2009-10 Annual Report - Australia Post

28 Related parties (continued)
transactions entered into directly by directors or director-related entities with the australian postal corporation have been either domestic or trivial
in nature.
For the year ended 30 June 2010, the corporation has expensed $14.5 million with respect to amounts owed by related parties (2009: $16.6 million).
an impairment assessment is undertaken each financial year by examining the financial position of the related party and the market in which the
related party operates to determine whether there is objective evidence that a related party receivable is impaired. When such objective evidence
exists, the group recognises an allowance for the impairment loss.
a number of directors of the australian postal corporation are also directors of other entities which have transacted with the australian postal
corporation Group. these transactions have occurred on terms and conditions no more favourable than those which it is reasonable to expect the
group would have adopted if dealing with any third party on normal commercial terms.
ultimate controlling entity
the commonwealth is the ultimate parent and controlling entity of the australian postal corporation Group. the australian postal corporation is the
parent entity in the group comprising australia post and its controlled entities.
29 Financial and capital risk management
(a) Financial risk management objectives
the corporation’s risk management policy is to identify, assess and manage risks, which are likely to adversely affect the corporation’s financial
performance, continued growth and survival. in terms of financial and commodity risk management, the corporation will take a risk-averse approach
to financial risk management in that it will seek to minimise risk, provided it is cost effective to do so.
the group’s principal financial instruments, other than derivatives, comprise bonds, finance leases and hire purchase contracts, cash and short-term
deposits. the main purpose of these financial instruments is to provide finance for the group’s operations. the group has various other financial
assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. the group also enters into derivative
transactions, including interest rate swaps, forward currency contracts and commodity swap contracts. the purpose is to manage the interest rate,
currency and commodity risks arising from the group’s operations and its sources of finance. it is, and has been throughout the period under review,
the group’s policy that no trading in financial instruments shall be undertaken. the main risks arising from the group’s financial instruments are
interest rate risk, liquidity risk, commodity risk, foreign currency risk and credit risk. the board reviews and agrees policies for managing each of these
risks and they are summarised below.
details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis
on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed
in note 1 to the financial report.
(b) Capital risk management
the group’s objectives when managing capital are to safeguard the ability to continue as a going concern while maximising the return to the
commonwealth Government. the group recognises the impact on shareholder returns of the level of equity capital employed and seeks to
maintain a prudent balance between the advantages and flexibility afforded by a strong capital position and the higher returns on equity possible
with some leverage. a further consideration when managing capital is maintenance of an investment grade rating. the group holds a aa+rating
(2009: aaa) from the independent ratings agency standard & poor’s.
the capital structure of the group consists of debt, which includes the bonds payable disclosed in note 19, cash and cash equivalents disclosed in
note 31(a) and equity attributable to equity holders of the corporation, comprising contributed equity, reserves and retained profits disclosed in notes
22 and 23.
the capital structure is reviewed annually as part of the corporate plan, which includes analysis of the return on equity, return on average operating
assets and debt to debt plus equity ratios implicit in the corporate plan.
AustrAliA Post AnnuAl rePort 2009–10 | Financial and statutory reports 85