MIRVAC gRoup AnnuAl RepoRt 2012 - Mirvac - Mirvac Group

notes to tHe ConsolIDAteD fInAnCIAl stAteMents
1 suMMARy of significAnt Accounting
policies / continueD
on consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated
as hedges of such investments, are recognised in other
comprehensive income. when a foreign controlled entity is
sold or any borrowings forming part of the net investment
are repaid, a proportionate share of such exchange
differences is reclassified to profit or loss, as part of the gain
or loss on sale where applicable.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entities and translated at the closing rate.
f) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are
net of returns, trade allowances and duties and taxes paid.
Mirvac recognises revenue when the amount of revenue can
be reliably measured, it is probable that future economic
benefits will flow to the entity and specific criteria have been
met for each of the Group’s activities as described below.
The Group bases its estimates on historical results, taking
into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities
as follows:
i) Development projects and land sales
Revenue from the sale of development projects and land
is recognised upon settlement, which has been determined
to be when the significant risks and rewards of ownership
are transferred to the purchaser. other revenue from
development projects such as project management fees
is recognised as services are performed.
ii) Construction contracts
Agreements to develop real estate are only defined as
construction contracts when the purchaser is able to specify
the main elements of the design of the project. where this is
not the case, the project is treated as a development project.
Revenue and expenses are recognised in accordance with
the percentage of completion method unless the outcome
of the contract cannot be reliably estimated. The stage of
completion is determined by costs incurred to date as a
percentage of total expected cost. where it is probable that a
loss will arise from a construction contract, the excess of total
costs over revenue is recognised as an expense immediately.
when the outcome of a contract cannot be reliably estimated,
contract costs are recognised as an expense as incurred, and
where it is probable that the costs will be recovered, revenue
is recognised to the extent of costs incurred.
iii) Hotel revenue
Revenue is recognised when goods and services have been
provided to the customer.
iv) Rental income
Rental revenue for operating leases is recognised on a
straight line basis over the term of the lease, except when
an alternative basis is more representative of the pattern
of service rendered through the provision of the leased
premises. Lease incentives offered under operating leases
are amortised on a straight line basis in profit or loss.
v) Recoverable outgoings
Recovery of outgoings as specified in lease agreements is
accrued on an estimated basis and adjusted when the actual
amounts are invoiced to the respective tenants.
48 mirvac group annual report 2012
vi) fees
Revenues from the rendering of property funds management,
property advisory and facilities management services are
recognised upon the delivery of the service to the customers
or where there is a signed unconditional contract for the sale
or purchase of assets.
vii) Interest
Interest revenue is brought to account when earned, taking
into account the effective yield on the financial asset.
viii) Dividends/distributions
Dividends/distributions are recognised as revenue when the
right to receive payment is established. This applies even if they
are paid out of pre-acquisition profits. however, the investment
may need to be tested for impairment as a consequence.
ix) government grants
Grants from the government are recognised at their fair value
where there is a reasonable assurance that the grant will be
received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and
recognised in profit or loss over the period necessary to match
them with the costs that they are intended to compensate.
g) income tax
The income tax expense or benefit for the year is the tax
payable or receivable on the current year’s taxable income
based on the applicable income tax rate for each jurisdiction
adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences between the tax
bases of assets and liabilities and their carrying amounts
in the consolidated financial statements and to unused tax
losses. The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the
controlled entities, associates and joint ventures generate
taxable incomes.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to apply
when the assets are recovered or liabilities are settled,
based on those tax rates which are enacted or substantively
enacted. The relevant tax rates are applied to the cumulative
amounts of deductible and taxable temporary differences
to measure the deferred tax asset or liability. An exception
is made for certain temporary differences arising from the
initial recognition of an asset or a liability. No deferred tax
asset or liability is recognised in relation to these temporary
differences if they arose in a transaction, other than a
business combination, that at the time of the transaction did
not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses. Deferred tax assets and
liabilities are not recognised for temporary differences
between the carrying amount and tax bases of investments in
controlled entities where the parent entity is able to control
the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the
foreseeable future.
Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and
settle the liability simultaneously. Mirvac and its whollyowned
Australian controlled entities have implemented the
tax consolidation legislation. As a consequence, these entities
are taxed as a single entity and the deferred tax assets and
liabilities of these entities are recorded in the consolidated
financial statements. Current and deferred tax is recognised
in profit or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity respectively.