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Note 13. Financial instruments

Financial instruments
  2013 2012
  $’000 $’000
Note 13A: Categories of Financial Instruments    
Financial Assets    
Fair value through profit and loss    
Investments 46,930 48,746
Total 46,930 48,746
Loans and receivables:    
Cash and cash equivalents 1,875 1,550
Trade and other receivables 10,965 8,640
Total 12,840 10,190
Carrying amount of financial assets 59,770 58,936
Financial Liabilities    
At amortised cost:    
Trade creditors 4,124 3,619
Other payables 605 1,291
Outstanding claims 13,676 14,882
Total 18,405 19,792
Carrying amount of financial liabilities 18,405 19,792
Note 13B: Net Income and Expense from Financial Assets    
Fair value through profit and loss    
Interest revenue 1,601 2,137
Change in fair value (117) (208)
Net gain/(loss) at fair value through profit and loss 1,484 1,929
Net gain from fnancial assets 1,484 1,929

The net income/expense from financial assets not at fair value through profit and loss is nil (2012: nil).

Note 13C: Net Income and Expense from Financial Liabilities

There was no income or expense from financial liabilities (2012: nil).

Note 13D: Fair Value of Financial Instruments

The carrying amount of the Scheme’s financial instruments are reasonably approximate to their fair value. AASB 7 Financial Instruments: Disclosures introduced a three-level hierarchy for making fair value measurements. All of the Scheme’s financial instruments are disclosed as level 2 – fair value derived from inputs other than quoted prices included within Level 1 that are observable for the instrument, either directly or indirectly.

Valuation Method used for determining the fair value of financial instruments

The following table identifies for those assets and liabilities carried at fair value whether fair value was obtained by reference to market prices or by a valuation technique that employs observable market transactions, or one that uses other market information to determine a fair value.

Carrying amount and fair value
  Carrying amount 2013 Fair value 2013 Carrying amount 2012 Fair value 2012
$’000 $’000 $’000 $’000  
Financial Assets        
Investments 46,930 46,930 48,746 48,746
Total 46,930 46,930 48,746 48,746

Fair value measurements categorised by fair value hierarchy

The following table provides an analysis of financial instruments that are measured at fair value, by valuation method. The different levels are defined below:

Level 1: Fair value obtained from unadjusted quoted prices in active markets for identical instruments.

Level 2: Fair value derived from inputs other than quoted prices included within Level 1 that are observable for the instrument, either directly or indirectly.

Level 3: Fair value derived from inputs that are not based on observable market data.

Fair value hierarchy for financial assets

Fair value hierarchy for financial assets
  Level 1 Level 2 Level 3 Total
  2013 2012 2013 2012 2013 2012 2013 2012
Financial assets at fair value                
Investments - - 46,930 48.746 - - 46,930 48.746
Total - - 46,930 48,746 - - 46,930 48,746

There was no transfer between levels.

Note 13E: Financial Assets Reclassified

During the year there has been no financial assets that have been reclassified.

Note 13F: Credit Risk

The Scheme’s maximum exposure to credit risk at reporting date in relation to each class of recognised financial assets is the carrying amount of those assets as indicated on the Balance Sheet. The Scheme manages its credit risk by undertaking background and credit checks prior to allowing a debtor relationship and only dealing with Banks with a ’AA’ rating.

The Scheme holds no collateral to mitigate credit risk.

Credit quality of financial instruments not past due or individually determined as impaired

Credit quality of financial instruments not past due or individually determined as impaired
  Not past due nor impaired 2013 Not past due nor impaired 2012 Past due or impaired 2013 Past due or impaired 2012
  $’000 $’000 $’000 $’000
Cash and cash equivalents 1,875 1,550 - -
Trade and other receivables 10,965 8,640 - -
Investments 46,930 48,746 - -
Total 59,770 58,936 - -

Ageing of financial assets that were past due but not impaired for 2013

Ageing of financial assets that were past due but not impaired for 2013
  0 to 30 days 31 to 60 days 61 to 90 days 90+ days Total
  $’000 $’000 $’000 $’000 $’000
Trade and other receivables 511 180 81 - 772
Total 511 180 81 - 772

Ageing of financial assets that were past due but not impaired for 2012

Ageing of financial assets that were past due but not impaired for 2012
  0 to 30 days 31 to 60 days 61 to 90 days 90+ days Total
  $’000 $’000 $’000 $’000 $’000
Trade and other receivables 474 154 76 2 706
Total 474 154 76 2 706

The Scheme has no derivative financial liabilities in either 2013 or 2012.

Note 13G: Liquidity Risk

The Scheme’s financial liabilities are payables, outstanding claims and other interest bearing liabilities stemming from its insurance activities. The exposure to liquidity risk is based on the notion that the Scheme will encounter difficulty in meeting its obligations associated with its financial liabilities. This is highly unlikely due to mechanisms available to the Scheme and internal policies and procedures put in place to ensure there are appropriate resources to meet its financial obligations.

Maturities for non-derivative financial liabilities 2013

Maturities for non-derivative financial liabilities 2013
  On demand Within 1 year 1 to 5 years > 5 years Total
  $’000 $’000 $’000 $’000 $’000
Payables – suppliers 4,124 - - - 4,124
Outstanding claims 13,676 - - - 13,676
Other payables – reinsurance premium 592 - - - 592
Total 18,392 - - - 18,392

Maturities for non-derivative financial liabilities 2012

Maturities for non-derivative financial liabilities 2012
  On demand Within 1 year 1 to 5 years > 5 years Total
  $’000 $’000 $’000 $’000 $’000
Payables – suppliers 3,619 - - - 3,619
Outstanding claims 14,882 - - - 14,882
Other payables – reinsurance premium 1,291 - - - 1,291
Total 19,792 - - - 19,792

Note 13H: Market Risk

The Scheme holds basic financial instruments that do not expose the Scheme to certain market risks.

The Scheme is not exposed to ’Currency risk’ or ’Other price risk’ and the only interest-bearing item on the balance sheet is the managed fund that is operated by UBS. The table below is a sensitivity analysis of the risk that the Scheme is exposed to:

Sensitivity analysis of the risk that the entity is exposed to for 2013

Sensitivity analysis of the risk that the entity is exposed to for 2013
        Effect on
  Interest rate Balance Change in risk Profit and loss Equity
  % $’000 variable $’000 $’000
Interest rate risk (UBS Investment) 3.32% 46,930 0.50% 235 235
    -0.50% (235) (235)  

Sensitivity analysis of the risk that the entity is exposed to for 2012

Sensitivity analysis of the risk that the entity is exposed to for 2012
        Effect on
  Interest rate Balance Change in risk Profit and loss Equity
  % $’000 variable $’000 $’000
Interest rate risk (UBS Investment) 4.53% 48,746 0.50% 244 244
      -0.50% (244) (244)

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