2015-11-16 GC Agenda - Item 3, Attach 1 - Annual Report 2014-15

                                                                                                                                       QAO
                                                                                                                              certified statement5



NOOSA SHIRE COUNCIL


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


28 Financiallnstrumenls       •.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 OTC and other financial institutions.
              The Council has access to a mix of variable and fixed rate funding options through     aTe 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 dale.


              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
              2015
                                                                   Net canying    Chanae in arefit & Ilass' hom         Chance in e uilv hom
             Financial assets and liabilities that are              amount        1% increase     1% deaease        1% increase       1% deaease
             held at variable interest rates total:                    $               $                 $                $                   $
                arc cash funds                                     27742381           277424           '277 424           277 424            1277 424
                Other investments                                   6973,517           69735             169735             69,735           169735
                loans -OTC                                        139380545          (3938051           393805           1393805             393805
                Net total                                          14664647           146646'            46646            146646              46646
             2014
                OTC cash funds                                     25118125          251 181           1251 181           251181           (251 181
                Other investments                                   5926935            59269            159269             59,269            159269
                loans - OTC                                       141177025          1411,770          411770            1411 770            411,770
                Net total                                         110131 965         (101 320          101 320           1101,320            101 320

             In relalion to the aTe loans held by the Council, the following has been applied:

             -OTC Generic Debt poor - the generic debt poor 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 aTe 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 aTe 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 represe;nts the amount required
            to be repaid if this was to occur at balance date. The market value of debt is provided by OTC and is discussed below and
            disclosed in note 18.


            OTC 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.