Notes to the Financial Statements
continued
72
maximum exposure to credit risk at reporting date is the carrying amount of the financial assets as shown in
the statement of financial position. The Group does not require any collateral or security to support financial
instruments as it only deposits with, or lends to, banks and other financial institutions with high credit ratings
except for funds lent to a related party and an external entity for which the Group has appropriate security and
guarantees. The Group further minimises credit exposure by limiting the amount of surplus funds placed with
any one financial institution. The Group does not expect non‑performance of any obligations at balance date.
There are no material financial assets held by the Company and Group at balance date which are past due but
not impaired.
(b) Market risk
(i) Currency
The Group has no exposure to currency risk at balance date.
There are no notional principal or forward foreign exchange contracts at 31 March 2013 (2012: nil).
The Group’s interest rate risk arises from long‑term borrowings. Borrowings issued at variable rates expose the
Group to cash flow interest rate risk. Borrowings issued at fixed rate expose the Group to fair value interest rate
risk.
(ii) Interest rate risk
The Company and Group adopt a policy of ensuring that between 25 and 90 per cent of its exposure to changes
in interest rates on borrowings is on a fixed rate basis.
The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest
rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed contract and
floating rate interest amounts calculated by reference to the agreed notional principal amounts. Such contracts
enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held
and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the
reporting date is determined by discounting the future cash flows at reporting date and the credit risk inherent
in the contract, and are disclosed below. The average interest rate is based on the outstanding balances at the
start of the financial year.
(iii) Price risk
The Group and the Parent are exposed to equity securities price risk. This arises from investments held by the
Group and Parent that are classified at fair value through profit or loss. Neither the Group nor the Parent are
exposed to commodity price risk.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty raising liquid funds to meet commitments as
they fall due. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.
(d) Financial risk management strategies relating to agricultural activities
The Group undertakes agricultural activities through its farm operations and forestry land. These operations are
exposed to business risks, including the volatility of revenue and valuation of its assets.
The Group utilises the skills of appropriately qualified and experienced farm consultants, farm managers and
sharemilkers to mitigate the financial risk relating to farming activities.
The Group utilises the skills of appropriately qualified and experienced forestry consultants and forestry
contractors to mitigate the financial risk relating to forestry activities.
(e) Fair value estimation
The fair value of financial instruments traded in active markets is based on quoted market prices at balance
date. The quoted market price used for financial assets held by the Group is the current bid price.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate
their fair values due to their short term nature. The fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at the current market interest rate that is available
to the Group for similar financial instruments.
Note 25.1 continued
