IGO Interactive Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2020 Notes to the consolidated financial statements 30 June 2020 (continued) 22 Financial risk management (continued) (b) Credit risk (continued) Other receivables and financial assets (continued) Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired, or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. In respect of cash and cash equivalents, financial assets at fair value through profit or loss and derivative financial instruments, the Group's exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The Group does not hold any credit derivatives to offset its credit exposure. Derivative counterparties and cash transactions are restricted to high credit quality financial institutions. (ii) Significant estimates and judgements Impairment of financial assets The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Management and the Board monitors liquidity levels on an ongoing basis. Maturities of financial liabilities The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables are based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Contractual maturities of financial liabilities Less than 6 months 6 - 12 months Between 1 and 5 years Over 5 years Total contractual cash flows Carrying amount $'000 $'000 $'000 $'000 $'000 $'000 At 30 June 2020 Trade and other payables 53,013 - - - 53,013 53,013 Lease liabilities 3,931 3,775 27,862 9,485 45,053 39,785 Bank loans* 57,388 - - - 57,388 56,937 114,332 3,775 27,862 9,485 155,454 149,735 At 30 June 2019 Trade and other payables 49,902 - - - 49,902 49,902 Bank loans* 29,100 29,900 28,842 - 87,842 84,589 79,002 29,900 28,842 - 137,744 134,491 * Includes estimated interest payments. IGO Limited 45 Notes to the consolidated financial statements 30 June 2020 (continued) 22 Financial risk management (continued) (c) Liquidity risk (continued) Maturities of financial liabilities (continued) (d) Recognised fair value measurements (i) Fair value hierarchy The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 13 Fair Value Measurement requires disclosure 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 (level 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) (level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June 2020 and 30 June 2019 on a recurring basis. Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 At 30 June 2020 Financial assets Listed investments 107,759 - - 107,759 Derivative instruments Diesel hedging contracts - 348 - 348 107,759 348 - 108,107 Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 At 30 June 2019 Financial assets Listed investments 27,531 - - 27,531 Derivative instruments Diesel hedging contracts - 484 - 484 27,531 484 - 28,015 The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June 2020 and did not transfer any fair value amounts between the fair value hierarchy levels during the year ended 30 June 2020. (ii) Valuation techniques used to determine level 1 fair values The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. (iii) Valuation techniques used to determine level 2 and level 3 fair values The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Specific valuation techniques used to value financial instruments include: • The use of quoted market prices or dealer quotes for similar instruments. • The fair value of commodity and forward foreign exchange contracts is determined using forward commodity and exchange rates at the reporting date. IGO Limited 46 Notes to the consolidated financial statements 30 June 2020 (continued) 22 F nancial risk man gement (continued) (c) Liquidity risk (continued) Maturities of financial liabilities (continued) (d) Recognised fair value measurements (i) Fair value hierarchy The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 13 Fair Value Measurement requires disclosure 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 (level 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) (level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June 2020 and 30 June 2019 on a recurring basis. Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 At 30 June 2020 Financial assets Listed investments - 7 759 Derivative instruments Diesel hedging contracts - 348 - 348 107,759 348 - 108,107 Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 At 30 June 2019 Financial assets Listed investments - 7 531 Derivative instruments Diesel hedging contracts - 484 - 484 27,531 484 - 28,015 The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June 2020 and did not transfer any fair value amounts between the fair value hierarchy levels during the year ended 30 June 2020. (ii) Valuation techniques used to determine level 1 fair values The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. (iii) Valuation techniques used to determine level 2 and level 3 fair values The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is d termined using valuatio techniques. These valuation techniques m ximis the us of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Specifi valuation techniqu s used to value financial instruments include: • The use of quoted market prices or dealer quotes for similar instruments. • The fair value of commodity and forward foreign exchange contracts is determined using forward commodity and exchange rates at the reporting date. IGO Limited 46 112 — IGO ANNUAL REPORT 2020 IGO ANNUAL REPORT 2020— 113