Northern Territory Treasury Corporation Annual report 2013-2014
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51Annual Report 2014 Notes to the Financial Statements For the financial year ended 30June2014 Note 2 continued (iii) Effective interest method: The effective interest method is a method of calculating the amortised cost of a financial asset or liability and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial assets or liabilities or, where appropriate, a shorter period. Interest income and expense is recognised on an effective interest rate basis for debt instruments. (iv) Financial instruments issued by NTTC: Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual agreement. (v) Impairment of financial assets: Financial assets are reviewed at each reporting date to determine whether there is objective evidence ofimpairment. A financial asset or group of financial assets is impaired and impairment losses are incurred if there is objective evidence of impairment, resulting from one or more loss events that occurredafter initial recognition, which indicates it is probable that NTTC will be unable to collect all amounts due. The carrying amount of a financial asset identified as impaired is reduced to its estimated recoverable amount. (vi) Gains and losses on extinguishment: Gains and losses on extinguishment occur when a loan or a borrowing is redeemed prior to the scheduled maturity date. A gain or loss is derived where the fair value at redemption is higher or lower than the value of the instrument at amortised cost. These gains and losses are recognised in the period in which the instrument is extinguished. (vii) Derecognition: Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or been transferred. Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled or expired. (e) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: (i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of the acquisition of an asset or as part of an item of expense; or (ii) for receivables and payables that are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST component of cash flows arising from investing and financing activities that is recoverable from, or payable to, the taxation authority is classified as operating cash flows.