Hunter United Employees' Credit Union ACN 087 650 182 ...assets.hunterunited.com.au/files/2015AnnualReport.pdf · 130 Lambton Road, Broadmeadow, NSW 2292 PO Box 851 Newcastle NSW

julie bowen

Text Box

Hunter United Employees' Credit Union ACN 087 650 182 Annual Report 2015

julie bowen

Text Box

AFSL / Australian Credit Licence No. 238316 130 Lambton Road, Broadmeadow, NSW 2292 PO Box 851 Newcastle NSW 2300 (02) 4941 3888 www.hunterunited.com.au

Hunter United Employees' Credit Union Limited ACN 087 650 182

Annual report - 30 June 2015

ContentsPage

Directors' report 1Financial report 7Independent auditor's report to the members 45

Directors' report

The Directors present their report on Hunter United Employees' Credit Union Limited ("the Credit Union") for theyear ended 30 June 2015.

Directors

The following persons held office as Directors of the Credit Union during the financial year:

Mr Bruce Pickering (resigned 24 November 2014)Mr Mark HedgesMs Sharon HowesMs Jann GardnerMs Shirley LiewMs Samantha AlfordMr Donald Magin (appointed 2 March 2015)

Principal activities

During the year the principal continuing activities of the Credit Union involved the provision of financial services tomembers in the form of taking deposits and providing financial accommodation as prescribed by the Constitution.There were no significant changes in the nature of the Credit Union's activities during the year.

Review of operations

A summary of results is set out below:

2015$

2014$

Profit from ordinary activities after income tax expense 568,473 441,889

The results of the Credit Union's operations during the financial year have not in the opinion of the Directors beensubstantially affected by any item, transaction or event of a material and unusual nature, not otherwise referred toin this report.

The Credit Union's pre-tax profit for the year was $743,674 (2014: $670,991) representing an increase of 10.8%over the previous financial year, with net profit after tax being $568,473 (2014: $441,889) representing anincrease of 28.6%.

Total assets decreased to $276,156,594 for the year to 30 June 2015 (2014: $277,308,240).

Significant changes in the state of affairs

In the opinion of the Directors there were no significant changes in the state of affairs during the year.

Event since the end of the financial year

No other matters or circumstances have arisen since 30 June 2015 that have significantly affected, or maysignificantly affect:

(a) the Credit Union's operations in future financial years, or(b) the results of those operations in future financial years, or(c) the Credit Union's state of affairs in future financial years.

Likely developments and expected results of operations

Disclosure of information relating to future developments in operations of the Credit Union and the expectedresults of those operations in subsequent years which will not, in the opinion of the Directors, be prejudicial to theinterests of the Credit Union are contained in the Chairman's Report.

Environmental regulation

The Credit Union has assessed whether there are any particular or significant regulations which apply to it andhas determined that there is none.

Hunter United Employees' Credit Union Limited30 June 2015

1

Directors' reportInformation on directors

Ms Jann Gardner BA LLB, MBA, GAICD

Experience and expertiseLawyer - Former Partner Sparke Helmore Lawyers

Other current directorshipsMember of the Advisory Board to the Faculty of Law and Business - Newcastle University, Non-ExecutiveDirector - StateCover Mutual Ltd, Member of the Governing Council of Sancta Sophia College, Member of theUniversity of Newcastle Council, Member of the Nursing and Midwifery Council of NSW

Special responsibilitiesChairman (appointed 24 November 2014)Mergers & Acquisitions CommitteeRisk Management Committee

Mr Mark Hedges B. Bus, MBA, M App Fin, CPA, CFTP, GAICD

Experience and expertiseWide experience in financial markets, particularly corporate funding, comprehensive experience and successfultrack record in senior finance roles in large, listed corporates and leadership in risk management.

Other current directorshipsGroup Treasurer - Fairfax Media Ltd

Special responsibilitiesDeputy ChairmanChair - Risk Management CommitteeHuman Resources Committee

Ms Sharon Howes B.Sc, Grad Dip Mgt GAICD

Experience and expertiseLead Executive, Project Management - Vulcan Steel Pty LtdOver 25 years’ experience in management and senior executive roles across energy and manufacturing sectorsand management consulting roles.

Other current directorshipsManaging Director Ableson Howes & Assoc.

Special responsibilitiesChair - Human Resources CommitteeRisk Management CommitteeIT Steering Committee

Ms Shirley Liew GAICD, MBA, BBUS (Fin), FTIA, FCPA, CIA, CRISC (ISACA), FINSIA(Aff)

Experience and expertiseAccountant, Chartered Internal Auditor, Certified Risk and Information Systems Audit, Risk and GovernanceSpecialist. Over 23 years senior executive and lead advisory services with Big 4 and leading accountancy firms inAustralian Financial Services Advisory in retail and wholesale sector. Consults on risk, audit and governance tofinancial institutions. Independent member audit, risk and finance committee: Inner West Sydney Medicare Local,Nepean Blue Mountains Area Health Network, NSW Trains.

Other current directorshipsNon-executive Director, Chair of Finance, Risk and Audit Committee - Bridge Housing Limited, Lantern HotelsGroup Limited, Norcos Investments Pty Limited.

Former directorships in last 3 yearsFormer Non-executive Director and Chair of Finance, Risk and Audit Committee of various organisations infinancial services, health and hospitals across for profit and non-for-profit.


2

Directors' reportInformation on directors (continued)

Special responsibilitiesChair - Audit CommitteeMergers and Acquisitions Committee

Ms Samantha Alford

Experience and expertiseOver 15 years’ experience in management and senior executive roles across telecommunications sector,government, and management consulting roles. Specialist in integrated digital marketing strategy and practice.Founder & CEO of Getudigital.Trustee of the Committee for Economic Development of Australia.

Other current directorshipsDirector - Go2 Travel Pty Ltd.

Special responsibilitiesChair - IT Steering CommitteeAudit CommitteeHuman Resources Committee

Directors were in office from the beginning of the financial year until the date of this report, unless otherwisestated.

Mr Donald Magin B Maths Grad Dip Mgt (Appointed 2 March 2015)

Experience and expertiseOver 25 years’ experience in management and Director roles in the financial services industry and not-for-profitsector. Experienced in a broad range of oversight functions including remuneration, audit and risk.

Other current directorshipsChair of the Hunter Appeal Committee - The Salvation ArmyDirector of the Hunter Medical Research InstituteDirector of the Hunter Research FoundationChairman the of Heal For Life Foundation

Former directorships in last 3 yearsChairman of the Customer Owned Banking AssociationDirector of Australian Settlements Limited

Special responsibilitiesChair - Mergers & Acquisitions CommitteeAudit CommitteeIT Steering Committee

Company secretary

The company secretary is Mr Kent Dwyer B. Comm, CPA, AIMM. Mr Dwyer was appointed to the position ofcompany secretary in 2005 and is the Credit Union's Chief Financial Officer.


3

Directors' reportMeetings of directors

The numbers of meetings of the Credit Union's board of Directors and of each board committee held during theyear ended 30 June 2015, and the numbers of meetings attended by each Director were:

FullMeetings Audit

Mergers &Acquisitions

RiskManagement

HumanResources IT Steering

of directors Committee Committee Committee Committee CommitteeA B A B A B A B A B A B

Ms Jann Gardner 10 11 7 7 * * 5 5 ** ** ** **Mr Mark Hedges 9 11 ** ** ** ** 6 6 3 3 ** **Ms Sharon Howes 11 11 ** ** ** ** 5 6 3 3 1 1Ms Shirley Liew 8 11 7 8 * * ** ** ** ** ** **Ms Samantha Alford 8 11 6 8 ** ** ** ** 2 3 1 1Mr Donald Magin 5 5 2 2 * * ** ** ** ** 1 1Mr Bruce Pickering 5 5 4 4 ** ** 2 2 ** ** ** **

A = Number of meetings attendedB = Number of meetings held during the time the Director held office or was a member of the committee duringthe year* = There were no meetings of the Mergers & Acquisitions Committee held** = Not a member of the relevant committee

During the year Sharon Howes also attended (by invitation) the Audit Committee meeting on 24 October 2014with Auditors present. Jann Gardner also part attended (by invitation) the Human Resources Committee meetingon 9 February 2015.

Insurance of officers

During the financial year, the Credit Union paid a premium to insure the Directors, company secretary and seniorexecutive management of the Credit Union.

In accordance with normal commercial practice, disclosure of the total amount of premium payable under, andthe nature of liabilities covered by, the insurance contract is prohibited by a confidentiality clause in the contract.

No insurance cover has been provided for the benefit of the auditors of the Credit Union.

Proceedings on behalf of the company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bringproceedings on behalf of the Credit Union, or to intervene in any proceedings to which the Credit Union is a party,for the purpose of taking responsibility on behalf of the Credit Union for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Credit Union with leave of the Court undersection 237 of the Corporations Act 2001.

Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. Detailsof amounts paid and payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services during theyear are disclosed in note 16.


4

Directors' reportAuditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 isset out on page 6.

The report is made in accordance with a resolution of the Board of Directors.

Ms Sharon HowesDirector

Ms Jann GardnerChairman

Newcastle28 September


5

julie bowen

Stamp

julie bowen

Stamp

6

Auditor’s Independence Declaration

As lead auditor for the audit of Hunter United Employees’ Credit Union Limited for the year ended 30 June 2015, I declare that to the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit.

