Department of Defence Annual Report 2008-2009

| Department of Defence | Vote 19 |
SPECIAL DEFENCE ACCOUNT
ACCOUNTING POLICY
for year ended 31 March 2009 (continued)
3.2 Foreign exchange rate losses
Foreign exchange losses resulting from the settlement of assets and from the translation at yearend
are determined using the difference between the exchange rate ruling at the date of delivery
of the goods/services and the spot rate on the day of actual transaction/payment. Foreign
exchange losses are recognised in the statement of nancial performance.
3.3 Fruitless expenditure
| Financial Performance |
Fruitless expenditure relates to amendments to orders/contracts which result in increased costs
without a corresponding benet. Expenditure without a corresponding benet arises when the
same service or product will be delivered at a higher price than what was originally contracted.
When the delivery date or period of a contract/order has been extended and work that was
supposed to be done in a specic nancial year or date has to be done in the following nancial
year or date at a higher labour rate or price, it is considered to be expenses without a corresponding
benet.
Expenditure without a corresponding benet is identied when the amendment to the order is
approved. The value is calculated using the difference between the costs originally contracted
and the amended costs.
Fruitless expenditure is recognised as an expenditure in note 7.2 of the nancial statements.
4. Assets
4.1 Cash and cash equivalents
Cash and cash equivalents are recognised in the statement of nancial position at cost.
4.2 Prepayments
Amounts made as prepayments, except for the Strategic Defence Procurement Programme
(SDP) related amounts, are recognised in the statement of nancial position when the payments
are made. SDP related amounts are recognised in the statement of nancial performance as
expenditure.
Outstanding prepayments at the end of the nancial year are recognised at cost in the statement
of nancial position.
Annual Report FY 2008 - 2009 366