03Financial Statements

CEFC ANNUAL REPORT / 2015–16

Note 1: Overview

1.1    Objectives of the Corporation

The Clean Energy Finance Corporation (‘CEFC’ or ‘the Corporation’) was established on 3 August 2012 under the Clean Energy Finance Corporation Act 2012 [Cth] (‘the CEFC Act’) and is classified as a corporate Commonwealth entity. It is a not-for-profit entity and, working with co-financiers, its objective is to facilitate increased flows of finance into the clean energy sector. The Corporation’s functions are to:

  1. Invest, directly and indirectly, in solely or mainly Australian-based clean energy technologies and projects, which can be any one or more of the following: 
    • Renewable energy technologies and projects, which include hybrid technologies that integrate renewable energy technologies and technologies (including enabling technologies) that are related to renewable energy technologies;
    • Energy efficiency technologies and projects, including technologies that are related to energy conservation technologies or demand management technologies (including enabling technologies); and
    • Low emissions technologies and projects.
  2. Liaise with relevant persons and bodies, including the Australian Renewable Energy Agency (‘ARENA’), the Clean Energy Regulator, other Commonwealth agencies and State and Territory governments, for the purposes of facilitating its investment function;
  3. Work with industry, banks and other financiers, and project proponents, to accelerate Australia’s transformation towards a more competitive economy in a carbon constrained world, by acting as a catalyst to increase investment in the clean energy sector; and
  4. Do anything incidental or conducive to the performance of the above functions.

The Corporation’s outcomes are set out in Note 7.1.

Effective 5 May 2016, the Corporation was issued with the Clean Energy Finance Corporation Investment Mandate Direction 2016 (‘Investment Mandate 2016’) which among other things, required the Corporation to make available up to $100 million a year, from 2016-17 to 2025-26, for debt and equity investment in emerging clean energy technology projects and businesses that involve technologies that have passed beyond the research and development stages but are not yet established or of sufficient maturity, size or otherwise commercially ready to attract sufficient private sector investment.

1.2    Basis of Preparation of the Financial Statements

The financial statements are general purpose financial statements and are required by:

  1. section 42 of the PGPA Act; and
  2. section 74 of the CEFC Act.

The financial statements have been prepared in accordance with:

  1. the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (‘FRR’); and
  2. Australian Accounting Standards (‘AAS’) and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain financial assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

Part 5 of the CEFC Act makes provision for funding of the Clean Energy Finance Corporation via an appropriation to the CEFC Special Account. Accordingly, the Corporation has sufficient funding and realisable assets to meet all of its liabilities and obligations. Any change to the continued existence of the Corporation in its present form would require an Act of Parliament to amend or repeal the CEFC Act. Accordingly, these financial statements are prepared on the basis of the Corporation remaining a going concern.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

1.3   Events after the Reporting Period

There have been no significant events subsequent to balance date.

1.4   Taxation

The Corporation is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Revenues, expenses and assets are recognised net of GST except:

  1. where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
  2. for receivables and payables.

The net amount of GST payable to the Australian Taxation Office is included as part of the payables or commitments.

The financial statements have been prepared on the basis that the Corporation is generally not entitled to input tax credits for GST included in the price of goods and services acquired because financial supplies, such as loans, are input taxed.

1.5   New Accounting Standards

Adoption of New Australian Accounting Standard Requirements

No accounting standard has been adopted earlier than the application date as stated in the standard.

The new/revised/amending standards and/or interpretations issued prior to the sign-off date and applicable to the current reporting period did not have a material effect, and are not expected to have a future material effect, on the Corporation’s financial statements.

Future Australian Accounting Standard Requirements

The following new standards were issued by the AASB prior to the signing of the statement by the accountable authority, chief executive and chief financial officers:

 

Standard/Interpretation

Application date for the Corporation

Nature of impending change/s in accounting
policy and likely impact on initial application

AASB 9 Financial Instruments

1 July 2018

Regulatory Deferral Accounts. Part E defers the application date of AASB 9 Financial Instruments to annual reporting periods beginning on or after 1 January 2018.

AASB 9 (December 2014) is a new Principal standard which replaces AASB 139. This new Principal version supersedes AASB 9 issued in December 2009 (as amended) and AASB 9 (issued in December 2010), and includes a model for classification and measurement, a single forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting.

AASB 9 is effective for annual periods beginning on or after 1 January 2018. However, the Standard is available for early application. The own credit changes can be early applied in isolation without otherwise changing the accounting for financial instruments.

The final version of AASB 9 introduces a new expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, the new Standard will require the Corporation to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis.

AASB 9 includes requirements for a simpler approach for classification and measurement of financial assets compared with the requirements of AASB 139.

The main changes impacting the Corporation are described below:

a.   Financial assets that are debt instruments will be classified based on (1) the objective of the entity’s business model for managing the financial assets;
(2) the characteristics of the contractual cash flows.

b.   Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

Consequential amendments were also made to other standards as a result of AASB 9, most notably revisions to AASB 7, including significant new disclosure requirements for each component of
AASB 9.

The Corporation is currently evaluating the likely impact of adopting AASB 9. It is reasonable to expect that certain financial assets will be classified differently and that it will involve a larger provision for impairment based on the change to the expected-loss model.

AASB 15 Revenue from Contracts with Customers

1 July 2018

AASB 15 will supersede the current revenue recognition guidance including AASB 118 ‘Revenue,’ AASB 111 ‘Construction Contracts’ and the related Interpretations when it becomes effective.

AASB 15 specifies the accounting treatment for revenue arising from contracts with customers (except for contracts within the scope of other accounting standards such as leases or financial instruments). The core principle of AASB 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer

• Step 2: Identify the performance obligations in the contract

• Step 3: Determine the transaction price

• Step 4: Allocate the transaction price to the performance obligations in the contract

• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

Under AASB 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. AASB 15 applies to annual periods beginning on or after 1 January 2018.

The Corporation is currently evaluating the likely impact of adopting AASB 15, however, since the majority of the Corporation’s revenue is derived from financial instruments, it is not anticipated that the adoption of this standard will have a material impact on the Corporation’s revenue recognition.

AASB 16 Leases

1 July 2019

AASB 16 effectively does away with the distinction between an operating lease and a finance lease as lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.

The Corporation operates from leased premises and the application of AASB 16 in the future may have a material impact on the amounts reported and disclosures made in the Corporation’s financial statements. However, it is not practicable to provide a reasonable estimate of the effect of AASB 16 until the Corporation performs a detailed review.