Caroline Mara Newcastle Partner 28 September 2015 PricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757 Level 3 Watt Street Commercial, 45 Watt Street, PO Box 798, NEWCASTLE NSW 2300 T: +61 2 4925 1100, F: +61 2 4925 1199, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation

Hunter United Employees' Credit Union Limited ACN 087 650 182

Annual report - 30 June 2015

Contents PageFinancial report

Statement of Comprehensive Income 8Statement of Financial Position 9Statement of Changes in Equity 10Statement of Cash Flows 11Notes to the Financial Report 12

Directors' declaration 44Independent auditor's report to the members 45

This financial report covers Hunter United Employees' Credit Union Limited as an individual entity. The financialreport is presented in the Australian currency.

Hunter United Employees' Credit Union Limited is a company limited by shares, incorporated and domiciled inAustralia. Its registered office and principal place of business is:

Hunter United Employees' Credit Union Limited130 Lambton RoadBroadmeadow NSW 2292

A description of the nature of the Credit Union's operations and its principal activities is included in the Directors'report on page 1, which is not part of this financial report.

The financial report was authorised for issue by the Directors on 28 September. The Credit Union has the powerto amend and reissue the financial report.


7

Statement of Comprehensive Income

Notes2015

$2014

$

Interest income 2(a) 13,515,776 14,219,215Interest expense 2(b) (6,631,276) (7,506,589)Net interest income 6,884,500 6,712,626

Fee and commission income 3(a) 1,456,620 1,530,002Fee and commission expense 3(b) (466,736) (388,056)Net fee and commission income 989,884 1,141,946

Other operating income 3(a) 106,114 29,545Impairment losses on loans and advances 5(d)(i) (136,776) (24,405)General administration expenses 3(b) (4,714,940) (4,525,612)Other operating expenses 3(b) (2,385,108) (2,663,109)Profit before income tax 743,674 670,991

Income tax expense 4 (175,201) (229,102)Profit for the year 568,473 441,889

BlankItem that will not be reclassified to profit or loss

Gain on revaluation of property, plant and equipment - 469,924Other comprehensive income for the year, net of tax - 469,924

Total comprehensive income for the year 568,473 911,813

Total comprehensive income for the year is attributable to:Owners of Hunter United Employees' Credit Union Limited 568,473 911,813

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.


8

Statement of Financial Position

Notes2015

$2014

$

ASSETSCash and cash equivalents 5(a) 17,532,470 26,820,417Other receivables 5(b) 403,451 292,948Placements with other financial institutions 5(c) 50,832,076 44,390,292Loans and advances to members 5(d) 201,782,062 200,482,722Other financial assets 5(e) 237,920 124,600Intangible assets 6(b) 571,886 232,538Property, plant and equipment 6(a) 4,796,729 4,964,723Total assets 276,156,594 277,308,240

LIABILITIESPayables 5(f) 945,806 964,727Deposits due to members 5(g) 251,417,723 253,079,010Current tax liabilities 6(d) 69,839 99,040Provisions 6(e) 400,793 406,042Deferred tax liabilities 6(c) 217,141 222,602Total liabilities 253,051,302 254,771,421

Net assets 23,105,292 22,536,819

EQUITYReserves 7(a) 4,372,415 4,372,415Retained profits 7(b) 18,732,877 18,164,404

Total equity 23,105,292 22,536,819

The above Statement of Financial Position should be read in conjunction with the accompanying notes.


9

Statement of Changes in Equity

NotesReserves

$

Retainedearnings

$Total

$

Balance at 1 July 2013 3,902,491 17,722,515 21,625,006

Profit for the year - 441,889 441,889Other comprehensive income 469,924 - 469,924Total comprehensive income for the year 469,924 441,889 911,813

Balance at 30 June 2014 4,372,415 18,164,404 22,536,819

Balance at 1 July 2014 4,372,415 18,164,404 22,536,819

Profit for the year - 568,473 568,473Other comprehensive income 7(a) - - -Total comprehensive income for the year - 568,473 568,473

Balance at 30 June 2015 4,372,415 18,732,877 23,105,292

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.


10

Statement of Cash Flows

Notes2015

$2014

$

Cash flows from operating activitiesInterest received 13,525,273 14,219,216Fees and commissions received 1,497,359 1,530,002Other operating income 26,234 15,874Interest paid (6,631,276) (7,506,589)Fees and commissions paid (466,736) (388,056)Payments to employees and suppliers (inclusive of goods and servicestax) (6,850,123) (6,591,166)Income taxes paid (209,867) (258,385)Net (increase) in placements and withdrawals from other financialinstitutions (6,441,784) (1,449,779)Net (increase) in loans and advances to members (1,299,340) 1,831,307Net (decrease) in deposits due to members (1,661,287) (2,009,690)Net cash (outflow) from operating activities 8(a) (8,511,547) (607,266)

Cash flows from investing activitiesPayments for intangibles 6(b) (389,247) (233,631)Payments for property, plant and equipment 6(a) (273,833) (1,083,008)Net (increase) in investment securities (113,320) -Net cash (outflow) from investing activities (776,400) (1,316,639)

Cash flows from financing activitiesNet cash inflow (outflow) from financing activities - -

Net (decrease) in cash and cash equivalents (9,287,947) (1,923,905)Cash and cash equivalents at the beginning of the financial year 26,820,417 28,744,322Cash and cash equivalents at end of year 5(a) 17,532,470 26,820,417

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.


11

Contents of the notes to the financial reportPage

1 Segment information 13

2 Interest income and expense 13

3 Non-interest revenue and expenses 14

4 Income tax expense 15

5 Financial assets and financial liabilities 16

6 Non-financial assets and liabilities 20

7 Equity 25

8 Cash flow information 26

9 Critical estimates, judgements and errors 27

10 Financial risk management 27

11 Capital management 34

12 Contigencies 34

13 Commitments 35

14 Events occurring after the reporting period 35

15 Related party transactions 36

16 Remuneration of auditors 37

17 Economic dependency 37

18 Summary of significant accounting policies 38


12

1 Segment informationThe Credit Union’s operations are confined to one business segment being the provision of financial services andproducts to members in the form of the acceptance of deposits and providing financial accommodation asprescribed by the constitution.

2 Interest income and expense(a) Interest income

2015$

2014$

Cash and cash equivalents 106,665 202,813Placements with other financial institutions 2,061,651 2,418,534Loans and advances 11,347,460 11,597,868

13,515,776 14,219,215

(b) Interest expense

2015$

2014$

Total deposits and borrowings expense (6,631,276) (7,506,589)

(i) Recognising interest income and expense

Interest income and expense are recognised in the Statement of Comprehensive Income for all instrumentsmeasured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financialliability and of allocating the interest income or interest expense over the relevant period. The effective interestrate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of thefinancial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset orfinancial liability. When calculating the effective interest rate, the Credit Union estimates cash flows consideringall contractual terms of the financial instrument (for example, prepayment options) but does not consider futurecredit losses. The calculation includes all fees paid or received between parties, transactions costs and premiumsincurred or discounts received in relation to the contract that are an integral part of the effective interest rate.

Once a financial asset or a group of financial assets has been written down as a result of an impairment loss,interest income is recognised using the rate of interest used to discount the future cash flows for the purpose ofmeasuring impairment loss.


13

3 Non-interest revenue and expenses(a) Non-interest revenue

2015$

2014$

Fee and commission income

Credit related fees (excluding loan origination fees) 268,972 282,687Other fees 551,754 524,347Insurance commissions 136,147 172,159Other commissions 499,747 550,809

1,456,620 1,530,002

Other operating income

Research and development incentive 82,802 -Dividends 15,396 14,952Other 7,916 14,593

106,114 29,545

Total non-interest revenue 1,562,734 1,559,547

Non-interest revenue is recognised using the method outlined below.

(i) Fee and commission income

Fees and commissions are generally recognised on an accruals basis when the service has been provided orincurred. Loan fees received in relation to the origination of loans is deferred and recognised as an adjustment tothe effective interest rate on loans. The outstanding balance of the deferred origination income is recognised inthe balance sheet as a decrease in the value of loan balance outstanding.

(b) Non-interest expense

2015$

2014$

Fees and commission expense

Card and ATM 466,736 388,056

General and administration expenses

DepreciationBuildings 89,526 78,508Plant and equipment 179,411 162,950Leasehold improvements 172,890 157,421

Total depreciation 6(a) 441,827 398,879

AmortisationComputer software 49,899 51,195

Total amortisation 6(b) 49,899 51,195

Employee related expense 3,453,955 3,314,677


14

Non-interest revenue and expenses(b) Non-interest expense

Rental expense relating to operating leases 769,259 752,579

Net loss on disposal of property, plant and equipment - 8,282

Total general and administration expenses 4,714,940 4,525,612

Other operating expenses

Branch office costs 194,248 242,245Advertising 269,600 314,684Data processing expense 449,138 462,134Goods and services tax and other taxes 202,579 216,313Other 1,269,543 1,427,733

2,385,108 2,663,109

Non-interest expenses are recognised using the method outlined below.

(i) Fees and commission expense

Expenses incurred directly in relation to the origination of loans, investments and other debt instruments aredeferred and recognised as an adjustment to the effective interest rate on loans and debt instruments. Theoutstanding balance of the deferred origination expenses is recognised in the balance sheet as an increase in thebalances outstanding.

