CQUniversity Annual Report - Central Queensland University
CQUniversity Annual Report - Central Queensland University
CQUniversity Annual Report - Central Queensland University
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<strong>CQ<strong>University</strong></strong> ANNUAL REPORT 2012<br />
Note 41. Financial risk management<br />
The consolidated entity's activities expose it to a variety of financial risks, as follows:<br />
(a)<br />
<strong>Central</strong> <strong>Queensland</strong> <strong>University</strong><br />
and Controlled Entities<br />
Notes to the Financial Statements<br />
for the year ended 31 December 2012<br />
Market risk<br />
(i) Foreign exchange risk<br />
Foreign currency risk arises when commercial transactions and recognised assets and liabilities are denominated in a<br />
currency that is not the entity's functional currency. The consolidated entity operates internationally and is exposed to<br />
foreign exchange risk arising from currency exposure to the Fijian and Singapore dollar.<br />
Fees charged to overseas students are generally denominated in Australian dollars.<br />
The consolidated entity manages foreign currency risk by maintaining sufficient cash balances in these currencies to<br />
meet offshore purchases.<br />
63<br />
ANNUAL FINANCIAL STATEMENTS<br />
(ii) Equity market risk<br />
Equity market risk arises when the value of an investment decreases due to moves in market factors. In accordance<br />
with the accounting policy discussed in note 1(l), these investments are measured at fair value at each balance date and<br />
changes in fair value are recognised in equity.<br />
The consolidated entity negates equity risk as it holds no investments in an active market.<br />
(iii) Interest rate risk<br />
Interest rate risk is the risk (variability in value) borne by an interest-bearing asset due to the variability of interest rates.<br />
The consolidated entity minimises its exposure to fluctuating market interest rates by diversifying its investments in both<br />
cash and short term funding with <strong>Queensland</strong> Treasury Corporation (QTC). It regularly reviews its investments and<br />
markets to obtain best interest rates. The entity does not have any borrowings which are subject to interest rate risk.<br />
Summarised sensitivity analysis<br />
Consolidated<br />
An increase in interest rates of 100 basis points (1%) would have increased the Group profit before tax and Equity by<br />
$182,000 (2011: $442,000). A decrease of 100 basis points (1%) would have decreased the Group profit before tax and<br />
Equity by an equivalent amount.<br />
An increase in the foreign exchange rate of 10% would have decreased the Group profit before tax and Equity by $Nil<br />
(2011:$Nil). A decrease of 10% would have increased the Group profit before tax and Equity by an equivalent amount.<br />
Parent<br />
An increase in interest rates of 100 basis points (1%) would have increased the Parent profit before tax and Equity by<br />
$81,000 (2011: $294,000). A decrease of 100 basis points (1%) would have decreased the Parent profit before tax and<br />
Equity by an equivalent amount.<br />
An increase in the foreign exchange rate of 10% would have decreased the Parent profit before tax and Equity by $Nil<br />
(2011:$Nil). A decrease of 10% would have increased the Parent profit before tax and Equity by an equivalent amount.<br />
(b) Credit risk<br />
Credit risk arises from the potential failure of students, other customers and other contractual counterparties to meet<br />
their obligations under the respective contracts. The consolidated entity has a Collections Policy in place to manage the<br />
collection of accounts receivable. A provision for impaired receivables has been established.<br />
Detailed information on the consolidated groups' impaired receivables is contained in Note 18.