Zoological Parks Authority - Parliament of Western Australia - The ...

Zoological Parks Authority ANNUAL REPORT 2012
Disclosures and Legal Compliance
Financial Statements
Zoological Parks Authority
Notes to the Financial Statements for the Year Ended 30 June 2012 continued
35. Financial instruments
(a) Financial risk management objectives and policies
Financial instruments held by the Authority are cash and cash equivalents, restricted cash and cash equivalents, loans and receivables, payables and finance leases.
The Authority has limited exposure to financial risks. The Authority’s overall risk management program focuses on managing the risks identified below:
Credit risk
Credit risk arises when there is the possibility of the Authority’s receivables defaulting on their contractual obligations resulting in financial loss to the Authority.
The maximum exposure to credit risk at the 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 35(c) ‘Financial instruments disclosures’ and note 22 ‘Receivables’.
Credit risk associated with the Authority’s financial assets is minimal because the main receivable is the amounts receivable for services (holding account). For receivables
other than government, the Authority trades only with recognised, creditworthy third parties. Amounts owing by Government agencies are guaranteed and therefore no
credit risk exists in respect of those amounts.
The Authority 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 Authority’s exposure to bad debts is minimal. At the end of the reporting period there were no
significant concentrations of credit risk.
The collectability of receivables is reviewed on an ongoing basis by individual assessment of the debts outstanding. The type of recovery action is determined by
management and is based on individual assessment of debts. Consideration is given to factors such as debt amount, nature of debt and past history of debtor.
Allowance for impairment of financial assets is calculated based on objective evidence such as past experience, and current and expected changes in client credit
ratings. For financial assets that are either past due or impaired, refer to note 35(c) ‘Financial instruments disclosures’.
Liquidity risk
Liquidity risk arises when the Authority is unable to meet its financial obligations as they fall due.
The Authority is exposed to liquidity risk through its trading in the normal course of business.
The Authority 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.
Market risk
The market risk is the risk that changes in market prices such as foreign exchange rates and interest rates will affect the Authority’s income or the value of its holdings of
financial instruments. The Authority does not trade in foreign currency and is not materially exposed to other price risks.
Other than as detailed in the interest rate sensitivity analysis table at note 35(c), the Authority is not exposed to interest rate risk because the majority of cash and cash
equivalents and restricted cash are non-interest bearing and it has no borrowings.
The interest rate sensitivity is determined by reference to recent trends in interest rate movements and economic forecasts by the Reserve Bank of Australia.
107