Home' Annual Report : Annual Report 2015 Contents SENSITIVITY ANALYSIS
The defined benefit obligation as at 31 December 2015
under several scenarios is presented below.
Scenario A and B relate to discount rate sensitivity, Scenario
C and D relate to expected salar y increase rate sensitivity.
• Scenario A: 0.5% p.a. lower discount rate assumption
• Scenario B: 0.5% p.a . higher discount rate assumption
• Scenario C: 0.5% p.a. lower assumed salary increase
• Scenario D: 0.5% p.a . higher assumed salar y increase
Discount rate (% p.a.)
4.4 3.9 4.9 4.4 4.4
rate (% p.a.)
4.0 4.0 4.0 3.5 4.5
655 664 648 651 661
* Includes defined benefit contributions tax provision
The defined benefit obligation has been recalculated by
changing the assumptions as outlined above, whilst retaining
all other assumptions.
ASSET-LIABILITY MATCHING STRATEGIES
CPA Australia is not aware of any asset and liability matching
strategies adopted by the Fund.
The financing obligations adopted at the 31 December 2013
ac tuarial investigation of the Fund, in a repor t dated 10 July
2014, is to maintain the value of the Fund’s asset at least
• 100 per cent of accumulation account balances plus
• 110 per cent of vested benefits for defined benefit members
In that valuation, it was recommended that CPA Australia
contributes to the Fund as follows:
For defined benefit members:
• 10 per cent of salaries up to 30 June 2014 then nil
from 1 July 2014
For accumulation members:
• As required to meet the employer’s obligations under
Superannuation Guarantee legislation or employment
• Any additional employer contributions agreed between
the employer and a member (e.g. additional salary
FINANCIAL YEAR ENDED
31 DEC 2016
Expected employer contributions
MATURITY PROFILE OF DEFINED BENEFIT
The weighted average duration of the defined benefit
obligation as at 31 December 2015 is approximately
EXPECTED BENEFIT PAYMENTS
FOR THE FINANCIAL YEAR
31 December 2016
31 December 2017
31 December 2018
31 December 2019
31 December 2020
Following 5 years
21. FINANCIAL RISK MANAGEMENT,
OBJECTIVES AND POLICIES
The Consolidated Entity’s activities expose it primarily to the
financial risks of changes in foreign currency exchange rates,
interest rates and equity markets.
The purpose of the investment policy is to protect and grow
the capital base within a defined risk tolerance over the
medium to long term and to generate an annual return that
is in excess of what could be achieved through a risk adverse
strategy. The policy allows CPA Australia to invest directly
or via managed funds in both Australian and international
equities, fixed interest investments including corporate debt
CPA Australia’s financial instruments consist mainly
of bank bills, cash, equities, bonds and hybrids that are
traded in an active market. The main purpose of these
financial instruments is to invest surplus member funds
in order to maximise returns while not exposing the
organisation to a high level of risk. Investment of funds
is in line with CPA Australia’s investment policy.
Other financial assets and liabilities are trade
receivables and trade payables which arise directly
from the Consolidated Entity’s operations. Policies for
managing the main risks are summarised below:
A. FOREIGN CURRENCY RISK MANAGEMENT
It is not CPA Australia policy to utilise off-balance sheet
derivative instruments as a means of managing exposure
to fluctuations in foreign exchange rates. Foreign exchange
exposure is continuously monitored by the Consolidated
Entity’s Finance Business Unit and reported to the relevant
operation of the Consolidated Entity through management
reports which analyse exposures by degree and magnitude
of risks. In 2015, the weakening of the Australian dollar
against the currencies where substantial cash is held resulted
in a foreign exchange gain of $278,850 for the full year.
B. CREDIT RISK EXPOSURES
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Consolidated Entity. The Consolidated Entity has adopted
a policy of only dealing with creditworthy counter parties as
a means of mitigating the risk of financial loss from defaults.
The Consolidated Entity’s exposure is continuously
monitored and limits reviewed annually. Trade receivables
consist of a large number of members and customers,
spread across diverse industries and geographical areas.
The Consolidated Entity does not have any significant credit
risk exposure to any single party or any group of counter
parties having similar characteristics. The credit risk on liquid
funds and bank bills is mitigated by ensuring the authorised
deposit taking institutions have a minimum S&P credit rating
of BBB+ (or Moody’s / Fitch equivalent).
The credit risk on financial assets of the Consolidated
Entity which have been recognised on the Statement of
financial position is generally the carrying amount, net of
any provisions for loss. Use of off balance-sheet financial
instruments is not part of current policy. Trade receivables
are concentrated in Australia and the concentration of credit
risk arises mainly in the following industries:
• Advertising and sponsors
• Accounting practices
• Credit services
C. INTEREST RATE RISK EXPOSURES
Exposures to interest rate risk are limited to assets and
liabilities bearing variable interest rates. The majority of
financial assets are equities and bank bills held to maturity
with fixed interest rates and term.
D. CAPITAL RISK MANAGEMENT
The Consolidated Entity manages its capital to ensure that
the Consolidated Entity will be able to continue as a going
concern. The Consolidated Entity’s overall strategy remains
unchanged from 2014.
The capital structure of the Consolidated Entity consists
of equity comprising reserves and retained earnings.
The Consolidated Entity is not subject to any externally
imposed capital requirements.
E. MATURITY PROFILE OF FINANCIAL INSTRUMENTS
The maturity profile of financial assets and liabilities held by
the Consolidated Entity are detailed on page 96.
F. NET FAIR VALUE OF FINANCIAL ASSETS
The Directors consider that the carrying amount of financial
assets and financial liabilities recorded in the financial
statements approximates their fair value.
G. LIQUIDITY RISK MANAGEMENT
Ultimate responsibility for liquidity risk management rests
with the Board of Directors, who have built an appropriate
liquidity risk management framework for the management
of the Consolidated Entity’s short, medium and long-term
funding and liquidity management. The Consolidated Entity
manages the liquidity risk by maintaining adequate cash
reserves, and by continuously monitoring forecast and
actual cash flows while matching the maturity profiles
of financial assets and liabilities. CPA Australia invests in
equities that are traded in an active market on the Australian
Securities Exchange and that can be readily disposed of.
All financial liabilities, namely trade and other payables,
are due for settlement within three months and are
non-interest bearing. Given the current surplus cash
assets, liquidity risk is minimal.
CPA AUSTRALIA 2015 INTEGRATED REPORT
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