0	33,579	33,579	0	0	0	0
Receivables (i)	21		14,077	0	0	14,077	14,077	14,077	0	0	0	0
Amounts receivable for services	22		1,028,137	0	0	1,028,137	1,028,137	0	0	24,836	137,468	865,833
			1,123,931	0	81,717	1,042,214	1,123,931	95,794	0	24,836	137,468	865,833
Financial Liabilities
Payables	27		97,789	0	0	97,789	97,789	97,789	0	0	0	0
Other current liabilities	30		211	0	0	211	211	211	0	0	0	0
WATC loans (iii)	28	4.94	1,316,602	1,316,602	0	0	1,653,752	207,120	2,304	83,552	391,116	969,660
Commonwealth loans	28	5.93	1,967	1,967	0	0	2,475	0	0	481	1,458	536
			1,416,569	1,318,569	0	98,000	1,754,227	305,120	2,304	84,033	392,574	970,196

(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.

			Interest rate exposure					Maturity dates
	Note	Weighted average effective interest rate %	Carrying Amount $000	Fixed interest rate $000	Variable interest rate (ii) $000	Non-interest bearing $000	Nominal Amount $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
2011
Financial Assets
Cash and cash equivalents	33	5.13	66,608	0	66,608	0	66,608	66,608	0	0	0	0
Restricted cash and cash equivalents	19	5.13	28,239	0	28,239	0	28,239	28,239	0	0	0	0
Receivables (i)	21		11,917	0	0	11,917	11,917	11,917	0	0	0	0
Amounts receivable for services	22		903,229	0	0	903,229	903,229	0	0	39,958	116,066	747,205
			1,009,993	0	94,847	915,146	1,009,993	106,764	0	39,958	116,066	747,205
Financial Liabilities
Payables	27		105,365	0	0	105,365	105,365	105,365	0	0	0	0
Other current liabilities	30		1,254	0	0	1,254	1,254	1,254	0	0	0	0
WATC loans (iii)	28	5.51	1,232,876	1,232,876	0	0	1,500,660	47,762	205,187	429,227	337,073	481,411
Commonwealth loans	28	5.93	2,332	2,332	0	0	2,971	0	0	498	1,672	801
			1,341,827	1,235,208	0	106,619	1,610,250	154,381	205,187	429,725	338,745	482,212

(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.

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
2012	Carrying amount $000	Surplus $000	Equity $000	Surplus $000	Equity $000
Financial Assets
Cash and cash equivalents	48,138	(481)	(481)	481	481
Restricted cash and cash equivalents	33,579	(336)	(336)	336	336
Total increase/(decrease)		(817)	(817)	817	817

		-100 basis points		+100 basis points
2011	Carrying amount $000	Surplus $000	Equity $000	Surplus $000	Equity $000
Financial Assets
Cash and cash equivalents	66,608	(666)	(666)	666	666
Restricted cash and cash equivalents	28,239	(282)	(282)	282	282
Total increase/(decrease)		(948)	(948)	948	948

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.