ADAVB 2018/2019 Annual Report

3 4 | A D A V B A N N U A L R E P O R T 2 0 1 8 / 1 9 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Financial instruments (continued) Categories of financial assets under AASB 9 Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVPL): • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows, • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as long-term deposits that were previously classified as held-to-maturity under AASB 139. Equity instruments at fair value through other comprehensive income (Equity FVOCI) Investments in equity instruments that are not held for trading are eligible for an irrevocable election at inception to be measured at FVOCI. Under Equity FVOCI, subsequent movements in fair value are recognised in other comprehensive income and are never reclassified to profit or loss. Dividends from these investments continue to be recorded as other income within the profit or loss unless they clearly represent return of capital. This category includes equity securities that were previously classified as ‘available-for-sale’ under AASB 139. Impairment of Financial assets AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses - the ‘expected credit losses (ECL) model’. Instruments within the scope of the new requirements includes loans and other debt-type financial assets measured at amortised cost and FVOCI and trade receivables. The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. Trade and other receivables The consolidated entity makes use of a simplified approach in accounting for trade and other receivables and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the consolidated entity uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. The consolidated entity assesses impairment of trade receivables on a collective basis as they possess credit risk characteristics based on the days past due. As at reporting date, the Group assesses whether there is significant increases in credit risk on the trade and other receivables on a case by case basis, especially after the contractual amounts payable are 30 past due, unless there is strong indicator in place of a guaranteed recovery, an amount equal to the life time expected losses is established as a loss allowance. Categories of financial assets previously under AASB 139 For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition: • loans and receivables • financial assets at fair value through profit or loss (FVPL) • Held-to- maturity (HTM) investments • Available-for-sale financial assets All financial assets except for those at fair value through profit or loss (FVPL) are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs or finance income, except for impairment of trade receivables which is presented within other expenses. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019