COPY OF FINAL PROSPECTUS - Mirabela Nickel

MIRABELA NICKEL LIMITED
NOTES TO FINANCIAL STATEMENTS (Continued)
For the year ended 30 June 2006
25. EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS (Continued)
Deferred tax asset and deferred tax liability
Under AIFRS the balance sheet method of tax effect accounting is adopted rather than the liability method previously applied
under GAAP.
Under the balance sheet approach, income tax on the profit and loss for the year comprises current and deferred taxes.
Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in
which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
reporting date, and any adjustments to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group
presently offsets deferred tax assets and deferred tax liabilities relating to the same taxation authority.
The residual of any deferred tax assets are not presently recognised as they do not meet the ‘highly probable’ requirements of
AASB 112.
Deferred tax assets will be reduced to the extent it is no longer probable that the related tax benefit will be realised.
b) Restatement of exploration expenditure in the Company
In the prior year, certain expenditure incurred by the Company was treated as an investment in a subsidiary, as the intent of
the Group was for such costs to be transferred to the wholly owned controlled entity. As those costs were not transferred they
have now been recognised as an expense in the records of the parent entity. This results in a difference between amounts
reported in accordance with previous GAAP and AIFRS, as under previous AGAAP corrections are adjusted in the year in
which they are identified without restatement of the prior year financial statements, as is required under AIFRS.
At 30 June 2005, this has resulted in a decrease in investments in controlled entities and an increase in retained losses,
as follows:
The Company
Year ended
30 June 2005
Investments (Balance Sheet) .............................................. (913,551)
Exploration expenditure (Income Statement) .................................... 913,551
26. CHANGE OF ACCOUNTING POLICY
In the current financial year the Company and the consolidated entity have adopted AASB 132 Financial Instruments: Disclosure and
Presentation and AASB 139 Financial Instruments: Recognition and Measurement. This change in accounting policy has been adopted
in accordance with the transition rule contained in AASB 1, which does not require the restatement of comparative information for
financial instruments within the scope of AASB 132 and AASB 139.
There is no impact on the balance sheet at 1 July 2005 from this change.
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