annual report - Harvey Norman Company Reports & Announcements

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(xvii) Leases (continued)
Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the
estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same basis as the lease income. Operating lease payments are recognised as
an expense in the income statement on a straight-line basis over the lease term.
Lease Incentives
Financial incentive contributions received from lessors of certain stores are recognised at their fair value on receipt as a
liability in the financial statements.
The liability is reduced and recognised as income, by offsetting against occupancy expenses in the income statement over
the period the consolidated entity expects to derive a benefit from the incentive contribution. Lease incentives are
normally amortised to the income statement on a straight-line basis over the term of the lease.
(xviii) Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the consolidated entity and
the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is
recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the
costs incurred, or to be incurred, in respect of the transaction can be measured reliably. Risks and rewards are considered
passed to the buyer at the time of delivery of the goods to the customer. Lay-by sales are recognised after the final
payment is received from the customer.
Interest
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that discounts
estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the
financial asset.
Dividends
Revenue is recognised when the shareholders‟ right to receive the payment is established.
Rental income
Rental income arising on investment properties is accounted for on a straight-line basis over the lease term. Contingent
rental income is recognised as income in the periods in which it is earned.
Franchisee income
Revenue attributable to franchise fees is brought to account only when the franchise fees have been earned, or where
franchise fees are unpaid but recovery is certain.
(xix) Income tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted by balance date.
Deferred income tax is provided on all temporary differences at balance date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:
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