Annual Report - Campus Living Villages

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9 4 Campus Living Villages Annual Report 09/10 Campus Living Finance Trust NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 A$’000 CLFT Fair value If the market for a financial asset is not active, the entity establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs. Impairment The entity assesses at each balance date whether there is objective evidence that a financial asset or entity of financial assets is impaired. Impairment losses are recognised in the income statement. h) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Borrowings are classified as current liabilities unless the entity has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Borrowing costs are expensed. k) Issued capital The issued capital of the entity is the unit holdings of CLFT. l) Distributions A provision is made for the amount of any distribution approved by the directors, on or before the end of the financial year but not distributed at balance sheet date. m) Provisions Provisions are recognised when the entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The entity uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the entity for similar financial instruments. i) Trade and other payables These amounts represent liabilities for goods and services provided to the entity prior to the end of financial period which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. j) Borrowings and borrowing costs Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any noncash assets transferred or liabilities assumed, is recognised in other income or other expenses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. n) Rounding of amounts The entity is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off’’ of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. o) New accounting standards AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2013) AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the group’s accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011). In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures.
Campus Living Villages Annual Report 09/10 9 5 Campus Living Finance Trust NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 A$’000 It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the definition of a related party. When the amendments are applied, the consolidated group will need to disclose any transactions between its subsidiaries and its associates. However, there will be no impact on any of the amounts recognised in the financial statements. It does not expect that any adjustments will be necessary as a result of applying the revised rules. Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2010 reporting period other than those mentioned above. The Fund has assessed the new standards and interpretations as unlikely to have a material impact. CLFT AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective from 1 July 2010/1 January 2011). In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the IASB’s annual improvements project. The group will apply the amendments from 1 July 2010. p) Parent entity information The financial information for the parent entity disclosed in note 21 has been prepared on the same basis as the consolidated financial statements except as set below: Investment in subsidiaries Investments in subsidiaries are accounted for at cost in the financial information provided for the parent entity. 2. Financial risk management CLFT’s activities expose it to a variety of financial risks, which include credit risk, cash flow interest rate risk and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance. a) Credit risk Credit risk arises from cash and cash equivalents, deposits with major banks and financial institutions and loans to related parties and entities within the CLV Fund. Only banks and financial institutions with high credit ratings are used to deposit funds. Credit granted to related parties is monitored regularly and the loan agreements contain unsecured recourse against the borrower for default of the loans. b) Cash flow interest rate risk The borrowings of CLFT (refer note 11) are variable and the entity does not utilise interest rate swaps to mitigate fluctuations in interest rates. The funds drawn from external borrowings are lent to entities within the fund at the variable rate plus an appropriate margin to cover interest and finance charges incurred. As at 30 June 2010 CLFT had a $28.3m facility from the ANZ Bank to provide financing for development projects and acquisitions to other entities within the staple when required. The loan incurs interest at the variable rate of BBSY for 30 days plus 0.42% margin and the undrawn facility attracts a commitment fee of 0.25%. The facility was repaid and the bank guarantees and letters of credit were cash backed in July 2010. A summary of the undrawn facility at 30 June 2010 is: June 2010 June 2009 Total facility 23,400 100,000 Funds drawn (12,608) (71,206) Letters of credit and indemnity guarantees (10,792) (25,633) Undrawn facility - 3,161 The letters of credit include US$7.7m that are valued at a spot rate of 0.8515 at 30 June 2010. The letters of credit and the undrawn facility is subject to movements in the US exchange rate.
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Annual Report - Campus Living Villages

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