Annual Report 2014

NOOSA SHIRE COUNCIL

Notes to the financial statements
For the six months ending 30 June 2014

 33   Financial instruments - continued
           Market risk
                 Market risk is the risk that changes in market prices, suclt as interest rates, will affect the Council's income or the value
                 of its holdings of financial instruments.

           Interest rate risk
                 Noosa Shire Council is exposed to interest rate risk through investments with QTC and other financial institutions.

                 The Council has access to ¢ mix of variable and fixed rate funding options through QTC so that interest rate risk exposure
                 catt be minimised,

           Sensitivity
                 Sensitivity to interest rate movements is shown for variable financial assets and liabilities based on the carrying amount
                 at reporting date.

                 The following interest rate sensitivity analysis depicts what cffect a reasonably possible change in interest rates (assumed
                 to be 1%) would have on the profit and equity, based on the carrying values at the end of the reporting period. The
                 calculation assumes that the change in interest rates wou!d be held constant over the period,
                 Consolidated

                 Financial assets and liabilities that are | amount          1% increase | 196decrease |        1% increase | 1% decrease
                 held at variable interest rates total: rs                {|   s          {| s |                   5 Jos                         |
                    QTC cash funds
                    Other investnents
                    Loans - QTC
                    Net total
                 Council

                 Financial assets and liabilities that are © amounts | 19 increase |          196 decrease 1°    1% increase | 1% decrease.
                 held at variable intercst rates tolal: ros             ldT|llcs tls                         gg
                    QTC cash funds
                    Other investments
                    Loans -QTCat fixed andgeneric* | canimnoryt tT
                    Net total
                    Loans - QTC at variabte                            ee             ee                es                   ee ee

                 In relation to the QTC loans held by the Council, the following has been applied:
                 *QTC Generic Debt Poot - the generic debt pool products approximate a fixed rate loan, There is a negligible impact on interest
                 sensitivity from changes in interest rates for generic debt pool borrowings.
                 The sensitivity analysis provided by QTC is currently based on a 1% change but this is subject to change.

            Fair Value
                 ‘The fair value of trade and other reccivabies and payables is assumed to approximate the value of the original transaction,
                 less any allowance for impairment,

                 The fair value of borrowings with QTC is based on the market value of debt outstanding. The market value of a debt
                 obligation is the discounted value of future cash flows based on prevailing market rates and represents the amount required
                 to be repaid if this was to occur at balance date. The market value of debt is provided by QTC and is discussed below and
                 disclosed in note 23.
                 QTC applies a book rate approach in the management of debt and interest rate risk, to limit the impact of market value
                 movements to clients’ cost of funding. The book value represents the carrying value based on amortised cost using the
                 effective interest method.

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