✨ Financial Statements
Financial Statements
Notes to the financial statements (In New Zealand Dollars ($000’s))
18 Financial instruments
Exposure to credit, interest rate, foreign currency, equity price and liquidity risks arises in the normal course of the Group’s business. The Group’s risk management policies and procedures for financial instruments are formally documented and approved by the Trustees in the Group’s Statement of Investment Policies and Objectives ("SIPO").
Credit risk
The Group’s SIPO stipulates value ranges that may be held in cash, New Zealand bonds, international bonds, emerging market bonds and property. Within each of these investment sub-groups there are maximum limits that can be invested within one financial institution. This diversified investment strategy reduces the credit risk exposure of the Group.
The Group only makes loans to entities that are well established and have the ability to demonstrate strong cashflows.
The SIPO states minimum credit ratings of the majority of investments that have to be achieved.
Liquidity risk
Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity measurements on an ongoing basis. In general, the Group generates sufficient cash flows from its activities to meet its obligations arising from its financial liabilities.
Market risk
Market risk is the risk that changes in market prices, such as interest rates or equity prices, will affect the Group’s profit or valuation of net assets. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
The risk is mitigated by the policies and procedures outlined in the Group’s SIPO. These include diversification of the investment portfolio and prudent investment strategies.
Foreign currency risk
The Group is exposed to foreign currency risk as a result of investment transactions entered into by fund managers in a currency other than the Parent’s functional currency, New Zealand dollars ($), which is the presentation currency of the Group. Fund managers typically hedge investments denominated in a foreign currency where appropriate with foreign exchange contracts.
Interest rate risk
The Group has bank call and deposit accounts, government and local authority securities and other investment held by the Group’s fund managers that are exposed to interest rate risk. Interest rate risk is mitigated by the use of swaps where appropriate, to achieve an appropriate mix of fixed and floating rate exposure within the Group’s policy.
Other market price risk
The entity is not exposed to substantial other market price risk arising from financial instruments.
Quantitative disclosure
Credit risk
The carrying amount of financial assets represents the Group’s maximum credit exposure.
The Group’s maximum exposure to credit risk for investments by geographic regions and investment type is as follows, net of related derivative liabilities:
| Carrying amount | Group 2011 | Group 2010 |
|---|---|---|
| New Zealand Community Loans | 4,702 | 4,318 |
| New Zealand Cash | 89,363 | 96,475 |
| New Zealand Fixed interest | 133,471 | 144,563 |
| New Zealand Property | 13,218 | 12,973 |
| Australian Equities | 75,644 | 69,779 |
| Private Equity | 13,853 | 11,994 |
| Global Bonds | 57,715 | 39,311 |
| Global Equities | 54,373 | 51,975 |
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NZ Gazette 2011, No 116
✨ LLM interpretation of page content
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Canterbury Community Trust Financial Statements
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💰 Finance & RevenueFinancial Instruments, Credit Risk, Liquidity Risk, Market Risk, Foreign Currency Risk, Interest Rate Risk, Investment Portfolio, Diversification