McConnell Dowell 2019 Annual Review

86 McConnell Dowell Group Notes to the annual financial statements (continued) for the year ended 30 June 2019 The Group classifies interest paid as cash flows from operating activities. Excessive Risk Concentration Concentrations arise when a number of counter parties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly effected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments effecting a particular industry. In order to avoid excessive concentrations of risk, the Group’s policies and procedures includes specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Fair value The fair value of all current financial assets and liabilities held by the Group approximate the individual carrying values of those assets and liabilities. Non-current interest bearing loans and borrowings held by the Group approximates its carrying value (except as disclosed in note 20). The Group can use various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 – the fair value is calculated using quoted prices in active markets. Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. The Group uses foreign exchange forward contracts (“FEFC”) to manage some of its transaction exposure. The FEFC’s are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally from one to 24 months. They are classified as fair value through profit or loss, with Level 2 methods used to estimate the fair value. At 30 June 2019 the Group had not booked any FEFC market to market transactions (2018: nil) The FEFC’s are valued using market observable inputs, applying a forward pricing model using present value calculations. The model incorporates foreign exchange spot and forward rates and the credit quality of counterparties. Financial Statements 2019 22. Financial risk management objectives and policies (continued) Changes in liabilities arising from financing activities All figures are in A$ 000’s 1 July 2018 Cash Flows Foreign Exchange Movement NewLoans 30 June 2019 Current interest- bearing loans and borrowings 11,753 (6,273) - 6,823 12,303 Current obligations under finance leases and hire purchase contracts 26 - - 18 44 Non-current interest-bearing loans and borrowings 8,267 (5,287) - 2,547 5,527 Non-current obligations under finance leases and hire purchase contracts 116 - - 44 160 Total liabilities from financing activities 20,162 (11,560) - 9,432 18,034