Financials - Santos

Notes to the Consolidated Financial Statements
for the year ended 31 December 2012
1. Significant Accounting Policies (continued)
AASB 10 replaces the guidance
on control and consolidation
in AASB 127 Consolidated and
Separate Financial Statements and
Interpretation 12 Consolidation –
Special Purpose Entities. AASB 10
includes a new definition of control
that focusses on the need to have
both power and rights or exposure
to variable returns. A review of
all entities in the Group which are
less than 100% owned has been
completed to assess the impact of
AASB 10. The review determined
that AASB 10 is not expected to
have a significant impact on the
composition of investments currently
consolidated into the Group’s results.
AASB 11 replaces AASB 131
Interests in Joint Ventures and uses
the definition of control in AASB 10
to introduce a principles-based
approach to accounting for joint
arrangements. The focus is no longer
on the legal structure of joint
arrangements, but rather on how
rights and obligations are shared by
the parties to the joint arrangement.
The joint arrangement will be
classified as either a joint operation
or a joint venture. Parties to a joint
operation recognise their share of
assets, liabilities, income and
expenses in relation to their interest
in a joint operation. Joint venturers
will be required to apply the equity
method of accounting for their
investment in a joint venture.
The majority of the Group’s joint
arrangements are in the form of
joint operations and the application
of AASB 11 from 1 January 2013
will have no impact on these. At
31 December 2012, the Group has
interests in seven jointly controlled
entities which are currently
accounted for using the
proportionate consolidation method.
These jointly controlled entities
have been assessed as meeting the
classification of joint ventures
under AASB 11. From 1 January
2013, the Group will be required
to retrospectively apply the equity
method of accounting to these
entities. As a result, the Group will
no longer recognise its proportionate
share of the revenue, expenses,
assets, liabilities and associated
cash flows of these operations.
Instead, the Group will recognise
its share of net assets on a single
line in the consolidated statement
of financial position, its share of
net profit on a single line in the
consolidated income statement
and its share of dividends received
in the consolidated statement of
cash flows.
The application of AASB 11 will
result in the following adjustment at
1 January 2012:
• derecognition of assets of
$71 million;
• recognition of liabilities of
$20 million;
• derecognition of losses of
non‐controlling interests of
$1 million; and
• recognition of equity accounted
investment of $92 million.
If AASB 11 had applied for the year
ended 31 December 2012 there
would be no significant impact on
net profit after tax or earnings per
share in the current year.
• AASB 13 Fair Value Measurement
and AASB 2011‐8 Amendments to
Australian Accounting Standards
arising from AASB 13
AASB 13 establishes a single source
of guidance for fair value
measurements and disclosures.
The standard defines fair value,
establishes a framework for
measuring fair value and requires
more extensive disclosures than the
current standards.
AASB 13 is effective for annual
reporting periods beginning on
or after 1 January 2013.
• Revised AASB 119 Employee Benefits,
AASB 2011‐10 Amendments to
Australian Accounting Standards
arising from AASB 119
These amendments require all
actuarial gains and losses to be
recognised immediately in other
comprehensive income, which is
consistent with the Group’s current
policy. The expected return on plan
assets will be calculated based on
the rate used to discount the defined
benefit obligation. The standard also
introduces a number of additional
disclosures for defined benefit assets
and liabilities.
AASB 119 is effective for annual
reporting periods beginning on or
after 1 January 2013.
There are no other standards that are
not yet effective that are expected to
have a material impact on the Group’s
consolidated financial statements in the
current or future reporting periods.
The accounting policies set out below
have been applied consistently to all
periods presented in the consolidated
financial report. The accounting policies
have been consistently applied by the
Group.
During the year, the Group reassessed its
accounting treatment of certain Cooper
Basin arrangements relating to crude oil
purchases and sales that have previously
been recorded as trading income. From
1 January 2012, these arrangements
have been recorded as product sales and
third-party product purchases on a gross
basis rather than as trading income
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