4 Income tax expense(a) Income tax expense

2015$

2014$

Current tax 180,662 256,180Deferred tax (5,461) (27,078)

175,201 229,102

Deferred income tax (revenue) included in income tax expense comprises:(Increase) decrease in deferred tax assets (note 6(c)(i)) (2,159) (14,310)(Decrease) increase in deferred tax liabilities (note 6(c)(ii)) (3,302) (12,768)

(5,461) (27,078)


15

Income tax expense(b) Numerical reconciliation of income tax expense to prima facie tax payable

2015$

2014$

Profit from operations before income tax expense 743,674 670,991Tax at the tax rate of 30.0% 223,102 201,297Tax effect of amounts which are not deductible (taxable)in calculating taxable income:

Entertainment 475 2,827Non-assessable income - government grants (24,841) -Under/(over) provision in prior year (23,872) 23,799Dividend imputation credit received 1,979 1,922Imputation credit gross received (6,598) (6,408)Sundry items 4,956 5,665

Income tax expense 175,201 229,102

(918,875) (900,093)(c) Amounts recognised directly in equity

2015$

2014$

Aggregate current and deferred tax arising in the reporting period and notrecognised in net profit or loss but directly debited or credited to equity:Net deferred tax - debited (credited) directly to equity - 201,396

- 201,396

5 Financial assets and financial liabilities(a) Cash and cash equivalents

2015$

2014$

Current assetsCash at bank and on hand 1,225,199 479,018Deposits at call 2,000,000 3,325,000Interest earning deposits 14,307,271 23,016,399

17,532,470 26,820,417

(i) Reconciliation to cash at the end of the year

The above figures reconcile to cash at the end of the financial year as shown in the Statement of Cash Flows.

(ii) Classification as cash equivalents

Deposits are presented as cash equivalents if they have a maturity of three months or less from the date ofacquisition.

See note 18(e) for the accounting policy on cash and cash equivalents.


16

Financial assets and financial liabilities(b) Other receivables

2015$

2014$

Prepayments 227,773 237,535Other receivables 175,678 55,413

403,451 292,948

Other receivables expected to be recovered within 12 months 403,451 292,948Other receivables expected to be recovered after 12 months - -

403,451 292,948

(i) Classification as trade and other receivables

Other receivables are recognised initially at fair value and subsequently measured at amortised cost using theeffective interest method, less provision for impairment. Other receivables are generally due for settlement within30 days.

The Credit Union’s impairment and other accounting policies for other receivables are outlined in note 18(f).

(c) Placements with other financial institutions

2015$

2014$

Placements with other financial institutions 50,832,076 44,390,292

Interest earning deposits expected to mature within 12 months 39,285,285 40,375,073Interest earning deposits expected to mature after 12 months 11,546,791 4,015,219

50,832,076 44,390,292

(i) Assets pledged as security

Deposit of $2,766,000 (2014: $2,766,000) is held as security by Indue Ltd for settlement facilities. Deposit of$2,200 (2014: $13,450) is held as a security by the Commonwealth Bank for the Elermore Vale ATM lease.

(d) Loans and advances to members

2015$

2014$

Overdrafts and revolving credit facilities 5,599,138 6,749,011Term loans 192,343,836 189,666,210Credit cards 3,962,187 4,124,666Gross loans and advances 201,905,161 200,539,887

Less: Allowances for impairment losses (i) (123,099) (57,165)Total loans and advances (net) 201,782,062 200,482,722

Loans and advances expected to be paid within 12 months 74,456,224 78,192,065Loans and advances expected to be paid after 12 months 127,448,937 122,347,822

201,905,161 200,539,887


17

Financial assets and financial liabilities(d) Loans and advances to members

(i) Allowance for impairment losses

2015$

2014$

Opening balance at 1 July 57,165 75,460Provision for loan impairment 121,846 10,534Loans written off during the year as uncollectable (55,912) (28,829)Closing balance at 30 June 123,099 57,165

(ii) Impairment losses on loans and advances

2015$

2014$

Bad and doubtful debts expense 14,930 13,871Increase in allowance for impairment losses 121,846 10,534

136,776 24,405

(iii) Loans to related parties and key management personnel

Further information relating to loans to related parties and key management personnel and credit risk are set outin notes 15 and 10.

(e) Other financial assets

2015$

2014$

Non-current assetsEquity securities (unlisted) 237,920 124,600

237,920 124,600

(i) Fair value

Unlisted securities are measured at cost as the fair value could not be reliably measured, due to the absence of aready market and restrictions in the ability to redeem these shares. The unlisted securities comprise of the CreditUnion’s investment in service providers of settlement services to the industry.

(f) Payables

2015$

2014$

Current liabilitiesTrade payables 209,656 226,954Other payables 283,138 303,491Unearned revenue 81,463 54,845Annual leave payable 371,549 379,437

945,806 964,727

Trade payables are unsecured and are usually paid within 30 days of recognition.

The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to theirshort-term nature.


18

Financial assets and financial liabilities(g) Deposits due to members

2015$

2014$

Non-current liabilitiesCall deposits 115,988,148 113,947,714Term deposits 95,154,014 95,806,379Retirement savings account 38,836,126 42,016,445Super Choice 1,419,953 1,287,326Redeemable preference shares 19,482 21,146

251,417,723 253,079,010

(h) Recognised fair value measurements

(i) Fair value hierarchy

The Credit Union has adopted the amendment to AASB 7 Financial Instruments: Disclosures which requiresdisclosure of fair value measurements by level of the following fair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (lvl 1)(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either

directly (as prices) or indirectly (derived from prices) (lvl 2), and(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (lvl 3).

The following table presents the Credit Union’s assets and liabilities measured and recognised at fair value.

30 June 2015Level 1

$Level 2

$Level 3

$Total

$

Financial assetsAvailable-for-sale financial assets

Equity securities - - 237,920 237,920Total financial assets - - 237,920 237,920

30 June 2014Level 1

$Level 2

$Level 3

$Total

$

Financial assetsAvailable-for-sale financial assets

Equity securities - - 124,600 124,600Total financial assets - - 124,600 124,600


19

6 Non-financial assets and liabilities(a) Property, plant and equipment

Freehold land$

Freeholdbuildings

$

Leaseholdimprovements

$

Plant andequipment

$Total

$

At 1 July 2013Cost or fair value 1,415,000 1,785,000 1,434,030 3,182,173 7,816,203Accumulated depreciation - (205,788) (1,085,425) (2,907,434) (4,198,647)Net book amount 1,415,000 1,579,212 348,605 274,739 3,617,556

Year ended 30 June 2014Opening net book amount 1,415,000 1,579,212 348,605 274,739 3,617,556Revaluation surplus 305,000 371,938 - - 676,938Additions - - 155,538 931,205 1,086,743Disposals - - - (17,635) (17,635)Depreciation charge (note 3(b)) - (78,508) (157,421) (162,950) (398,879)Closing net book amount 1,720,000 1,872,642 346,722 1,025,359 4,964,723

At 30 June 2014Cost or fair value 1,720,000 1,880,000 1,461,196 2,448,707 7,509,903Accumulated depreciation - (7,358) (1,114,474) (1,423,348) (2,545,180)Net book amount 1,720,000 1,872,642 346,722 1,025,359 4,964,723

Year ended 30 June 2015Opening net book amount 1,720,000 1,872,642 346,722 1,025,359 4,964,723Additions - - 205,649 68,184 273,833Depreciation charge (note 3(b)) - (89,526) (172,890) (179,411) (441,827)Closing net book amount 1,720,000 1,783,116 379,481 914,132 4,796,729

At 30 June 2015Cost 1,720,000 1,880,000 1,463,830 2,419,164 7,482,994Accumulated depreciation - (96,884) (1,084,349) (1,505,032) (2,686,265)Net book amount 1,720,000 1,783,116 379,481 914,132 4,796,729

(i) Revaluation, depreciation methods and useful lives

Land and buildings are shown at fair value based on periodic, but at least triennial, valuations by externalindependent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date ofrevaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to therevalued amount of the asset. All other property, plant and equipment is recognised at historical cost lessdepreciation.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate theircost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case ofleasehold improvements and certain leased plant and equipment, the shorter lease term as follows:

- Buildings 40 years- Vehicles 4 - 5 years- Furniture, fittings and equipment 3 - 15 years- Leased improvements the lease term or 5 years whichever is the shorter

See note 18(i) for the other accounting policies relevant to property, plant and equipment.

(ii) Carrying amounts that would have been recognised if land and buildings were stated at cost

If freehold land and buildings were stated on the historical cost basis, the amounts would be as follows:


20

Non-financial assets and liabilities(a) Property, plant and equipment

2015$

2014$

Freehold landCost 1,044,632 1,044,632Accumulation depreciation - -Net book amount 1,044,632 1,044,632

BuildingsCost 1,473,474 1,473,474Accumulated depreciation (710,773) (673,936)Net book amount 762,701 799,538

(b) Intangible assets

All intangible assets are non-current.

Computersoftware

$

At 1 July 2013Cost 1,232,250Accumulated amortisation (1,182,148)Net book amount 50,102

Year ended 30 June 2014Opening net book amount 50,102Additions 233,631Amortisation charge (51,195)Closing net book amount 232,538

At 30 June 2014Cost 1,357,976Accumulated amortisation (1,125,438)Net book amount 232,538

Year ended 30 June 2015Opening net book amount 232,538Additions 389,247Amortisation charge (49,899)Closing net book amount 571,886

At 30 June 2015Cost 1,681,113Accumulated amortisation (1,109,227)Net book amount 571,886


21

Non-financial assets and liabilities(b) Intangible assets

(i) Amortisation methods and useful lives

Acquired computer software licences which are not an integral part of the related hardware are capitalised on thebasis of the costs incurred to acquire or bring to use the specific software. They have a finite useful life and arecarried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using thestraight-line method to allocate the cost of computer software over their estimated useful lives, which vary from2.5 to 7 years.

