annual report 2011

IOOF | annual report 2011
of the underlying instrument. The liability to buy back vested
shares is measured and recognised in accordance with AASB
139 Financial Instruments: Recognition and Measurement
precluding any adjustment for the probability that settlement
of the liability will occur. The directors have assessed the
probability that the Group will be required to settle the
share buy back liability as low and therefore recognition of
movements in the reserve provides users with increased
relevance and reliability of the financial performance of the
Group.
This change in accounting policy has had an effect on
consolidated earnings per share and on net profit, further
information is provided in note 4 Change in accounting policy.
3 Significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by
Group entities.
Certain comparative amounts have been reclassified to
conform with the current year’s presentation.
(a) Basis of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of the Company as at 30 June
2011 and the results of all controlled subsidiaries for the year
then ended. This includes the benefit funds of its subsidiary,
IOOF Ltd, and any controlled trusts.
Control of an entity is identified where the Group has the
power to govern the financial and operating policies of that
entity so as to obtain benefits from its activities, generally
accompanying a shareholding of more than half of the voting
rights.
The benefit funds, and any trusts controlled by those funds, are
treated as statutory funds in accordance with the Life Insurance
Act 1995. These statutory funds, in addition to the statutory
funds of the life insurance business conducted by the Group,
are shown separately from shareholder funds in the notes to
the financial statements.
Refer to Note 3(k) Contract classification for information in
relation to the different accounting treatment of investment
contracts with discretionary participating features.
(i)
Business combinations
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group.
Acquisitions on or after 1 July 2009
For acquisitions on or after 1 July 2009, the Group measures
goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in
the acquiree; plus if the business combination is achieved
in stages, the fair value of the existing equity interest in the
acquiree; less
• the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated
with the issue of debt or equity securities, that the Group
incurs in connection with a business combination are
expensed as incurred.
Any contingent consideration payable is recognised at fair
value at the acquisition date. If the contingent consideration
is classified as equity, it is not remeasured and settlement is
accounted for within equity. Otherwise, subsequent changes
to the fair value of the contingent consideration are recognised
in profit or loss.
When share-based payment awards (replacement awards) are
required to be exchanged for awards held by the acquiree’s
employees (acquiree’s awards) and relate to past services, then
all or a portion of the amount of the acquiree’s replacement
awards is included in measuring the consideration transferred
in the business combination. This determination is based on
the market-based value of the replacement awards compared
with the market-based value of the acquiree’s awards and the
extent to which the replacement awards relate to past and/or
future service.
Acquisitions between 1 July 2004 and 1 July 2009
For acquisitions between 1 July 2004 and 1 July 2009, goodwill
represents the excess of the cost of the acquisition over the
Group’s interest in the recognised amount (generally fair value)
of the identifiable assets, liabilities and contingent liabilities
of the acquiree. When the excess was a negative, a bargain
purchase gain was recognised immediately in profit or loss.
Transaction costs, other than those associated with the
issue of debt or equity securities, that the Group incurred in
connection with the business combinations were capitalised
as part of the cost of the acquisition.
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