LEGAL SERVICES COMMISSIONER ANNUAL REPORT 2012

15 Financial instruments CONTINUED(b) Categorisation of financial instrumentsThe carrying amounts of the LSC’s contractual financial assets and financial liabilities are disclosed below.2012 CONTRACTUAL FINANCIALASSETS – LOANS ANDRECEIVABLESContractual financial assetsCONTRACTUAL FINANCIALLIABILITIES AT AMORTISEDCOSTTOTAL$ $ $Cash and deposits 204,771 - 204,771Other assets – loan to LSB 2,585,114 - 2,585,114Receivables:Sale of goods and services 466,123 - 466,123Total contractual financial assets 3,256,008 - 3,256,008Contractual financial liabilitiesSupplies and services - 254,620 254,620Disputed costs - 205,925 205,925Borrowings:Lease liabilities - 44,123 44,123Total contractual financial liabilities - 504,668 504,6682011Contractual financial assetsCash and deposits 1,776,758 - 1,776,758Other assets – loan to LSB 85 - 85Receivables:Sale of goods and services 429,654 - 429,654Total contractual financial assets 2,206,497 - 2,206,497Contractual financial liabilitiesSupplies and services - 261,993 261,993Disputed costs - 225,146 225,146Borrowings:Lease liabilities - 81,347 81,347Total contractual financial liabilities - 568,486 568,486(c) Credit riskCredit risk arises from the contractual financial assets of the LSC, which comprise cash, deposits and receivables.The LSC’s exposure to credit risk arises from the potential default of a counter party on their contractual obligationsresulting in financial loss to the LSC. Credit risk is measured at fair value and is monitored on a regular basis.Credit risk associated with the LSC’s financial assets is minimal because the amounts are held by Westpac BankingCorporation. Management has assessed the risk associated with the receivables as minimal because they are made up of:• funding from the LSB as per section 6.7.7 of the Legal Profession Act 2004; and• income from the service agreement in place with the LSB.The LSC’s policy is to only deal with banks with high credit ratings.Provision of impairment for contractual financial assets is recognised when there is objective evidence that the LSC will notbe able to collect a receivable. Objective evidence includes financial difficulties of the debtor, default payments, debt which aremore than 60 days overdue, and changes in debtor credit ratings.Except as otherwise detailed in the following table, the carrying amount of contractual financial assets recorded in thefinancial statements, net of any allowances for losses, represents the LSC’s maximum exposure to credit risk without takingaccount of the value of any collateral obtained.Legal Services COMMISSIONER Annual Report 2012 73