SYDNEY PORTS CORPORATION ANNUAL REPORT 12

(e) Fair value compared to carrying amount
Financial instruments are generally recognised at cost, with the exception of the TCorp Hour-Glass Cash Facility Trust,
which is measured at fair value. The value of the TCorp Hour-Glass Cash Facility Trust is based on the Corporation’s share
of the market value of the underlying assets of the facility.
Except where specified below, the amortised cost of financial instruments recognised in the statement of financial position
approximates the fair value because of the short-term nature of many of the financial instruments. The following table
details the financial instruments where the fair value differs from the carrying amount:
2012
Carrying
amoUnt
$000
2012
fair
valUe
$000
2011
Carrying
amoUnt
$000
2011
fair
valUe
$000
Financial liabilities
NSW TCorp borrowings 604,574 695,054 603,826 618,477
The fair values have been calculated by discounting the expected future cash flows at prevailing market rates varying from
2.95% to 4.34% (2011: 5.03% to 5.99%).
(f) Fair value recognised in the statement of financial position
The Corporation uses the following hierarchy for disclosing the fair value of financial instruments by valuation technique:
■■ Level 1 – Derived from quoted prices in active markets for identical assets/ liabilities.
■■ Level 2 – Derived from inputs other than quoted prices that are observable directly or indirectly.
■■ Level 3 – Derived from valuation techniques that include inputs for the asset/ liability not based on observable market
data (unobservable input).
The fair values of the financial instruments as well as the method used to estimate the fair value are summarised in
the table below.
level 1
$000
level 2
$000
level 3
$000
Financial assets at fair value
TCorp Hour-Glass Cash Facility Trust 2012 – 83,632 – 83,632
TCorp Hour-Glass Cash Facility Trust 2011 – 151,698 – 151,698
No financial liabilities were measured at fair value in the statement of financial position at 30 June 2012 and 30 June 2011.
There were no transfers between Level 1 and 2 during the year.
(g) Capital management
The Corporation manages its capital to ensure it will be able to continue as a going concern, while maximising the return
to stakeholders through optimisation of the debt and equity balance.
There are no externally imposed capital requirements.
The Board reviews and agrees policies for managing the capital structure when considering each major project investment
and following consultation with NSW Treasury. In order to maintain or adjust the capital structure, the Corporation may
adjust the amount of dividends paid to shareholders.
The Corporation monitors capital on the basis of the gearing ratio, debt cover (years) and interest cover (times).
The ratios based on operations at 30 June 2012 and 2011 were as follows:
Gearing ratio
total
$000
CorPoration CorPoration
Total debt 604,574 603,826
Total debt and total equity 1,728,156 1,660,142
Gearing ratio 35.0% 36.4%
2012
$000
2011
$000
Sydney PortS CorPoration finanCial rePort 2011/12 79