Annual Report

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52 Ausgrid and Controlled Entity Notes to financial statements For the year ended 30 June 2015 Provision for costs relating to the Retail Sale A provision for costs relating to the Retail Sale was created to cover expected future costs incurred during subsequent years relating to the cost of transitioning our retail operations to EnergyAustralia. The provision as at 30 June 2015 was estimated to be $6.4 million (2014: $12.1 million). Provision for costs relating to decommissioning assets The provision to cover the expected future costs associated with decommissioning Ausgrid’s system assets as at 30 June 2015 was estimated to be $7.4 million (2014: $16.2 million). Provision for Other Costs A provision was created to represent estimated expenditure required to settle obligations at the reporting date. The provision as at 30 June 2015 was estimated to be $2.3 million (2014: $1.8 million). Provision for Make Good Ausgrid is required to restore the leased premises to the lessor clean, tidy, and free from loose items and in good condition. A provision has been recognised for the amount payable in terms with the lease agreement. The provision as at 30 June 2015 was $4.2 million (2014: $1.9 million). (vi) Amounts not expected to be settled within the next 12 months The current provision for employee benefits includes accrued annual leave, vesting sick leave and long service leave. For long service leave it covers all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro‐rata payments in certain circumstances. The entire amount of the provision for accrued annual leave, vesting sick leave and unconditional entitlements to long service leave of $309.3 million (2014 – $367.1 million) is presented as current, since Ausgrid does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, Ausgrid does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months. Consolidated Entity & Ausgrid Current leave obligations expected to be settled after 12 months 212.0 248.2 2015 $M 2014 $M 17. OTHER LIABILITIES Current Consolidated Entity & Ausgrid Deposits 3.3 2.9 Deferred revenue 11.8 24.2 Non‐Current 2015 $M 2014 $M 15.1 27.1 Deposits 3.4 5.4
Ausgrid – <strong>Annual</strong> <strong>Report</strong> 2014/15 53 18. FINANCIAL INSTRUMENTS DISCLOSURE a. Financial risk management objectives and policies Financial instruments comprise cash, trade debtors, trade creditors, short term deposits, loans and derivatives. The main purpose of these financial instruments is to raise finance or invest surplus cash for the entity’s operations, and to manage exposure to price movements. The Ausgrid’s leadership team and Board manage the Corporation’s exposure to key financial risks including credit risk, currency risk, interest rate risk, liquidity risk and commodity price risk, in accordance with the Board’s financial risk management policies. The Board reviews and agrees policies for managing each of the key financial risks. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements. Derivative financial instruments can be used to hedge exposure to fluctuations in foreign exchange rates, commodity prices, interest rates and energy prices. b. Credit risk Credit risk is the risk of financial loss arising if counterparties failed to meet their financial obligations. The credit risk on trade and other receivables, and accrued income from unread meters of Ausgrid that have been recognised in the Statement of Financial Position, is generally the carrying amount net of any impairment provision. Ausgrid's credit risk management policy requires customers to pay in accordance with agreed payment terms. The payment terms are generally 15‐30 days. All credit and recovery risks associated with trade receivables have been provided for in the Statement of Financial Position. The ageing of trade receivables past due but not impaired at 30 June 2015 is detailed below: Consolidated Entity & Ausgrid Less than 3 months overdue 3.7 68.5 3 months to 6 months overdue 0.6 3.1 Later than 6 months overdue 4.3 6.5 2015 $M 2014 $M 8.6 78.1 Ausgrid's credit exposure is predominantly with investment grade rated corporations or government owned entities in the energy industry. Where the counter‐party is a non‐government owned corporation, its credit worthiness is established and monitored in accordance with the credit risk management policy as approved by the Board. The maximum credit exposure resulting from energy derivatives, excluding realised gains and losses not yet settled to EnergyAustralia is nil (2014: $153.5 million). As all energy derivative contracts were extinguished or novated to EnergyAustralia by 31 December 2014, there is no credit risk related to these contracts. c. Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Ausgrid is exposed to foreign currency risk in respect of purchases of capital equipment that are denominated in a currency other than the AUD. Ausgrid uses forward exchange contracts to hedge its foreign currency risk for all foreign exchange exposures that exceed $AUD 500,000 in value. There are no other significant assets or liabilities denominated in currencies other than AUD. At reporting date, for both current and prior year, there is no material exposure to any foreign currency net of estimated purchases and forward exchange contracts. It is estimated that a change at reporting date by ten percentage points in the value of the AUD against other foreign currencies would have no impact on Ausgrid’s profit or loss or value of comprehensive income for the year.
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