Telstra 2012 Annual Report Download - page 168

Telstra Corporation Limited and controlled entities
138
Notes to the Financial Statements (continued)
(a) Risk and mitigation (continued)
Credit risk (continued)
Liquidity risk
Liquidity risk includes the risk that, as a result of our operational
liquidity requirements:
• we will not have sufficient funds to settle a transaction on the due
date;
• we will be forced to sell financial assets at a value which is less
than what they are worth; or
• we may be unable to settle a financial liability or recover a
financial asset at all.
To help reduce these risks we:
• have a liquidity policy which targets a minimum and average
level of cash and cash equivalents to be maintained;
• have readily accessible standby facilities and other funding
arrangements in place;
• generally use instruments that are tradeable in highly liquid
markets; and
• have a liquidity portfolio structure that requires surplus funds to
be invested within various bands of liquid instruments ranging
from ultra liquid, highly liquid to liquid instruments.
During the prior year new policy settings were implemented to raise
the minimum level of liquidity and to pre-fund major payments. This
has resulted in the holding of higher levels of liquidity.
We monitor rolling forecasts of liquidity reserves on the basis of
expected cash flow. Our objective is to maintain a balance between
continuity of funding and flexibility through the use of liquid
instruments, borrowings and committed available credit lines.
At 30 June 2012, based on contractual face values, 18% of our debt
(after hedging) comprising offshore borrowings, Telstra bonds and
domestic loans and excluding promissory notes, will mature in less
than one year (2011: 13%).
The contractual maturity of our fixed and floating rate financial
liabilities and derivatives and the corresponding carrying values are
shown in the following Table E. The contractual maturity amounts
(nominal cash flows) represent the future undiscounted principal
and interest cash flows and therefore do not equate to the carrying
values. These amounts are reported in Australian dollars based on
the applicable exchange rate as at 30 June. We have also included
derivative financial assets in the following table on the basis that
these assets have a direct relationship with an underlying financial
liability and both the asset and the liability are managed together.
For floating rate instruments, the amount disclosed is determined by
reference to the current market pricing for interest rates over the
period to maturity.
Also affecting liquidity are cash and cash equivalents, available for
sale financial assets and other interest and non-interest bearing
financial assets. Liquidity risk associated with these financial
instruments is represented by the face values as shown in note 17
Table C.
18. Financial risk management (continued)
Table D Telstra Group
Credit risk concentrations (VaR based)
As at 30 June
2012 2011
%$m % $m
Australia . . . . . 25.8 3,190 16.7 1,644
United States . . . 21.1 2,616 24.8 2,440
Japan . . . . . . . 0.5 63 0.6 56
Europe . . . . . . 20.5 2,530 19.4 1,911
United Kingdom . 15.3 1,889 17.3 1,703
Canada . . . . . . 0.1 11 6.4 629
Switzerland . . . . 0.6 70 1.0 99
China/Hong Kong 15.3 1,892 10.2 1,001
Singapore . . . . 0.6 71 3.3 324
New Zealand . . . 0.2 27 0.3 36
100.0 12,359 100.0 9,843