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Australian Government - Department of Foreign Affairs and Trade

Advancing the interests of Australia and Australians internationally

Australian Government - Department of Foreign Affairs and Trade

Advancing the interests of Australia and Australians internationally



Note 16: Financial Instruments

2010
$'000
2009
$'000
Note 16A: Categories of Financial Instruments    
Financial Assets
    Cash 48,555 40,782
Loans and receivables:    
    Receivables for goods and services (gross) 14,669 27,947
    Other receivables 15,390 17,228
Carrying amount of financial assets 78,614 85,957
     
Financial Liabilities    
At amortised cost:    
    Finance lease liabilities  - 648
    Trade creditors 83,120 85,973
Carrying amount of financial liabilities 83,120 86,621
 
Note 16B. Net Income and Expense from Financial Liabilities
Loans and receivables    
Exchange gains/(loss) 60 336
Impairment 99 293
Net gain/(loss) loans and receivables 159 629
     
Note 16B. Net Income and Expense from Financial Liabilities
Financial liabilities - at amortised cost    
    Interest expense 4 4
Net gain/(loss) financial liabilities - at amortised cost 4 4

The total interest expense from financial liabilities not at fair value through profit or loss is $465,000 ($700,000 for 2009).

Note 16D. Fair Value of Financial Instruments

As the Department only holds basic financial instruments (cash, receivables and payables), the carrying amounts are a reasonable approximation of fair value.

Note 16E. Credit Risk

The Department is exposed to minimal credit risk as loans and receivables comprise of trade and other receivables.  The maximum exposure to credit risk is the risk that arises from potential default of a debtor.  This amount is equal to the total amount of these outstanding receivables of $30,600,000 (2009: $45,045,000).

The Department has assessed the risk of the default on payment and has allocated $389,000 (2009: $502,000) to an allowance for doubtful debts account.

The Department manages its credit risk by undertaking background and credit checks prior to allowing a debtor relationship.  In addition, the Department has policies and procedures that guide employees debt recovery.

The Department has no collateral to mitigate against credit risk.

Ageing of financial assets for 2010
Not past due
nor impaired
0 to 30
days
$'000
31 to 60
days
$'000
61 to 90
days
$'000
90+
days
$'000
Total
$'000
Not impaired    
    Cash 48,555  -  -  -  - 48,555
    Receivables for goods and services 9,004 1,980 101 1,136 2,448 14,669
    Other receivables 15,066 82 1 194 48 15,391
Impaired  
    Receivables for goods and services  -  -  -  - (389) (389)
Total 72,625 2,062 102 1,330 2,107 78,226

Ageing of financial assets for 2009
Not past due
nor impaired
0 to 30
days
$'000
31 to 60
days
$'000
61 to 90
days
$'000
90+
days
$'000
Total
$'000
Not impaired    
    Cash 40,782  -  -  -  - 40,782
    Receivables for goods and services 21,234 975 1,374 276 3,586 27,445
    Other receivables 17,159 62 3  - 4 17,228
Impaired  
    Receivables for goods and services  -  -  -  - 502 502
Total 79,175 1,037 1,377 276 4,092 85,957

The following list of assets have been individually asessed as impaired:

Note 16F. Liquidity Risk

The Department's financial liabilities are trade creditors.  It is highly unlikely that the Department will encounter difficulty in meeting its obligations associated with these liabilities given that it is a Commonwealth entity and has funding mechanisms available to ensure default does not occur. In addition,  the Department has internal policies and procedures in place to ensure there are sufficient resources to make payments and has no history of default.  The following table illustrates the maturities for financial liabilities:

Maturities for non-derivative financial liabilities 2010
On
demand
$'000
within 1
year
$'000
1 to 2
years
$'000
2 to 5
years
$'000
> 5
years
$'000
Total
$'000
Trade Creditors  - 83,120  -  -  - 83,120
Total  - 83,120  -  -  - 83,120
 
Maturities for non-derivative financial liabilities 2009
On
demand
$'000
within 1
year
$'000
1 to 2
years
$'000
2 to 5
years
$'000
> 5
years
$'000
Total
$'000
Finance lease liability  - 648  -  -  - 648
Trade creditors  - 85,973  -  -  - 85,973
Total  - 86,621  -  -  - 86,621

The Department has no derivative financial liabilities in both the current and prior year.

Note 16G. Market Risk

Currency risk

Foreign currency risk refers to the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in foreign currency exchange rates.  The Department is exposed to foreign currency exchange risk primarily through undertaking certain transactions denominated in a wide range of foreign currencies through its operations overseas.

The following table illustrates the effect on the Department's operating result (profit or loss) and equity as at 30 June 2010 from a 14% increase or decrease against the AUD in the currencies in which financial instruments were held by the Department, with all other variables held constant.

 
+Favourable
-Unfavourable
Financial Instrument held in foreign currency
Change in variable
AUD
equivalent
$'000
Profit or loss
2010
$'000
Equity
2010
$'000
Profit or loss
2010
$'000
Equity
2010
$'000
Cash 14% 20,034 (2,460) (2,460) 3,261 3,261
Receivables for goods and services (net) 14% 905 (111) (111) 147 147
Other receivables 14% 43,530 (5,346) (5,346) 7,086 7,086
Trade creditors 14% 5,174 (635) (635) 842 842
Total   69,643 (8,552) (8,552) 11,336 11,336
 
 
+Favourable
-Unfavourable
Financial Instrument held in foreign currency
Change in variable
AUD
equivalent
$'000
Profit or loss
2009
$'000
Equity
2009
$'000
Profit or loss
2009
$'000
Equity
209
$'000
Cash 12% 25,521 (2,737) (2,737) 3,483 3,483
Receivables for goods and services (net) 12% 1,159 (124) (124) 158 158
Other receivables 12% 10,836 (1,161) (1,161) 1,478 1,478
Trade creditors 12% (6,769) 725 725 (923) (923)
Total   30,747 (3,297) (3,297) 4,196 4,196

Interest rate and Other price risk. The Department holds basic financial instruments that do not expose it to 'Interest rate risk' or 'Other price risk'.

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Department of Foreign Affairs and Trade