Annual Report 2011 - Watercare

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Watercare Services Limited 2011 ANNUAL REPORT Notes to the financial statements (continued) for the year ended 30 June 2011 21. Financial Assets and Liabilities (continued) Foreign currency risk Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Most of the group’s transactions are carried out in New Zealand dollars. From time to time the group is exposed to foreign currency risk on transactions denominated in foreign currencies. This is predominantly for the purchase of equipment, parts and chemicals in foreign currency. Where amounts exceed $100,000 the group manages this risk with forward foreign exchange contracts or options. The group has forward foreign exchange contracts at balance date as follows: average foreign Contract Carrying amount exchange rate currency value and fair value FC 000 NZ$000 NZ$000 Group and company 2011 USD Less than 3 months 0.737 274 372 (41) 3 months and beyond 0.721 3,575 4,961 (542) EUR 3 months and beyond 0.515 150 292 (19) GBP Less than 3 months 0.452 88 194 (23) AUD Less than 3 months 0.734 3,113 4,241 (216) 3 months and beyond 0.758 420 554 (23) Total forward foreign exchange contracts 10,614 (864) average foreign Contract Carrying amount exchange rate currency value and fair value FC 000 NZ$000 NZ$000 Company 2010 USD Less than 3 months 0.719 1,740 2,420 96 3 months and beyond 0.713 1,000 1,403 66 AUD Less than 3 months 0.789 90 114 (48) 3 months and beyond 0.801 140 175 (4) Total forward foreign exchange contracts 4,112 110 2011 Financial Report PAGE 100 Return to Contents page
Watercare Services Limited 2011 ANNUAL REPORT Notes to the financial statements (continued) for the year ended 30 June 2011 21. Financial Assets and Liabilities (continued) Foreign currency sensitivity The following sensitivity analysis is based on the foreign currency risk exposures in existence at year-end. At 30 June, had the New Zealand dollar exchange rate changed, as illustrated in the table below, with all other variables held constant, post-tax surplus and equity would have been affected as follows: group and Company company 2011 2010 Post-tax deficit equity Post-tax deficit equity higher/(lower) higher/(lower) higher/(lower) higher/(lower) $000 $000 $000 $000 Sensitivity to reasonable movements Change in United States dollar exchange rate 10% increase (309) (309) (256) (256) 10% decrease 380 380 313 313 Change in Euro Monetary Union euro exchange rate 10% increase (18) (18) - - 10% decrease 22 22 - - Change in United Kingdom pound exchange rate 10% increase (11) (11) - - 10% decrease 13 13 - - Change in Australian dollar exchange rate 10% increase (289) (289) (18) (18) 10% decrease 353 353 22 22 Credit risk Credit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. Financial instruments which potentially subject the group to credit risk principally consist of cash and cash equivalents, derivative assets held for risk management, and trade and other receivables. The group’s cash and cash equivalents are placed with major trading banks with a minimum AA- credit rating assigned by international creditrating agencies. Debtors and other receivables arise from the group’s statutory functions. Therefore, there are no procedures in place to monitor the credit quality of debtors and other receivables with reference to credit evaluations or external credit rating. However, there is no concentration of credit risk with respect to receivables as the company has a large number of customers. The ageing of the trade receivables at balance date was as follows: group and Company company 2011 2010 Carrying amount Provision for Net carrying Carrying amount Provision for Net carrying doubtful debts amount doubtful debts amount $000 $000 $000 $000 $000 $000 Not past due 18,415 - 18,415 18,852 - 18,852 Past due one to thirty days 7,229 (302) 6,927 145 - 145 Past due thirty to sixty days 3,337 (124) 3,213 35 - 35 Past due more than sixty days 12,128 (2,702) 9,426 15 - 15 Total 41,109 (3,128) 37,981 19,047 - 19,047 group and Company Company 2011 2010 $000 $000 Movement in the provision of doubtful debts Balance at 1 July 2010 - - Acquisition through integration on 1 November 2010 1,845 - Additions during the year 1,313 - Bad debts written off (30) - Balance at 30 June 2011 3,128 - 2011 Financial Report PAGE 101 Return to Contents page
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Annual Report 2011 - Watercare

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