2007 Annual report (PDF 8.1 Mb) - University of Melbourne

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 NOTE 31: RESERVES AND RETAINED SURPLUS (CONTINUED) CONSOLIDATED UNIVERSITY 2007 2006 2007 2006 $’000 $’000 $’000 $’000 Foreign Currency Translation Reserve Balance Beginning of Year 164 58 - - Exchange differences on translation of foreign operations (214) 106 - - Balance End of Year (50) 164 - - Summary of Transfers (excluding Members Capital Reserve) Land Asset Revaluation Reserve - - 45,000 - Building Asset Revaluation Reserve - - 29,976 - Other Collections Asset Revaluation Reserve - (218,166) - (218,166) Works of Art Asset Revaluation Reserve - - 2,215 - Available-for-Sale Revaluation Reserve (145) (170) - (166) Trust Fund Reserve 17,570 15,679 17,569 15,679 Special Purpose Reserve (10,534) 1,054 105 105 General Reserve 23 145 23 4 6,914 (201,458) 94,888 (202,544) NOTE 31 (b): Retained Surplus Balance at Beginning of Year 1,034,332 742,867 936,525 649,550 Operating Result from Continuing Operations after related 96,246 90,007 183,378 84,431 Income Tax Expense Transfers from/(to) Reserves (6,914) 201,458 (94,888) 202,544 Balance at End of Year 1,123,664 1,034,332 1,025,015 936,525 NOTE 31(c): NATURE AND PURPOSE OF RESERVES Trust Fund Reserve - this reserve reflects net surpluses derived from endowments and bequests which can only be applied to restricted purposes. General Reserve - this reserve is maintained to cover a range of general purposes. Asset Revaluation Reserves - these reserves arise from the revaluation of the specific assets of Land, Buildings, Other Collections and Works of Art. Available-for-Sale Revaluation Reserve - this reserve arises from the revaluation of Available-for-Sale Investments. Special Purpose Reserve - this reserve is maintained to cover a range of special purposes. The major Special Purpose Reserve is maintained by the University against possible future claims that may arise under the University’s self insurance licence for WorkCover. This reserve is in addition to the University’s statutory obligation. Members Capital Reserve - this reserve is maintained by the Melbourne Business School Ltd, a deemed subsidiary, for the purpose of recording capital donations principally received from the University and other parties who have subscribed, or are invited to subscribe to the Memorandum of Association of the Company. Foreign Currency Translation Reserve - this reserve is maintained by UMEE Ltd, a subsidiary, for recording the effect of foreign currency exchange rate movements at balance dates in respect of its non-hedged holdings of assets and liabilities of its overseas subsidiaries. MBS Contributed Equity - represents the Net Fair Value of Assets identified upon acquisition of Mt Eliza Graduate School of Business and Government Limited as at 5 March 2004.
FINANCIAL STATEMENTS NOTE 32: FINANCIAL INSTRUMENTS 32.1 Financial Risk Management Objectives and Policies The consolidated entity’s principal financial instruments consist mainly of listed and unlisted shares, unit trusts, and borrowings. The main purpose of these financial instruments is to raise finance to support the Group’s activities. The Group has various other financial instruments such as accounts receivable and accounts payable, which arise directly from its operations. The Group is exposed to key financial risks, including market risk (which includes interest rate risk, price risk and foreign currency risk), credit risk and liquidity risk. This note presents information about the Group’s exposure to each of these risks, and the objectives, policies and processes for measuring and managing risk. The University’s Council has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Council has established: > the Finance Committee, which meets regularly to monitor and evaluate the University’s financial management strategies in the context of the most recent economic conditions and forecasts, > the Investment Management Committee, which monitors and advises the Finance Committee on University’s short term cash management and long term investments, and > the Audit and Risk Committee, which is responsible for developing and monitoring risk management policies. Primary responsibility for identification and control of financial risks rests with the Finance Committee, under the authority of Council. The Finance Committee reviews and makes recommendations to Council in relation to the University’s financial policies and risk management policies and procedures. 32.2 Risk Exposures The main risks the Group is exposed to through its financial instruments are as follows: (a) Market Risk Market risk is the risk that changes in market prices will affect the Group’s result or the value of the Group’s financial assets and liabilities. The key market risks that the Group is exposed to are interest rate risk, foreign currency risk and price risk, each of which are discussed below. (i) Interest Rate Risk The Group’s exposure to market interest rates relates primarily to the Group’s long-term borrowings and funds invested on the money market. The interest rate on the University’s long term borrowings is fixed, and therefore the Group is not exposed to any material interest rate risk. The interest rate on the University’s borrowings is capped at 7.32% under a Bill Acceptance and Discount Facility. (b) All borrowings are subject to approval by the University of Melbourne Council and the Treasurer of Victoria. The Group has minimal exposure to interest rate risk through its holding of cash assets and other financial assets at fair value. At the reporting date, if interest rates were 1% lower/higher than the year-end rates with all other variables