Annual Report 10/11 - Campus Living Villages

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 A$’000 Campus Living Villages Annual Report 10/11 Campus Living Villages Fund ab) New accounting standards AASB 9 Financial Instruments, AASB-2009-11 Amendments to the Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013). AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the Fund’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 issues a revised AASB 124 Related Party Disclosures. 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 Fund 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. 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 for annual periods beginning on or after 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 30 June 2012. The Fund does not expect that any adjustments will be necessary as the result of applying the revised rules. IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and revised IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures (effective 1 January 2013). In May 2011, the IASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and associated disclosures. The AASB is expected to issue equivalent Australian standards shortly. IFRS 10 replaces all of the guidance on control and consolidation in IAS 27 Consolidated and Separate Financial Statements, and SIC-12 Consolidation -- Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. While the Fund does not expect the new standard to have a significant impact on its composition, it has yet to perform a detailed analysis of the new guidance in the context of its various investees that may or may not be controlled under the new rules. IFRS 11 introduces a principles based approach to accounting for joint arrangements. As the Fund is not party to any joint arrangements, this standard will not have any impact on its financial statements. IFRS 12 sets out the required disclosures for entities reporting under the two new standards, IFRS 10 and IFRS 11, and replaces the disclosure requirements currently found in IAS 28. Application of this standard by the Fund will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the Fund’s investments. The Fund does not expect to adopt the new standards before their operative date. They would therefore be first applied in the financial statements for the annual reporting period ending 30 June 2014. IFRS 13 Fair Value Measurement (effective 1 January 2013). IFRS 13 was released in May 2011. The AASB is expected to issue an equivalent Australian standard shortly. IFRS 13 explains how to measure fair value and aims to enhance fair value disclosures. The Fund does not use fair value measurements extensively. It is therefore unlikely that the new rules will have a significant impact on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The Fund does not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 30 June 2014. 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 A$’000 Campus Living Villages Annual Report 10/11 Campus Living Villages Fund Revised IAS 1 Presentation of Financial Statements (effective 1 July 2012). In June 2011, the IASB made an amendment to IAS 1 Presentation of Financial Statements. The AASB is expected to make equivalent changes to AASB 101 shortly. The amendment requires entities to separate items presented in other comprehensive income into two groups, based on whether they may be recycled to profit or loss in the future. It will not affect the measurement of any of the items recognised in the balance sheet or the profit or loss in the current period. The Fund intends to adopt the new standard from 1 July 2012. Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2011 reporting period other than those mentioned above. The Fund has assessed the new standards and interpretations as unlikely to have a material impact. 2. Financial risk management The Fund’s activities expose it to a variety of financial risks, which include market risk (currency risk and cash flow interest rate risk), credit risk and liquidity risk. The Fund’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Fund. The Fund uses derivative financial instruments such as interest rate swaps to mitigate cash flow interest rate risk. The Fund uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign exchange risk; age analysis for credit risk; and cash flow forecasts for liquidity risks. The Fund holds the following financial instruments: Notes June 2011 June 2010 Financial assets Cash and cash equivalents 8 72,210 75,213 Trade and other receivables 10 4,864 9,715 Derivative financial instruments 9 - 56 Other financial assets 13 338 338 77,412 85,322 Financial liabilities Trade and other payables 17 44,934 53,022 Borrowings 19 692,859 856,465 Derivative financial instruments 9 20,673 30,391 758,466 939,878 a) Currency risk Subsidiaries of the Fund are located in Australia, the US, NZ and the UK and operate and source external financing in their local currencies. Management of the Fund monitors the exchange rate fluctuations between the Australian Dollar and the local currencies of the foreign subsidiaries on a regular basis. If the exchange rates fluctuated by 10% the loss after tax would vary by $2.3m and the net assets would vary by $63.2m. Management have not utilised any derivative financial instruments to date to hedge the foreign currency risk of earnings from subsidiaries in accordance with an agreement with the unit holders of the Fund. Management will institute the appropriate action and utilise the necessary derivative financial instruments should there be a change in agreement with the unit holders. Forward exchange contracts are utilised to hedge currency risk on the equity portion of capital projects. Loans are made during the year between entities within the Fund for purposes of providing funding for capital expenditure or the net investment in subsidiaries. The currency of the loan is generally denominated in the currency of the lender and the loans are valued at balance sheet spot rate at each reporting date. b) Credit Risk Credit risk arises from cash and cash equivalents, deposits with major banks and financial institutions, as well as credit exposure to students and universities, including outstanding receivables and committed transactions. Credit granted to 28
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