See Note 18(j) for the other accounting policies relevant to intangible assets.

(ii) Capital work in progress

Included in intangibles is capital work-in-progress of $12,830 (2014: $39,379).

(c) Deferred tax balances

(i) Deferred tax assets

2015$

2014$

The balance comprises temporary differences attributable to:Doubtful debts 36,930 17,150Employee benefits 228,562 231,095Other provisions 3,140 4,548Accrued expenses 5,568 18,984Loan establishment costs 32,695 32,959

306,895 304,736

Set-off of deferred tax liabilities pursuant to set-off provisions (306,895) (304,736)Net deferred tax assets - -

Deferred tax assets expected to be recovered within 12 months 189,797 190,905Deferred tax assets expected to be recovered after more than 12 months 117,098 113,831

306,895 304,736

Movements:Opening balance at 1 July 304,736 290,426Charged/credited:

Charged/(credited) - profit or loss 2,159 14,310Closing balance at 30 June 306,895 304,736


22

Non-financial assets and liabilities(c) Deferred tax balances

(ii) Deferred tax liabilities

2015$

2014$

The balance comprises temporary differences attributable to:Property, plant and equipment 524,036 527,338

524,036 527,338

Set-off of deferred tax liabilities pursuant to set-off provisions (note (i)) (306,895) (304,736)Net deferred tax liabilities 217,141 222,602

Deferred tax liabilities expected to be settled within 12 months - -Deferred tax liabilities expected to be settled after more than 12 months 524,036 527,338

524,036 527,338

Movements:Opening balance at 1 July 527,338 338,710Charged/credited:

- profit or loss (3,302) (12,768)- directly to equity - 201,396

Closing balance at 30 June 524,036 527,338

(d) Current tax receivable / payable

2015$

2014$

Current tax (receivable)/payable 69,839 99,040

All current tax is expected to be received or settled within 12 months.

(e) Provisions

2015$

2014$

Employee benefits 390,326 390,878Other provisions 10,467 15,164

400,793 406,042

2015$

2014$

Provisions expected to be settled within 12 months 16,989 15,164Provisions expected to be settled after 12 months 383,804 390,878

400,793 406,042

(i) Information about individual provisions and significant estimates

Employee benefits

The provision for employee benefits relates to the Credit Union’s liability for long service leave.

Refer to note 18(n) for the accounting policies relevant to employee benefits.


23

Non-financial assets and liabilities(f) Recognised fair value measurements

(i) Fair value hierarchy

30 June 2015Level 1

$Level 2

$Level 3

$Total

$

AssetsLand and building - - 3,600,000 3,600,000

Total non-financial assets - - 3,600,000 3,600,000

30 June 2014Level 1

$Level 2

$Level 3

$Total

$

AssetsLand and building - - 3,600,000 3,600,000

Total non-financial assets - - 3,600,000 3,600,000

(ii) Valuation techniques used to determine level 2 and level 3 fair values

The Credit Union obtains independent valuations for its freehold land and buildings (classified as property, plantand equipment) at least every three years.

The best evidence of fair value is current prices in an active market for similar properties. Where such informationis not available the Directors consider information from a variety of sources including:

• current prices in an active market for properties of different nature or recent prices of similar properties in lessactive markets, adjusted to reflect those differences

• discounted cash flow projections based on reliable estimates of future cash flows• capitalised income projections based upon a property’s estimated net market income, and a capitalisation

rate derived from an analysis of market evidence.

(iii) Fair value measurements using significant unobservable inputs (level 3)

The following table presents the changes in level 3 items for the periods ended 30 June 2015 and 2014 forrecurring fair value measurements:

Land andbuildings

$

Opening balance 1 July 2013 3,200,000Gains recognised in other comprehensive income 400,000Closing balance 30 June 2014 3,600,000

Gains recognised in other comprehensive income -Closing balance 30 June 2015 3,600,000

(iv) Valuation processes

The valuation of land and buildings is on the basis of fair market values based on existing use. An annualassessment is made by the Directors to ensure that the carrying values do not differ materially from the fair value.The Directors assessment is supported by an independent valuation performed on the 19 May 2014 by Mr HPawlik (FAPI, AICV), Reg Valuer No. 1192 of WBP Property Group (Newcastle). The revaluation surplus net ofapplicable deferred income taxes was credited to property, plant and equipment revaluation reserve (note 7(a)).


24

7 Equity(a) Reserves

The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements inthese reserves during the year. A description of the nature and purpose of each reserve is provided below thetable.

Property,plant and

equipmentrevaluation

surplus$

Reservefor credit

$

Generalreserve

$Total

$

Balance at 1 July 2013 836,651 501,500 2,564,340 3,902,491Revaluation - gross 671,320 - - 671,320Deferred tax (201,396) - - (201,396)Balance at 30 June 2014 1,306,575 501,500 2,564,340 4,372,415

Balance at 1 July 2014 1,306,575 501,500 2,564,340 4,372,415Revaluation - gross 6(a) - - - -Balance at 30 June 2015 1,306,575 501,500 2,564,340 4,372,415

(i) Nature and purpose of other reserves

Property, plant and equipment revaluation reserve

The property, plant and equipment reserve is used to record increments and decrements on the revaluation ofnon-current assets as described in note 18(i).

Reserve for credit losses

The reserve for credit losses is used to record the increments and decrements of the prescribed provision andgeneral provision relating to loan impairment required to be maintained to comply with APRA PrudentialStandards. APRA Prudential Standards requires:

• A prescribed provision is the minimum provision required to be maintained, based on specific percentagesapplied to a portfolio of loans based on the type of security, level of security taken as collateral and the lengthof time the loans is in arrears.

• A general reserve is required to be maintained and is based on an economic conditions index calculated bythe Credit Union using quarterly cash and unemployment indices. This index is used to establish a probabilityof default for both personal and housing loan portfolios and enables the Credit Union to calculate a predictedloss given default under stressed economic conditions. Any significant movement in this figure is reflected inquarterly changes to the general reserve.

General reserve

The general reserve represents amounts transferred from retained profits as determined by the Directors fromtime to time. The purpose of the reserve is to support the overall financial stability of the Credit Union.

(b) Retained profits

Movements in retained profits were as follows:

2015$

2014$

Balance 1 July 18,164,404 17,722,515Net profit for the year 568,473 441,889Balance 30 June 18,732,877 18,164,404


25

8 Cash flow information(a) Reconciliation of profit after income tax to net cash inflow from operating activities

2015$

2014$

Profit for the year 568,473 441,889Depreciation and amortisation 491,726 450,074Net (gain) loss on sale of non-current assets - 8,282Change in operating assets and liabilities:

(Increase) in other receivables (100,137) (2,315)(Increase) in deferred tax assets and deferred tax liabilities (5,463) (27,078)(Decrease) increase in deposit due to members (1,661,287) (2,009,690)(Decrease) increase in payables (29,286) 89,386(Decrease) increase in loans and advances to members (1,299,340) 1,836,854(Decrease) increase in current tax liabilties (29,201) (2,205)(Decrease) increase in placements with other financial institutions (6,441,784) (1,449,779)(Decrease) increase in provisions (5,248) 57,316

Net cash inflow (outflow) from operating activities (8,511,547) (607,266)


26

9 Critical estimates, judgements and errorsThe Credit Union makes estimates and assumptions that affect the reported amounts of assets and liabilitieswithin the next financial year. Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that are believed to be reasonable under thecircumstances.

(a) Critical accounting estimates and judgements in applying accounting policies

(i) Impairment losses on loans and advances

The Credit Union reviews loans to assess impairment at least on a monthly basis. In determining whether animpairment loss should be recorded in the income statement, the Credit Union makes judgements as to whetherthere is any observable data indicating that there is a measurable decrease in the estimated future cash flowsfrom a loan. This evidence may include observable data indicating that there has been an adverse change in thepayment status of the borrower or national or local economic conditions that correlate with defaults on assets in agroup. Management uses estimates based on historical loss experience for assets with credit risk characteristicsand objective evidence of impairment similar to those in the loan portfolio when scheduling its future cash flows.The methodology and assumptions are reviewed regularly.

(ii) Held-to-maturity investments

The Credit Union follows the guidance of AASB 139 on classifying non-derivative financial assets with fixed ordeterminable payments and fixed maturity as held-to-maturity. This classification requires significant judgement.In making this judgement, the Credit Union evaluates its intention and ability to hold such investments to maturity.If the Credit Union fails to keep these investments to maturity other than for specific circumstances - for example,selling an insignificant amount close to maturity - it will be required to reclassify the entire class asavailable-for-sale. The investments would therefore be measured at fair value, not amortised cost. If the entireclass of held-to-maturity investments is tainted, there would be no material impact to the statement ofcomprehensive income as these investments are predominantly interest bearing deposits which will continue tobe measured at amortised cost. However, the tainting will impact on the classification from held-to-maturity toavailable-for-sale by $50,832,076 (2014: $44,390,292). Furthermore, the Credit Union will not be able to classifyany financial assets as held-to-maturity for the following two annual reporting periods.

