AWB Limited - 2003 Annual Report

(h) Derivatives (continued)
transaction is no longer expected to occur as designated, deferred
gains and losses that arose on the hedge prior to its termination are
included in the statement of financial performance for the period.
Where a hedge is redesignated as a hedge of another transaction,
gains and losses arising on the hedge prior to its redesignation are
only deferred where the original anticipated transaction is still
expected to occur as designated. When the original anticipated
transaction is no longer expected to occur as designated, any gains
or losses relating to the hedge instrument are included in the
statement of financial performance for the period.
Other derivatives
All other derivative transactions are initially recorded at the relevant
rate at the date of the transaction. Derivatives outstanding at
balance date are valued at the rates ruling on that date and any
gains or losses are brought to account in the statement of financial
performance.
(i) Cash
For the purpose of the statement of cash flows, cash includes cash
on hand and in banks, net of outstanding bank overdrafts. Bank
overdrafts are carried at the principal amount. Interest is charged
as an expense as it accrues.
(j) Receivables
The collectability of debts is assessed at balance date and specific
provision is made for any doubtful accounts.
Trade debtors
Terms of trade receivables generally require settlement within 30
days.
Receivables from related parties have been discounted to their
present value using a market determined discount rate.
(k) Inventories
Inventories are valued at the lower of cost or net realisable value.
(l) Investments
Controlled entities
Investments in controlled entities are carried in the Company’s
financial statements at the lower of cost or recoverable amount.
Associates
Investments in unlisted shares of associates are carried in the
financial statements at the lower of cost or recoverable amount.
Joint venture operations
Investments in joint venture operations are accounted for in the
financial statements as set out in Note 1(c) Principles of
consolidation.
Other entities
Investments in other entities are carried at the lower of cost or
recoverable amount.
(m) Lease assets
Finance leases
Finance leases are capitalised. A lease asset and a lease liability
equal to the present value of the minimum lease payments are
recorded at the inception of the lease.
Lease liabilities are reduced by repayments of principal. The
interest components of the lease payments are expensed.
Operating leases
Payments made under operating leases are expensed on a straight
line basis over the term of the lease.
(n) Constructed non–current assets
The cost of non–current assets constructed by the consolidated
entity includes the cost of all materials used in construction, direct
labour on the project and an appropriate proportion of overheads.
(o) Research and development expenditure
Research and development expenditure is expensed as incurred
except to the extent that its recoverability is assured beyond any
reasonable doubt, in which case it is deferred.
(p) Intangible assets
Goodwill
On acquisition of some, or all, of the assets of another entity, the
identifiable net assets acquired are measured at fair value. The
excess of the fair value of the cost of acquisition over the fair value
of the identifiable net assets acquired is brought to account as
goodwill and will be amortised so that it is recognised as an
expense in the statement of financial performance on a straight
line basis over a period of 20 years or the expected useful life.
Licence fees
Costs associated with licence fees are deferred and amortised on a
straight line basis over the period of their expected benefit.
(q) Recoverable amount of non–current assets
Non–current assets are not carried at an amount above their
recoverable amount, and where carrying values exceed their
recoverable amount, assets are written down to their recoverable
amounts. In determining a recoverable amount, the expected net
cash flows have been discounted to their present value using a
market determined risk adjusted discount rate.
(r) Depreciation of property, plant and equipment
Depreciation is provided on a straight line basis for all property,
plant and equipment, other than freehold land, from the date at
which the asset becomes available for use. Depreciation charges
are calculated to allocate cost or valuation, less estimated residual
value at the end of the useful lives of the assets against revenue
over those estimated useful lives.
The depreciation rates used for each class of depreciable assets are:
– buildings 2%
– plant and equipment 5% to 33%.
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