Annual Report 2014-15

NOOSA SHIRE COUNCIL

Notes to the financial statements
For the year ended 30 June 2015

 28 Financial instruments - continued
         Market risk
              Market risk is the risk that changes in market prices, such 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 a mix of variable and fixed rate funding options through QTC so that interest rate risk
              exposure can 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 effect 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 would be held constant over the period.
              Consolidated

                                                              Net carrying] Change in profit & (loss) from   Change in equity from
              Financial assets and liabilities that are        amount
              held at variable interest rates total:                         Se SS
                QTC cash funds                                27,742,381       277,424         277,424          277,424        277,424
                Other investments                              6,973,517        69,735          69,735           69,735         69,735
                Loans - QTC                                   39,380,545       393,805         393,805          393,805        393,805
                Net total                                      4,664,647        46,646          46,646           46,646         46,646
              2014
                QTC cash funds                                25,118,125       251,181         251,181          251,181        251,181
                Other investments                             5,926,935         59,269          59,269           59,269| _(59,269)|
                Loans - QTC                                   41,177,025       411,770         411,770          411,770        411,770
                Net total                                     10,131,965       101,320         101,320          101,320        101,320

              In relation to the QTC loans held by the Council, the following has been applied:
              *QTC Generic Debt Pool - the generic debt pool products approximate a fixed rate loan. There is a negligible impact
              on the 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 receivables 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 18.

              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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