(iii) Securitisation and special purpose entity

The Credit Union participated in the formation of a special purpose entity (SPE) primarily for the purpose of assetsecuritisation transactions which allow investors to invest in mortgage backed securities. The Credit Union doesnot consolidate SPEs that it does not control. As it can sometimes be difficult to determine whether the CreditUnion does control an SPE, it makes judgments about its exposure to the risks and rewards, as well as about itsability to make operational decisions for the SPE in question. In many instances, elements are present that,considered in isolation, indicate control or lack of control over an SPE, but when considered together make itdifficult to reach a clear conclusion. On consideration of all factors the Credit Union has not consolidated theSPE. If the SPE had been consolidated it would result in a consolidated group whose financial position andfinancial performance would not be materially different from that reported by Hunter United Employees' CreditUnion Limited as parent.

10 Financial risk managementThe Credit Union's activities expose it to a variety of financial risks: market risk being or including interest raterisk, credit risk and liquidity risk. The Credit Union's overall risk management program focuses on theunpredictability of financial markets and seeks to minimise potential adverse effects on the financial performanceof the Credit Union. The Credit Union uses different methods to measure different types of risk to which it isexposed. These methods include sensitivity analysis in the case of interest rate risk and aging analysis for creditrisk.

Risk management is carried out by senior management under policies approved by the Board of Directors. TheBoard provides written principles for overall risk management.


27

Financial risk management(a) Market risk

(i) Interest rate risk

The Credit Union’s only market risk relates to interest rate risk. Interest rate risk arises in all activities where theCredit Union’s assets and liabilities have different repricing dates. As a result of these maturity mismatchesbetween assets and liabilities their fair market values may react differently when interest rates change.

Financial assets and liabilities issued at variable rates expose the Credit Union to cash flow interest rate risk.

Financial assets and liabilities issued at fixed rates expose the Credit Union to fair value interest rate risk if theassets and liabilities are carried at fair value. The Credit Union takes on exposure to the effects of fluctuations inthe prevailing levels of market interest rates on both its fair value and cash flow risks. Interest rate risk marginsmay increase as a result of such changes but may reduce or create losses in the event that unexpectedmovements arise.

The policy of the Credit Union is to maintain a balanced “on book” hedging strategy by ensuring the net interestrate gaps between assets and liabilities are not excessive. There are no hedges currently designated foraccounting purposes. The measured “gap” is to be maintained as a % of the net assets. The Board sets limits onthe level of mismatch of interest rate repricing that may be undertaken which is monitored monthly bymanagement and appropriate actions detailed in the policies and procedures are taken to mitigate risk toacceptable levels set by the Board. This model is reviewed annually by management to ensure the continuedvalidity of the assumptions and parameters used in the model.

The Credit Union’s exposure to interest rate risk is also managed using the following controls:

• The establishment of an Asset and Liability Committee who meets monthly and/or when necessary

• Maximum product mix ratio’s defined and documented for loans and member deposits

• Repricing of products is folded into the Credit Union’s budget and changes to interest rates are approved bythe Asset and Liability Committee under delegation from the Board of Directors

• An external report on interest rate risk is prepared biennially, reporting on the Value at Risk and SensitivityAnalysis of the Credit Union’s portfolio

• The establishment of maximum acceptable interest rate exposure measured as a percentage of the capitalbase

• The establishment of limits on the maximum maturity periods that can be offered for term deposits and fixedrate loans

• Performing weekly market research on interest rates to test out any market/pricing risk that may be evident

• Training and attendance at seminars is provided to staff involved in roles of managing interest rate risk

The Credit Union also has a documented derivative management strategy which may be enacted whenever it isdetermined that the use of derivatives would be beneficial in reducing interest rate risk.


28

Financial risk management(a) Market risk

Sensitivity

At 30 June 2015, if interest rates had changed by -25 basis points (2014: -25 basis points) from the year-endrates with all other variables held i.e. assumes interest and expense constant, post-tax profit and equity for theyear would have been $43,930 lower (2014: $41,832 lower), mainly as a result of lower net interest margins ofthe Credit Union’s portfolio of loans and deposits.

The basis point movement between both periods has been determined by management through their review ofeconomic conditions and market influences in existence at each period end. Management have also reviewedinformation made available by the Reserve Bank of Australia when determining the basis point movement above.

(ii) Price risk

Exposure

The Credit Union is exposed to equity security price risk. This arises from investments held by the Credit Unionand classified on the balance sheet as available for sale. The Credit Union holds investments in Indue Limitedwho provide settlement services to the Credit Union. The investment securities are unlisted hence there is nostandard rating provided. Further details of these equity investments are detailed in note 5(e).

(b) Credit risk

Credit risk arises from cash and cash equivalents, placements with other financial institutions, loans andadvances to members. The maximum exposure to credit risk at the reporting date is the carrying amount offinancial assets as summarised in notes 5(a) to 5(d).

The Board has approved a number of policies for the management of credit risk. As part of the Internal AuditPlan, to be approved by the Audit Committee and Risk Management Committee, a regular review of operations isundertaken to ensure compliance with these policies.

(i) Risk management

Investment Credit Risk

Exposure to credit risk on cash and placements with other financial institutions is managed through the CreditUnion's Investment Credit Risk Policy, Large Exposures Policy and Liquidity Risk Policy, which detail themaximum exposure to different types of investments and counterparty limits.

These policies impose maximum exposure limits based on the credit rating of counterparties, as assessed byStandard and Poor’s or Moody’s rating agencies. Limits apply as both a percentage of net assets, and apercentage of total investments.

Investment credit risk is managed by regular review of credit ratings and diversification of investments. Ratingsfor individual counterparties are reviewed when new investments are being placed, and ratings for allcounterparties are reviewed at least quarterly.

2015$

2014$

Placements with other financial institutions 50,832,076 44,390,292

Lending credit risk

Exposure to credit risk from lending activities is managed through the Credit Union’s Lending Credit Risk Policy,Large Exposures Policy, Retail Lending Policy, Business Lending Policy and Arrears and Collections Policy. Inaddition to these, the Credit Union’s lending practices also comply with APRA Prudential Standards APS 220(Credit Quality) and APS 221 (Large Exposures), the National Consumer Credit Protection Act and the NationalPrivacy Principles (Privacy Act).


29

Financial risk management(b) Credit risk

The above policies define loan serviceability assessment criteria, security requirements and acceptable loan tovaluation ratios. They set exposure limits for various types of loans, (mortgage secured, personal secured,personal unsecured, commercial and revolving credit) as well as setting maximum and minimum levels ofexposure to loan types and geographic concentrations. Procedures for debt recovery and the recognition ofimpaired loans and the creation of appropriate provisions for these loans are defined within these policies. Thepolicies place limits on the amount of risk accepted in relation to one borrower, or group of borrowers and type ofsecurities. Such risks are monitored regularly and policy limits are reviewed at least annually by managementand the Board.

These policies clarify the level of acceptable risk for the Credit Union (credit risk appetite) and describes theintended balance between meeting member’s borrowing needs, the Credit Union’s need for a financial return andthe need to limit lending risk to a level which can be confidently managed.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers tomeet interest and principal repayment obligations. Borrower conduct is monitored and followed up on a dailybasis. Impairment provisions are provided for potential losses that have been identified at balance date.Significant changes in the economy or a segment that represents a concentration in the Credit Union’s portfoliocould result in losses that are different from those provided for at balance date. Management manages thisspecific exposure to credit risk via the Credit Union’s Credit Risk Management policies.

Exposure to credit risk is also managed in part by obtaining mortgage insurance, collateral and corporate andpersonal guarantees, but a portion of personal lending is unsecured and no such facilities are obtained. TheCredit Union requests collaterals in all loan products except for unsecured loans. Collaterals are fair valued at thepoint of loan application and approval. Refer to (vi) below for further details of collateral held.

The collateral held for mortgaged loan products is real property. For other loan products, collateral (where it isrequired to be held under the contract) consists of the goods, which were the purpose of the loan. Refer to (iii)and (iv) below for details of collateral acquired through the enforcement of security during the period.

Further information on the Credit Union’s loan portfolio is set out as follows:

2015$

2014$

Loans and advances by product typeMortgage - secured 188,707,423 185,347,454Other loan products 13,197,738 15,192,433

201,905,161 200,539,887

(ii) Impaired loan receivables

As at 30 June 2015 loan products of the Credit Union with a nominal value of $259,955 (2014: $421,678) wereimpaired. The amount of the provision was $123,099 (2014: $57,165). There are no individually impairedreceivables as all loans and receivables were assessed to be recoverable.

The creation and release of the provision for impaired receivables has been disclosed in the Statement ofComprehensive Income. Amounts charged to the allowance account are generally written off when there is noexpectation of recovering additional cash.

(iii) Real estate assets acquired through the enforcement of security

The real estate assets acquired through the enforcement of security that are held at 30 June 2015 had a fairvalue of $Nil (2014: $Nil).

(iv) Other assets acquired through the enforcement of security

2015$

2014$

Balance at 30 June 2015 - 18,564


30


(v) Past due but not impaired

As of 30 June 2015, loan receivables of $7,638,203 (2014: $5,597,415) were past due but not impaired. Theserelate to a number of independent members for whom there is no recent history of default. The ageing analysis ofthese loan receivables is as follows:

Mortgage-secured

$

Other loanproducts

$Total

$

For the year ended 30 June 20150 to 29 days 5,136,453 603,726 5,740,17930 to 59 days 524,028 19,501 543,529Over 60 days 1,334,460 20,035 1,354,495Total 6,994,941 643,262 7,638,203

$ $ $

For the year ended 30 June 20140 to 29 days 3,389,623 899,381 4,289,00430 to 59 days 505,237 60,034 565,271Over 60 days 656,808 86,332 743,140Total 4,551,668 1,045,747 5,597,415

(vi) Collateral held in support of financial assets

The following tables provide detail on the Credit Union’s loan portfolio by class of asset.

