2010 Annual Report - Grange Resources

46 GRANGE RESOURCES LIMITED
Notes to the Financial Statements (cont.)
NOTE 1.
(i)
SUMMARY OF SIGNIFICANT
aCCOUNTING POLICIES (cont.)
Cash and cash equivalents
For statement of cash flows presentation purposes, cash and
cash equivalents comprise cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that
are readily convertible to amounts of cash and which are subject
to an insignificant risk of changes in value, net of outstanding
bank overdrafts. Bank overdrafts are shown within borrowings in
current liabilities on the balance sheet.
(j) Trade and other receivables
Trade receivables are recognised and carried at the original
invoice amount less provision for impairment. Trade receivables
are generally due for settlement within 14 days.
Collectability of trade receivables are reviewed on an ongoing
basis. Debts which are known to be uncollectable are written off
by reducing the amount directly. An allowance accounts
(provision for impairment of trade receivables) is used when there
is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables.
The amount of the impairment loss is recognised in the income
statement within other expenses. When a trade receivable for
which an impairment allowance had been recognised become
uncollectable in a subsequent period, it is written off against the
allowance account. Subsequent recoveries of amounts
previously written off are credited against other expenses in
the income statement.
(k) Inventories
Raw materials and stores, ore stockpiles, work in progress and
finished goods are stated at the lower of cost and net realisable
value. Cost is determined primarily on the basis of weighted
average costs and comprises of cost of direct materials and the
costs of production which include:
◆ ◆ labour costs, materials and contractor expenses which are
directly attributable to the extraction and processing of ore;
◆ ◆ depreciation of property, plant and equipment used in the
extraction and processing of ore; and
◆ ◆ production overheads directly attributable to the extraction
and processing of ore.
Stockpiles represent ore that has been extracted and is available
for further processing. If there is significant uncertainty as to
when the stockpiled ore will be processed it is expensed as
incurred. Where the future processing of the ore can be
predicted with confidence because it exceeds the mine’s cut-off
grade, it is valued at the lower of cost and net realisable value.
Work in progress inventory includes partly processed material.
Quantities are assessed primarily through surveys and assays.
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
(l) Income tax
Current income tax and liabilities for the current and prior periods
are measured at the amount expected to be recovered from or
paid to the taxation authorities based on the current period’s
taxable income. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted by
the balance sheet date. Management periodically evaluates
positions taken in tax returns with respect to situation in which
applicable tax regulation is subject to interpretation. Such
positions are considered individually and where appropriate,
provisions are established based on the estimates of the
amounts expected to be paid to the taxation authorities.
Deferred income tax is provided on all temporary differences at
the balance sheet date between the tax base of assets and
liabilities and their carrying amounts for financial reporting
purposes.
Deferred income tax liabilities are recognised for all assessable
temporary differences except:
◆◆
where the deferred income tax liability arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and that, at
the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; and
◆ ◆ when the taxable temporary difference is associated with
investments in subsidiaries, associates or interests in joint
ventures and the timing of the reversal of the temporary
differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable
future.
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 credits and
unused tax losses can be utilised except:
◆◆
◆◆
where the deferred income tax asset relating to the deductible
temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or
in respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, a deferred tax asset is only recognised to the extent
that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available
against which the temporary difference can be utilised.
Overview
Review Of Operations
Corporate Governance