##### Financial instruments: Credit risk

Credit risk arises from the contractual financial assets of DJPR, which comprise cash and deposits, non-statutory receivables and available-for-sale contractual financial assets. DJPR's exposure to credit risk arises from the potential default of the counter party on their contractual obligations resulting in financial loss to DJPR. Credit risk is measured at fair value and is monitored on a regular basis. Credit risk associated with DJPR's financial assets is minimal because its main debtor is the Victorian Government. For debtors other than government, it is DJPR's policy to only deal with entities with high credit ratings of a minimum triple-B rating and to obtain sufficient collateral or credit enhancements, where appropriate. In addition, DJPR does not engage in hedging for its contractual financial assets and mainly obtains contractual financial assets that are on fixed interest, except for cash and deposits, which are mainly cash at bank. As with the policy for debtors, DJPR’s policy is to only deal with banks with high credit ratings. DJPR mainly holds financial assets that are on fixed interest except for cash assets which are mainly cash at bank. As with the policy for debtors, DJPR's policy is to only deal with domestic banks with high credit ratings. Provision for impairment for contractual financial assets is recognised when there is objective evidence that DJPR will not be able to collect a receivable. Objective evidence includes financial difficulties of the debtor, default payments, debts which are more than 60 days overdue, and changes in debtor credit ratings. Contract financial assets are written off against the carrying amount when there is no reasonable expectation of recovery. Bad debt written off by mutual consent is classified as a transaction expense. Bad debt written off following a unilateral decision is recognised as other economic flows in the net result. Except as otherwise detailed in the following table, the carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents DJPR's maximum exposure to credit risk without taking account of the value of any collateral obtained.

###### Credit quality of contractual financial assets that are neither past due nor impaired.

($ thousand)
Financial Institution agencies (AAA credit rating)	Government agencies (AAA credit rating)	Other	Total
2019
Cash and deposits	484,651	24,475	2,745	511,871
Receivables(i)	107,563	–	287,889	395,452
Investments	–	–	71	71
Total contractual financial assets	592,214	24,475	290,705	907,394
i. The carrying amounts disclosed exclude statutory receivables (e.g. amounts owing from the State of Victoria and GST recoverable)

###### Contractual financial assets that are either past due or impaired

There are no material financial assets which are individually determined to be impaired. Currently DJPR does not hold any collateral as security nor credit enhancements relating to any of its financial assets. There are no financial assets that have had their terms renegotiated so as to prevent them from being past due or impaired, and they are stated at the carrying amounts as indicated.

###### Impairment of financial assets under AASB 9

From 1 January 2019, DJPR has been recording the allowance for expected credit loss for the relevant financial instruments, replacing AASB 139’s incurred loss approach with AASB 9’s Expected Credit Loss approach. Subject to AASB 9 impairment assessment include DJPR’s contractual receivables, statutory receivables and its investment in debt instruments.

62

DJPR Annual Report 2018–19