2015 2014$ $

Loanshousing &personnel

Loansbusiness Total loans

Loans housing& personnel


Fully secured 190,587,132 264,913 190,852,045 186,054,412 541,960 186,596,372Partially secured 2,980,877 0 2,980,877 5,992,970 - 5,992,970Unsecured 7,984,598 87,641 8,072,239 7,868,154 82,391 7,950,545Total 201,552,607 352,554 201,905,161 199,915,536 624,351 200,539,887

2015 2014% %

Loanshousing &personnel


Loans housing& personnel


Fully secured 94.6 75.1 94.5 93.1 86.8 93.0Partially secured 1.5 - 1.5 3.0 - 3.0Unsecured 4 24.9 4.0 3.9 13.2 4.0Total 100.0 100.0 100.0 100.0 100.0 100.0

The following tables provide analysis of the fair value of collateral held as security against each class of asset.

Fair value for collateral, in the form of land and housing, was calculated using the most recent independentvaluation, increased by the average capital growth rates since the date of valuation for the relevant geographicalareas. Fair value for collateral, in the form of personal property, was calculated using the valuation estimate atthe time of loan settlement, discounted by an estimate of the decline in value since the date of valuation, to allowfor the depreciable nature of this type of collateral.


31


2015

Carryingvalue-Loans

housing &personal

$

Fair value ofcollateral

$

Carryingvalue-Loans

business$


$

Carryingvalue-Total

$

Fair value ofcollateral-Total

$

Fully secured 190,587,132 446,611,541 264,913 1,534,631 190,852,045 448,146,172Partially secured 2,980,877 2,025,993 - - 2,980,877 2,025,993Unsecured 7,984,598 - 87,641 - 8,072,239 -Total 201,552,607 448,637,534 352,554 1,534,631 201,905,161 450,172,165

2014

Carryingvalue-Loans

housing &personal

$


$

Carryingvalue-Loans

business$


$

Carryingvalue-Total

$

Fair value ofcollateral-Total

$

Fully secured 186,054,412 365,731,145 541,960 1,913,727 186,596,372 367,644,872Partially secured 5,992,970 4,948,473 - - 5,992,970 4,948,473Unsecured 7,868,154 - 82,391 - 7,950,545 -Total 199,915,536 370,679,618 624,351 1,913,727 200,539,887 372,593,345

2015 2014Loan to

valuation %Loan to

valuation %Loans housing

& personnelLoans

business Total loansLoans housing

& personnelLoans

business Total loansFully secured 42.7 17.3 42.6 50.9 28.3 50.8Partially secured 147.1 147.1 121.1 $121.10 3Unsecured - - - - -Total 44.9 23.0 44.9 53.9 32.6 53.8

(c) Liquidity risk

Liquidity risk is the risk that the Credit Union will not have sufficient cash and cash equivalents available to meetits commitments as they fall due.

The Credit Union manages liquidity risk through the Liquidity Risk Policy by maintaining sufficient high qualityliquid assets which can be quickly realisable to meet any call on its liabilities and to comply with any requirementsarising pursuant to any prescribed liquidity support scheme. The availability of funding is mainly through termdeposits and other borrowed funds.

The Credit Union is exposed to daily calls on its available cash resources from on-call accounts, maturingdeposits, loan advances and additional draw downs. The Credit Union does not maintain cash resources to meetall potential demands, rather the Liquidity Risk Policy sets a minimum required level of high quality liquid assetswhich are readily convertible to cash within 48 hours which is in excess of the minimum level required byPrudential Standard APS 210.

The matching and controlled mismatching of the maturities and interest rates of assets and liabilities isfundamental to the management of the Credit Union. It is unusual for Approved Deposit-taking Institutions (ADI)to completely match, as transacted business is often of uncertain term and of different types. An unmatchedposition potentially enhances profitability but also increases the risk of losses.

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilitiesas they mature are important factors in assessing the liquidity of the Credit Union and its exposure to changes ininterest rates.

To ensure that the Credit Union is able to meet liquidity requirements to cover unexpected levels of demand, theCredit Union also has in place a standby liquidity arrangement.


32

Financial risk management(c) Liquidity risk

(i) Standby borrowing facilities

The standby facility with Trinity Limited and overdraft facilities with the Commonwealth Bank and Indue Limitedconsisted of:

at 30 June 2015Gross

$Used

$Unused

$

Standby facility 1,500,000 - 1,500,000Overdraft facility 290,000 - 290,000Total 1,790,000 - 1,790,000

at 30 June 2014Gross

$Used

$Unused

$

Standby facility 1,500,000 - 1,500,000Overdraft facility 290,000 - 290,000Total 1,790,000 - 1,790,000

(ii) Liquidity management

The Credit Union further manages liquidity risk under the Liquidity Risk Policy by:

• Management monitoring cash flows and liquidity position on a daily basis

• Management monitoring of large exposures

• Preparation of 12 month and quarterly liquidity forecasts and monthly Board monitoring of the actual liquidityposition against these targets

• Diversification of the liability and investment portfolio bases

• Maintaining access to a securitisation vehicle to a maximum value of $10,000,000

• Board review of quarterly APRA liquidity reporting

• Maintaining a documented liquidity management contingency plan that is agreed with APRA


33

Financial risk management(c) Liquidity risk

(iii) Maturities of financial liabilities

The table below analyses the Credit Union’s financial liabilities based on the remaining period at the reportingdate to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cashflows.

Contractual maturities offinancial liabilities

At call 1-3 months 3-12 months 1-5 yearsOver 5years Total

At 30 June 2015 $ $ $ $ $ $

Trade payables - 213,435 - - - 213,435Deposits due to members 149,088,938 45,987,717 51,017,790 523,275 - 251,417,720Total non-derivatives 149,088,938 46,201,152 51,017,790 523,275 - 251,631,155

At 30 June 2014

Trade payables - 240,273 - - - 240,273Other borrowed funds 217,712 - - - - 217,712Deposits due to members 157,251,485 45,184,146 42,312,415 9,888,212 21,146 254,657,404

157,469,197 45,424,419 42,312,415 9,888,212 21,146 255,115,389

For loan commitments refer to note 13(b).

11 Capital managementThe Credit Union has established a capital management plan. The plan’s objectives are to ensure that the CreditUnion maintains a level of capital that is:

• Consistent and appropriate to the risks the Credit Union is exposed to from its activities.

• Sufficient to provide a buffer to absorb any unanticipated losses from its activities and, in the event of anymajor problem, enable it to continue operating while the problem is being addressed.

• Sufficient to provide depositors and creditors confidence that the Credit Union will continue to honourobligations to them.

The above plan is consistent with the requirements of the Prudential Standards issued by APRA.

The Credit Union is required by APRA to measure and report capital on a risk weighted basis in accordance withthe requirements of the Prudential Standards. The risk weighted approach measures the ratio of the actualeligible capital held against a risk weighted balance for all on and off balance sheet risk positions as well as forother non balance sheet risk positions.

12 Contigencies(a) Contingent liabilities

The Credit Union has no contingent liabilities at reporting date.


34

13 Commitments(a) Capital commitments

Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:

2015$

2014$

Property, plant and equipmentWithin one year - -Later than one year but not later than five years - -Later than five years - -

- -

Intangible assetsWithin one year - 110,000Later than one year but not later than five years - -Later than five years - -

- 110,000

(b) Loan commitments

2015$

2014$

Approved but not advanced loans and credit limits 27,967,660 26,954,624

It is anticipated that the approved and unadvanced loans will be advanced within the next twelve months.Approved credit facilities are available to members for immediate use.

(c) Non-cancellable operating leases

The Credit Union leases various branch sites under non-cancellable operating leases expiring within one to sixyears. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leasesare renegotiated.

2015$

2014$

Commitments for minimum lease payments in relation to non-cancellableoperating leases are payable as follows:Within one year 786,277 688,430Later than one year but not later than five years 865,183 899,130

1,651,460 1,587,560

14 Events occurring after the reporting periodNo other matters or circumstances have arisen since 30 June 2015 that have significantly affected, or maysignificantly affect:

(a) the Credit Union's operations in future financial years, or(b) the results of those operations in future financial years, or(c) the Credit Union's state of affairs in future financial years.


35

Events occurring after the reporting period

15 Related party transactions(a) Key management personnel compensation

2015$

2014$

Short-term employee benefits 1,338,666 929,165Post-employment benefits 173,579 95,178Other long-term benefits 24,648 14,474

1,536,893 1,038,817

Key management personnel include persons who had authority and responsibility for planning, directing andcontrolling the activities of the Credit Union, and the Directors of the Credit Union as detailed in the Directors'report.

(b) Loans to/from related parties

Details of loans made to Directors and other key management personnel of the Credit Union, including theirpersonally related parties, are set out in aggregate below.

2015$

2014$

Loans to key management personnelBeginning of the year 896 3,409Loans advanced during the year 714,338 36,985Fees and charges 35,146 637Loan repayments during the year (125,548) (40,135)Key management personnel changes 91,044 -End of year 715,876 896

Interest income earned 34,234 237Fees and commissions earned 912 399Loans approved and not advanced and credit limits 28,883 659,605

No write downs or allowances for impairment losses have been recognised in relation to any loans made to keymanagement personnel.

