annual report 2011

IOOF | annual report 2011
Notes to the financial statements (cont’d)
For the year ended 30 June 2011
investment contract liability. Distributions on these contracts
are charged to profit or loss as an expense.
Where contracts contain both an investment component and
an insurance component and the deposit component can be
separately measured, the underlying amounts are unbundled.
Premiums relating to the insurance component are accounted
for through profit or loss and the investment component is
accounted for as a deposit through the statement of financial
position as described above.
(l)
Revenue
Revenue is measured at the fair value of the consideration
received or receivable.
(i)
Management fees
The Group provide management services to unit trusts and
funds operated by the Group at normal commercial rates.
Management fees earned from the unit trusts and funds are
calculated based on an agreed percentage of the respective
funds under management or administration as disclosed in the
respective product disclosure statements, and are recognised
on an accruals basis.
Management and service fees revenue from the provision of
financial advisory services together with revenue from the
rendering of services are recognised at the time the service is
provided.
(ii)
Other fee revenue and stockbroking revenue
Other fee revenue and stockbroking revenue from the
rendering of services are recognised at the time the service is
provided.
(iii) Upfront service fees
Upfront service fees are recorded as deferred revenue and
recognised on a straight-line basis over a period that is
reflective of the continued service provided. The period of
amortisation is based on historical experience and varies
between products on offer. The current deferral period is
between 5 and 7 years. These upfront service fees are recorded
as a deferred revenue liability within other liabilities in the
consolidated statement of financial position.
(iv) Premium revenue
Premium revenue is earned on life insurance products. Life
insurance premiums with no due date are recognised on a
cash received basis. Premiums with regular due dates are
recognised as revenue on a basis which is consistent with
the Actuary’s valuation of liabilities. Deposit components of
life insurance contracts are not revenue and are treated as
movements in life insurance contract liabilities.
(m) Lease payments
Payments made under operating leases are recognised in
profit or loss on a straight-line basis over the term of the lease.
Lease incentives received are recognised as an integral part of
the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are
apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated to
each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the
liability.
(n) Finance income and finance costs
Finance income comprises interest income on funds invested
(including available-for-sale financial assets), dividend income,
gains on the disposal of available-for sale financial assets,
changes in the fair value of financial assets at fair value through
profit or loss, and gains on hedging instruments that are
recognised in profit or loss. Interest income is recognised as it
accrues in profit or loss, using the effective interest method.
Dividend income is recognised in profit or loss on the date that
the Group’s right to receive payment is established, which in
the case of quoted securities is the ex-dividend date.
Finance costs comprise interest expense on borrowings,
unwinding of the discount on provisions, changes in the fair
value of financial assets at fair value through profit or loss,
impairment losses recognised on financial assets, and losses on
hedging instruments that are recognised in profit or loss.
Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are
recognised in profit or loss using the effective interest method.
(o) Income tax
Income tax expense comprises current and deferred tax.
Current and deferred tax are recognised in profit or loss except
to the extent that it relates to a business combination, or
items recognised directly in equity or in other comprehensive
income.
Current tax is the expected tax payable or receivable on
the taxable income for the year, using tax rates enacted
or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
The applicable rates of income tax vary depending upon the
fund or entity involved. The segregated superannuation and
rollover fund business of the IOOF Ltd benefit funds attracts
income tax at the rate of 15% (2010: 15%) and the ordinary
business of the Company is taxed at the rate of 30% (2010:
30%).
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