held constant, the Group’s net result for the year would have been $1,905,000 lower/higher (2006, $1,489,000 lower/higher), reflecting the lower/higher interest income earned on affected balances. The Group manages its interest rate risk primarily through fixing its interest rate on long term borrowings and by maintaining a diversified investment portfolio. (ii) Foreign Currency Risk The Group’s main exposure to foreign currency risk arises from International Shares held as part of its long term investment portfolio. The Group is mainly exposed to US dollars and the British Pound. At the reporting date, had the Australian Dollar weakened/strengthened by 10% against the relevant foreign currencies with all other variables held constant, the Group’s equity balance would have been $16,018,000 lower/higher (2006, $3,866,000 lower/higher), due to changes in the fair value of available-for-sale financial assets. There would have been no change to the net result for the year (2006, Nil). At times, the University will hedge large equipment purchases denominated in foreign currencies to manage foreign currency risk. The University did not undertake any hedging during 2007 (2006, Nil). (iii) Price Risk The University has a significant investment in marketable securities (included within available-for-sale financial assets), which exposes the Group to price risk. To limit this risk, the University has invested its funds with Fund Managers and maintained a diversified investment portfolio. The majority of the equity investments are of a high quality and are publicly traded on equity exchanges. The investments are mainly included in the S&P/ASX 200 Index. The sensitivity analysis has been determined based on the Group’s exposure to equity prices. At the reporting date, if the value of marketable securities were 10% lower/higher with all other variables held constant, the Group’s equity would have been $132,910,000 lower/higher (2006: $126,650,000 lower/higher), due to changes in the fair value of available-forsale financial assets. There would have been no change to the net result for the year (2006, Nil). Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises principally from the Group’s receivables from customers. The Group does not have any material credit risk exposure to any single receivable or group of receivables. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Receivable balances are monitored on an ongoing basis to ensure that the exposure to bad debts is not significant. The Group has established an allowance for doubtful debts that represents their estimate of incurred losses in respect of receivables. An analysis of the ageing of the Group’s receivables at reporting date has been provided in Note 19. The University of Melbourne Annual Report 2007 127
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ANNUAL REPORT07 A TRADITION OF INNO
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Chancellor’s Letter Chancellor’
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COUNCIL Members of Council and the
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SENIOR OFFICERS Senior Officers Pre
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HIGHLIGHTS Knowledge Transfer > Ina
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INTRODUCTION And OVERVIEW Introduct
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INTRODUCTION And OVERVIEW In 2007 M
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INTRODUCTION And OVERVIEW Lady Sout
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QUALITY PeoPLE Academic and Profess
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QUALITY PeoPLE HIGH ACHIEVING STAFF
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QUALITY PeoPLE HIGH ACHIEVING STUDE
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SECTION HEADING APPEARS HERE Perfor
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RESEARCH & ReseARCH TRAINING Resear
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RESEARCH & ReseARCH TRAINING reduci
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LEARNING & teACHING In 2006 the Uni
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LEARNING & teACHING Quality of Teac
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LEARNING & teACHING > Review the su
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Sally Firth Single mother of three
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LEARNING & teACHING undergraduate s
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KNOWLEDGE TRANSFER Internationally
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KNOWLEDGE TRANSFER supports ethical
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KNOWLEDGE TRANSFER of the Universit
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INTERNATIONAL ENGAGEMENT cooperatio
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INTERNATIONAL ENGAGEMENT and engage
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BINDING THE stRANDS TOGETHER The Le
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BINDING THE stRANDS TOGETHER 2007 s
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BINDING THE stRANDS TOGETHER Refurb
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BINDING THE stRANDS TOGETHER $18 mi
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BINDING THE stRANDS TOGETHER Melbou
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UNIVERSITY goVERNANCE University Go
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UNIVERSITY goVERNANCE Council and i
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2007 Annual report (PDF 8.1 Mb) - University of Melbourne

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