Movements for Directors, key management personnel and personally related parties as at 30 June 2014 whoceased or became key management personnel during the year ended 30 June 2015 are disclosed above in keymanagement personnel changes.

The loans made to Directors and other key management personnel of the Credit Union, including their personallyrelated parties were made under the same terms and conditions applicable to members.


36

Related party transactions(c) Deposits received from key management personnel

Details of deposits received from Directors and other key management personnel of the Credit Union, includingtheir personally related parties, are set out in aggregate below.

2015$

2014$

Balance 1 July 915,658 1,104,729Net movement in transactions (69,930) (314,441)Key management personnel changes 40,539 125,370Balance 30 June 886,267 915,658

Interest expense paid 21,179 31,977Fees and commissions earned 1,256 1,081

Movements for Directors, key management personnel and personally related parties as at 30 June 2014 whoceased or became key management personnel during the year ended 30 June 2015 are disclosed above in keymanagement personnel changes.

Deposits received from Directors and other key management personnel of the Credit Union, including theirpersonally related parties were received under the same terms and conditions applicable to members.

16 Remuneration of auditorsDuring the year the following fees were paid or payable for services provided by the external auditor of the CreditUnion:

(a) PricewaterhouseCoopers

(i) Audit and other assurance services

2015$

2014$

Audit and other assurance servicesAudit and review of financial statements and other audit work under theCorporations Act 2001 87,238 84,263

Other assurance servicesAudit of regulatory returns 39,380 49,031

Total remuneration for audit and other assurance services 126,618 133,294

(ii) Taxation services

Taxation services 12,112 5,979Total remuneration for taxation services 12,112 5,979

(iii) Other services

Preparation of financial statements 6,732 9,200Total remuneration for other services 6,732 9,200

17 Economic dependencyThe Credit Union has an economic dependency on Indue Ltd a company that provides treasury, money marketfacilities and settlement services.


37

18 Summary of significant accounting policiesThe principal accounting policies adopted in the preparation of these financial report are set out below. Thesepolicies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparation

These general purpose financial reports have been prepared in accordance with Australian AccountingStandards, other authoritative pronouncements of the Australian Accounting Standards Board and theCorporations Act 2001. The Credit Union is a for-profit entity for the purpose of preparing the financial reports.

(i) Compliance with IFRS

The financial reports comply with International Financial Reporting Standards (IFRS) as issued by theInternational Accounting Standards Board (IASB).

(ii) Historical cost convention

These financial reports have been prepared under the historical cost convention, as modified by the revaluationof available-for-sale financial assets and land and buildings.

(iii) New and amended standards adopted by the group

The group has applied the following standards and amendments for first time in their annual reporting periodcommencing 1 July 2014:

• Interpretation 21 Accounting for Levies

• AASB 2014-1 Amendments to Australian Accounting Standards

The adoption of these standards only affect the disclosures in the notes to the financial statements.

(iv) Critical accounting estimates

The preparation of financial reports requires the use of certain critical accounting estimates. It also requiresmanagement to exercise its judgement in the process of applying the Credit Union's accounting policies. Theareas involving a higher degree of judgement or complexity, or areas where assumptions and estimates aresignificant to the financial report, are disclosed in note 9.

(b) Income tax

The income tax expense or revenue for the period is the tax payable on the current period's taxable incomebased on the income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporarydifferences between the tax bases of assets and liabilities and their carrying amounts in the financial report, andto unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to applywhen the assets are recovered or liabilities are settled, based on those tax rates which are enacted orsubstantively enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxabletemporary differences to measure the deferred tax asset to liability. An exception is made for certain temporarydifferences to measure the deferred tax asset or liability. No deferred tax asset or liability is recognised in relationto these temporary differences if they arose in a transaction, other than a business combination, that at the timeof the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it isprobable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assetsand liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets andtax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on anet basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity, such as those that arerelated to fair value re-measurement of available-for-sale investment securities are also charged directly to equityand is subsequently recognised in the Statement of Comprehensive Income together with the deferred gain orloss.


38

Summary of significant accounting policies(c) Leases

Leases of property, plant and equipment where the Credit Union, as lessee, has substantially all the risks andrewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception atthe fair value of the leased property or, if lower, the present value of the minimum lease payments. Thecorresponding rental obligations, net of finance charges, are included in other short-term and long-term payables.Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit orloss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of theliability for each period. The property, plant and equipment acquired under finance leases is depreciated over theasset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonablecertainty that the Credit Union will obtain ownership at the end of the lease term.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases (note 13). Payments made under operating leases (net of any incentives receivedfrom the lessor) are charged to the Statement of Comprehensive Income on a straight-line basis over the periodof the lease.

(d) Impairment of assets

Other non-financial assets are tested for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. An impairment loss is recognised for the amount by which theasset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fairvalue less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable cash inflows which are largely independent of the cashinflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered animpairment are reviewed for possible reversal of the impairment at each reporting date.

(e) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents comprise balances with less thanthree months maturity from the date of acquisition that are readily convertible to known amounts of cash,including cash, deposits at call and highly liquid investments which are subject to an insignificant risk of changesin value, and bank overdrafts. Bank overdrafts are shown within other borrowed funds in liabilities on theStatement of Financial Position.

(f) Other receivables

Collectability of accounts receivables is reviewed on an ongoing basis. Debts which are known to be uncollectibleare written off by reducing the carrying amount directly. An allowance account (provision for impairment of tradereceivables) is used when there is objective evidence that the Credit Union will not be able to collect all amountsdue according to the original terms of the receivables. Significant financial difficulties of the debtor, probabilitythat the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (morethan 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of theimpairment allowance is the difference between the asset's carrying amount and the present value of estimatedfuture cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivablesare not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in the Statement of Comprehensive Income within otherexpenses. When a trade receivable for which an impairment allowance had been recognised becomesuncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries ofamounts previously written off are credited against other expenses in the Statement of Comprehensive Income.


39

Summary of significant accounting policies(g) Investments and other financial assets

(i) Classification

Financial assets are classified into the following categories:

• loans and receivables,

• held-to-maturity investments, and

• available-for-sale financial assets.

Management determines the classification of its financial assets at initial recognition. Refer below for accountingpolicies with respect to the financial assets held by the Credit Union.

Loans and receivables

Loans and receivables comprise of loans and advances to members.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. They arise when the Credit Union provides money directly to a debtor with nointention of trading the receivables.

Loans are recognised when cash is advanced to members. Loans are initially recognised at fair value net oftransactions costs. Loans and receivables are carried at amortised cost using the effective interest method.Interest calculated using the effective interest rate method is recognised in the Statement of ComprehensiveIncome; refer to note above.

Held-to-maturity investments

Held-to-maturity assets comprises of placements with other financial institutions.

Held-to-maturity investments are non-derivative financial assets quoted in an active market with fixed ordeterminable payments and fixed maturities that the Credit Union's management has the positive intention andability to hold to maturity. Were the Credit Union to sell other than an insignificant amount of held-to-maturityfinancial assets, the entire category would be tainted and reclassified as available-for-sale.

Held-to-maturity assets are initially recognised at fair value net of transactions costs and subsequently measuredat amortised cost using the effective interest method. Interest calculated using the effective interest rate methodis recognised in the Statement of Comprehensive Income; refer to note above.

Available-for-sale financial assets

Available-for-sale financial investments are comprised principally of equity securities (non-listed) which areintended to be held for an indefinite period of time, which may be sold if the need arises.

Available-for-sale investments are non-derivatives that are designated as available for sale and are notcategorised into any of the categories of financial assets at fair value through profit or loss; loans and receivablesor held-to-maturity investments.

Gains and losses arising from changes in the fair value of the equity instruments are recognised directly in equityvia an available-for-sale investment reserve, (refer to note 7(a), 7(b)) until the equity instrument is derecognisedor impaired at which time the cumulative gain or loss previously recognised in the reserve should be recognisedin profit or loss. Dividends received on equity instruments are recognised in the Statement of ComprehensiveIncome when the Credit Union's right to receive payment is established.

The fair values quoted for investments in active markets are based on current market prices. Unlisted equitysecurities which do not have an active market or other method of determining a reasonable estimate of fair valueare carried at cost less any impairment losses. Dividend income is recognised in the Statement ofComprehensive Income on an accrual basis when the Credit Union's right to receive dividend is established.

(ii) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position whenthere is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a netbasis, or realise the asset and settle the liability simultaneously.


40

Summary of significant accounting policies(g) Investments and other financial assets

(iii) Impairment of financial assets

Loans and advances to members

The Credit Union assesses at each reporting date or more frequently if events or circumstances indicate that theymight not be recoverable whether there is objective evidence the a loan or a group of loans is impaired, whichincludes observable data that comes to the attention of the Credit Union about loss events. The Credit Union firstassesses whether objective evidence of impairment exists individually for loans that are individually significant. Ifthe Credit Union determines that no objective evidence of impairment exists for an individually assessed loan,whether significant or not, it includes the loan in a portfolio of loans with similar credit risk characteristics andcollectively assesses them for impairment. Loans that are individually assessed for impairment and for which animpairment loss is or continues to be recognised are not included in the collective assessment of impairment.

