2011/2012 audited annual accounts - Falkirk Council

FALKIRK COUNCIL
NOTES TO THE CORE FINANCIAL STATEMENTS
33.(b)(iii) Fair value of Assets and Liabilities carried at Amortised Cost
Financial liabilities and financial assets represented by loans and receivables are carried on the Balance Sheet at
amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that take place over
the remaining life of the instruments, using the following assumptions:
For loans from the PWLB and other loans payable, premature repayment rates from the PWLB have been
applied to provide the fair value under PWLB debt redemption procedures;
For loans receivable, prevailing benchmark market rates have been used to provide the fair value;
No early repayment or impairment is recognised;
Where an instrument has a maturity of less than 12 months or is a trade or other receivable, the fair value is
taken to be the principal outstanding or the billed amount;
The fair value of trade and other receivables is taken to be the invoiced or billed amount.
The fair values calculated are as follows:
31/03/11 31/03/12
Carrying
Carrying
amount Fair value
amount Fair value
£’000 £’000 £’000 £’000
PWLB debt 123,485 163,726 123,637 183,823
Non-PWLB debt 39,438 41,943 28,366 29,071
Total debt 162,923 205,669 152,003 212,894
Trade creditors 5,621 5,621 5,515 5,515
Total Financial Liabilities 168,544 211,290 157,518 218,409
The fair value is greater than the carrying amount because the Council’s portfolio of loans includes a number of
fixed rate loans where the interest rate payable is higher than the rates available for similar loans in the market at
the Balance Sheet date.
31/03/11 31/03/12
Carrying
Carrying
amount Fair value
amount Fair value
£’000 £’000 £’000 £’000
Money market deposits < 1 year 10,355 10,355 102 102
Long-Term Investments 9,340 9,340 9,340 9,340
Trade debtors 8,112 8,112 8,204 8,204
Loans and receivables - - - -
Total Loans and Receivables 27,807 27,807 17,646 17,646
Nature and Extent of Risk Arising from Financial Instruments
33.(c)(i) Key Risks
The Council’s activities expose it to a variety of financial risks. The key risks are:
Credit risk – the possibility that other parties might fail to pay amounts due to the Council;
Liquidity risk – the possibility that the Council might not have funds available to meet its commitments to
make payments;
Re-financing risk – the possibility that the Council might be requiring to renew a financial instrument on
maturity at disadvantageous interest rates or terms;
Market risk – the possibility that financial loss might arise for the Council as a result of changes in such
measures as interest rates movements.
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