4.1 Total acceptances of customers - Net

Acceptances comprise undertakings by a RFC to pay bills of exchange drawn on customers. These bills of exchange are not held as part of the RFC’s asset portfolio. Acceptances are accounted for and disclosed as a liability with a corresponding contra asset. The contra asset is recognised to reflect the RFC’s claim against each drawer of the bills of exchange.

Bills of exchange that have been accepted and held in a RFC’s asset portfolio can be included in the Statement of Financial Position under either Trading Securities or Investment Securities.

Netting is allowed in accordance with the requirements specified in the Australian accounting standards. (i.e. only if there is a legal right to set off and there is an intention to settle on a net basis, or realise the assets and settle the liability simultaneously).

Acceptances generate fee income that is taken to profit and loss when earned.

5. Loans and advances

Loans and advances are investments of the RFC, which are deemed for this form not to be evidenced by the financing/issue of debt securities (e.g. bill financing). This type of financing/ investing is to be either recorded in the Trading Securities or Investment Securities.

Generally include:

• overdrafts;
• secured and unsecured lending;
• financial lease agreements;
• account balances which do not qualify as deposits;
• credit card outstanding balances;
• term loans;
• mortgage lending;
• commercial loans;
• equity participation in leveraged leases;
• redeemable preference share finance;
• subordinated loans; and
• loans to controlled entities, associates and joint ventures.

Loans and advances should be brought to account at the gross value of the outstanding balance.

Loans and advances should be recorded net of unearned revenue; this is mainly with respect to unearned lease receivables.

Netting is permitted in accordance with the requirements of the Australian accounting standards (i.e. were there is a legal right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the assets and settle the liability simultaneously).

Note: Specific provision and collective provision for products and counterparties where indicated in the form are to be reported only if the data is already recorded and allocated on that basis by the institution. Otherwise the specific provision and collective provision can be disclosed in aggregate. The specific provision and collective provision is a prudential classification determined in accordance with prudential standards.