If there is objective evidence that an impairment loss on loans has been incurred, the amount of the loss ismeasured as the difference between the asset's carrying amounts and the present value of the estimated futurecash flows (excluding future credit losses that have not been incurred) discounted at the loan's original effectiveinterest rate. The carrying amount of the loan is reduced through the use of an allowance for impairment lossesaccount and the amount of the loss is recognised in the Statement of Comprehensive Income. If a loan hasvariable interest rate, the discount rate for measuring any impairment loss is the current effective interest ratedetermined under the contract.

When a loan is uncollectable, it is written off against the related provision for loan impairment. Such loans arewritten off after all the necessary procedures have been completed and the amount of the loan loss has beendetermined by management and approved by the Board of Directors. Subsequent recoveries of amountspreviously written off shall be reversed directly or by adjusting the provision for loan impairment. The reversalshall not result in a carrying amount of the loan that exceeds what the amortised cost would have been had theimpairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognisedin the Statement of Comprehensive Income.

Available-for-sale investments

A significant or prolonged decline in the fair value of the equity investment below its cost is considered indetermining whether the equity instrument is impaired. If there is any objective evidence of impairment for equityinvestments, the cumulative loss - measured as the difference between the acquisition costs and the current fairvalue, less any impairment loss on that equity investment previously recognised in profit or loss - is removed fromthe available-for-sale reserve and recognised in the Statement of Comprehensive Income.

Impairment losses recognised in the Statement of Comprehensive Income on these equity investments are notreversed through profit or loss in a subsequent period.

(h) Securitisation

Participation in any new securitisation program/structure will need to be assessed at each reporting date. Interestincome relating to the equitably assigned mortgage loans will be recognised in the Statement of ComprehensiveIncome of the Credit Union measured at amortised cost using the effective interest rate method. Interest expenseon the loan to the special purpose entity will equate to the coupon payable on the loan from the special purposeentity which include the terms and conditions of the arrangements and services between the Credit Union and thespecial purpose entity. These include adjustments for fees paid directly by the special purpose entity to externalparty providers, servicing, liquidity fees and residual income.


41

Summary of significant accounting policies(i) Property, plant and equipment

The Credit Union's accounting policy for property, plant and equipment is explained in note 6(a).

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,only when it is probable that future economic benefits associated with the item will flow to the Credit Union andthe cost of the item can be measured reliably. The carrying amount of any component accounted for as aseparate asset is derecognised when replaced. All other repairs and maintenance are charged to the Statementof Comprehensive Income during the financial period in which they are incurred.

Increases in the carrying amounts arising on revaluation of land and buildings are recognised, net of tax, in othercomprehensive income and accumulated in reserves in equity. To the extent that the increase reverses adecrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases thatreverse previous increases of the same asset are first recognised in other comprehensive income to the extent ofthe remaining surplus attributable to the asset; all other decreases are charged to the Statement ofComprehensive Income. Each year, the difference between depreciation based on the revalued carrying amountof the asset charged to the Statement of Comprehensive Income and depreciation based on the asset's originalcost, net of tax, is reclassified from the property, plant and equipment revaluation surplus to retained earnings.

The depreciation methods and periods used by the group are disclosed in note 6(a).

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amountis greater than its estimated recoverable amount (note 18(d)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are includedin profit or loss. When revalued assets are sold, it is Credit Union policy to transfer any amounts included in otherreserves in respect of those assets to retained earnings.

(j) Intangible assets

(i) IT development and software

Costs associated with the development or maintenance of computer software programs are recognised as anexpense as incurred. Costs that are directly associated with the development or production of identifiable andunique software products controlled by the Credit Union, and that will probably generate economic benefitsexceeding costs beyond one year, are recognised as intangible assets. Direct costs directly attributable includesoftware development and employee costs.

(k) Financial liabilities

Financial liabilities may be held at fair value through profit or loss or at amortised cost. When a financial liability isrecognised, initially it should be measured at its fair value net of transaction costs, unless the financial instrumentis designated as fair value through profit or loss.

Refer to note 18(l) for the accounting policy with respect to the financial liabilities of the Credit Union.

(l) Deposits due to members

Represents deposits accepted from members.

Deposits are initially recognised at fair value (being fair value of consideration received) are subsequentlymeasured at amortised cost using the effective interest method, refer to note above.

(m) Payables

These amounts represent liabilities for goods and services provided to the Credit Union prior to the end offinancial year which are unpaid.

(n) Employee benefits

(i) Wages, salaries and other employee benefits

Liabilities for wages and salaries, including non-monetary benefits are expected to be settled within 12 months ofthe reporting date are recognised as payables in respect of employee's services up to the reporting date and aremeasured at the amounts expected to be paid when the liabilities are settled.


42

Summary of significant accounting policies(n) Employee benefits

(ii) Long service and annual leave

The liability for long service leave and annual leave is recognised in the provision for employee benefits andmeasured as the present value of expected future payments to be made in respect of services provided byemployees up to the reporting date using the projected unit credit method. Consideration is given to expectedfuture wage and salary levels, experience of employee departures and periods of service. Expected futurepayments are discounted using market yields on the Milliman report with terms to maturity that match, as closelyas possible, the estimated future cash outflows.

(iii) On-costs

Costs that are a consequence of employment, but which are not employee benefits, such as payroll tax andworkers compensation insurance are recognised as other liabilities.

(iv) Superannuation

Contributions are made by the Credit Union to an employee's superannuation fund and are charged as expenseswhen incurred. The Credit Union has no legal obligation to cover any shortfall in the fund's obligation to providebenefits to employees on retirement.

(v) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or when anemployee accepts voluntary redundancy in exchange for these benefits. The Credit Union recognises terminationbenefits when it is demonstrably committed to either terminating the employment of current employees accordingto a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offermade to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date arediscounted to present value.

(o) Goods and Services Tax (GST)

The Credit Union is treated as an input taxed entity for GST purposes. This means that in most circumstancesGST is not chargeable on the services provided and GST incurred by the Credit Union is not recoverable fromthe Australian Taxation Office. Accordingly, the amount of GST incurred that is not recoverable is recognised aspart of the cost of acquisition of an asset or as part of Other Operating Expenses (Note 3b).

(p) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June2015 reporting periods. The Credit Union has not applied the new amendments at 30 June 2015. The CreditUnion's assessment of the impact of these new standards and interpretations is set out below.

(i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising fromAASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9(December 2010) and AASB 2012-6 Amendments to Australian Accounting Standards- Mandatory EffectiveDate of AASB 9 and Transition Disclosures (effective for annual reporting periods beginning on or after 1January 2015)

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assetsand financial liabilities and introduces new rules for hedge accounting. In December 2014, the AASB madefurther changes to the classification and measurement rules and also introduced a new impairment model. Theselatest amendments now complete the new financial instruments standard. The current the requirements forclassification and measurement of financial assets will not have a material impact on the Credit Union. The CreditUnion has not yet made an assessment of the impact of the proposed amendments until all amendments havebeen confirmed. Early adoption has not been considered at this time.

(ii) AASB 15 Revenue from Contracts with Customers (effective 1 July 2017)

The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which coverscontracts for goods and services and AASB 111 which covers construction contracts. The new standard is basedon the principle that revenue is recognised when control of a good or service transfers to a customer - so thenotion of control replaces the existing notion of risks and rewards. The standard permits a modified retrospectiveapproach for the adoption. Under this approach entities will recognise transitional adjustments in retainedearnings on the date of initial application (eg 1 July 2017), ie without restating the comparative period. They willonly need to apply the new rules to contracts that are not completed as of the date of initial application.

There are no other standards that are not yet effective and that are expected to have a material impact on theentity in the current or future reporting periods and on foreseeable future transactions.


43

Directors' declaration

In the Directors' opinion:

(a) the financial report and notes set out on pages 7 to 43 are in accordance with the Corporations Act 2001,including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatoryprofessional reporting requirements, and

(ii) giving a true and fair view of the entity's financial position as at 30 June 2015 and of itsperformance for the year ended on that date, and

(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when theybecome due and payable.

Note 18(a) confirms that the financial report also comply with International Financial Reporting Standards asissued by the International Accounting Standards Board.

This declaration is made in accordance with a resolution of Directors.

Ms Sharon HowesDirector

Ms Jann GardnerDirector

Newcastle28 September


44

julie bowen

Stamp

julie bowen

Stamp

julie bowen

Text Box

Chairman

45

Independent auditor’s report to the members of Hunter United

Employees’ Credit Union Limited

Report on the financial report

We have audited the accompanying financial report of Hunter United Employees’ Credit Union

Limited (the company), which comprises the statement of financial position as at 30 June 2015, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 18(a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial

Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit ot obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the

assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence

In conducting our audit, we have complied with the independence requirements of the Corporations

Act 2001.

PricewaterhouseCoopers, ABN 52 780 433 757 Level 3 Watt Street Commercial, 45 Watt Street, PO Box 798, NEWCASTLE NSW 2300 T: +61 2 4925 1100, F: +61 2 4925 1199, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation

46

Auditor’s opinion In our opinion:

a) the financial report of Hunter United Employees’ Credit Union Limited is in accordance with the

Corporations Act 2001, including: (i) giving a true and fair view of the company’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001.

b) The company’s financial report also complies with International Financial Reporting Standards as disclosed in Note 18(a).

PricewaterhouseCoopers

Caroline Mara Newcastle Partner 28 September 2015

Documents

Hunter United Employees' Credit Union ACN 087 650 182 ...assets.hunterunited.com.au/files/2015AnnualReport.pdf · 130 Lambton Road, Broadmeadow, NSW 2292 PO Box 851 Newcastle NSW