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Wool Stocktake : AWI Annual Report 2008-09
Notes to the financial statements 30 June 2009 ( c o n t i n u e d ) NOTE 2: Financial risk management (continued) (ii) Cash flow and fair value interest rate risk The Group's main interest rate risk arises from term deposit investments. The company's investment policy is to maintain a prudent and conservative investment profile that is risk averse. As at reporting date, the Group's exposure to interest rate risk and the effective weighted average interest rates are as follows: 30 June 2008 Weighted average interest rate Balance % $'000 Cash on hand -- interest bearing 6.32% 91 Cash on hand -- non-interest bearing* 4,983 Funds invested -- term deposits 7.78% 59,737 Net exposure to cash flow interest rate risk 64,811 * The majority of the non-interest bearing cash is held in overseas jurisdictions where restrictions for repatriation and low interest regimes exist. Group sensitivity At 30 June 2009, if interest rates had changed by -/+100 basis points from the year end rates with all other variables held constant, post tax profit for the year would have been $468,000 lower/higher (2008 - change of 100 bps: $598,000 lower/higher) or post tax (loss) for the year would have been $468,000 higher/lower (2008 - change of 100 bps: $598,000 higher/lower), mainly as a result of lower/higher interest income from cash and cash equivalents and held-to- maturity investments. Parent entity sensitivity The parent entity's main interest rate risk arises from cash and cash equivalents and held-to-maturity investments. At 30 June 2009, if interest rates had changed by -/+ 100 basis points from the year end rates with all other variables held constant, post tax profit for the year would have been $467,000 lower/higher (2008 - change of 100 bps: $597,000 lower/higher) or post tax (loss) for the year would have been $467,000 higher/lower (2008 - change of 100 bps: $597,000 higher/lower), as a result of lower/higher interest income from these financial assets. The Group has no significant concentrations of credit risk and credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. Customers risk rating is assessed by the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal ratings and compliance with credit limits by customers is regularly monitored by management. Australian Wool Innovation Limited's funds investment policy is conservative and designed to minimise principal, interest rate and currency risk. Risk of principal amounts invested is minimised by only investing in deposits with Standard & Poor's ratings AAA, AA and A for long term and A1 and A2 for short term. Risk of loss due to adverse interest rate movements is minimised by investing in term deposits with a maximum term of 148 or 369 days in Australia and overseas respectively. Funds invested at 30 June 2009 were predominantly in Australian dollars thereby minimising any foreign exchange risk. As at 30 June, Australian Wool Innovation Limited had the following categories of funds invested: 2008 2008 $'000 $'000 Deposits with Australian Banks (rated A2 or better) 59,605 59,605 Deposits with overseas banks 5,206 257 64,811 59,862 The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets.
AWI Annual Report 2007-08
AWI Annual Report 2009-10