Notes to and forming part of the financial statements for the year ended 30 September 2008 <strong>AWB</strong> LIMITED1 Summary of significant accounting policies2 Revenues and expenses3 Income tax expense4 Cash and cash equivalents5 Loans and advances6 Inventories7 Investments8 Available for sale financial assets9 Other assets10 Investments accounted for using the equity method11 Intangible assets12 Property, plant and equipment13 Deferred income tax assets14 Trade and other payables15 Interest-bearing loans and borrowings16 Provisions17 Other liabilities18 Deferred income tax liabilities19 Contributed equity20 Reserves and retained profits21 Minority interest22 Dividends23 Reconciliation of profit after income tax to net cash flow from/(used in) operating activities24 Key management personnel disclosures25 Auditors’ remuneration26 Related party disclosures27 Segment information28 Expenditure commitments29 Contingent liabilities30 Share-based payments31 Financial risk management objectives and policies32 Derivative instruments33 Deed of cross guarantee34 Controlled entities35 Interests in joint venture operations36 Earnings per share37 Subsequent events38 Business combinations39 Class actions40 Oil-for-food inquiry41 Standard Chartered Bank Litigation1. Summary of Significant Accounting Policies(a) Basis of preparationThe financial report is a general purpose financial report which hasbeen prepared in accordance with Australian Accounting Standards,other authoritative pronouncements of the Australian AccountingStandards Board and the Corporations Act 2001. The financial reporthas also been prepared on a historical cost basis, except for derivativefinancial instruments, available for sale investments, inventories heldin commodity broker-trader arrangements and fixed rate loans whichhave been measured at fair value.The financial report is presented in Australian dollars and all valuesare rounded to the nearest thousand dollars ($000) unless otherwisestated under the option available to the company under ASIC classorder 98/0100.Compliance with IFRSThe financial report complies with Australian Accounting Standardsand International Financial <strong>Report</strong>ing Standards (IFRS).Adoption of new accounting standardsThe Group has adopted AASB 7 Financial Instruments; Disclosures andall consequential amendments which became applicable on 1 January2007. The adoption of this standard has modified the basis and detailsof disclosures concerning financial instruments. There has been noeffect on the profit and loss or the financial position of the entity as aresult of adopting this standard.The group has also adopted amendments to AASB 101 ‘Presentationof Financial Statements’ which requires new disclosures concerningthe objectives, policies and processes for managing capital.Critical Accounting EstimatesThe preparation of financial statements in conformity with AustralianAccounting Standards requires the use of certain critical accountingestimates. It also requires management to exercise its judgement inthe process of applying the Group’s accounting policies. The areasinvolving a higher degree of judgement or complexity, or areas whereassumptions and estimates are significant to the financial statementsare disclosed in note (1aa).This report was authorised for issue on 19 November 2008 inaccordance with a resolution of the directors.(b) Basis of consolidationThe consolidated financial statements comprise the financialstatements of <strong>AWB</strong> <strong>Limited</strong> and its subsidiaries (‘the Group’) (asoutlined in Note 34).The financial statements of subsidiaries are prepared for the samereporting period as the parent company with the exception of <strong>AWB</strong>India Private <strong>Limited</strong> (reporting date 31 March) and <strong>AWB</strong> Brasil TradingSA (reporting date 31 December). <strong>AWB</strong> India Private <strong>Limited</strong> and <strong>AWB</strong>Brasil Trading SA prepare, for consolidation purposes, additionalfinancial statements as of the same date as the financial statementsof <strong>AWB</strong> <strong>Limited</strong>.Consistent accounting policies have been applied to subsidiaries.In preparing the consolidated financial statements, all intercompanybalances and transactions, including unrealised profits arising fromintra group transactions, have been eliminated in full.Subsidiaries are consolidated from the date on which control istransferred to the Group and cease to be consolidated from the dateon which control is transferred out of the Group. Where there isloss of control of a subsidiary, the consolidated financial statementsinclude the results for the part of the reporting period which <strong>AWB</strong><strong>Limited</strong> has control.Investments in subsidaries held by <strong>AWB</strong> <strong>Limited</strong> are accounted forat cost in the separate financial statements of the parent entity.Interests in associates are equity accounted (see note (d) below).www.awb.com.au 61
<strong>AWB</strong> LIMITED Notes to and forming part of the financial statements for the year ended 30 September 2008<strong>AWB</strong> National PoolsThe Group operates grain pools on behalf of growers and has legaltitle over the pool inventory; however, the majority of the risks andbenefits associated with the pools, principally price risk and benefit,together with credit risk, are attributable to growers. As a result, poolinventory and other related balances held by the Group on behalfof growers are not recognised in the Group’s financial statements.Separate financial records are maintained for these grain pools.(c) ComparativesComparative data has been presented on a consistent basis with theprior reporting period, unless classification of items in the financialreport have been amended, in which case comparative amounts havebeen reclassified.(d) Investment in associatesThe Group’s investment in its associates is accounted for under theequity method of accounting in the consolidated financial statementsand at cost in the parent. The associates are entities over which theGroup has significant influence and which are neither subsidiaries norjoint ventures.The financial statements of the associates are used by the Group toapply the equity method. Both use consistent accounting policies.The investment in associates is carried in the consolidated balancesheet at cost plus post-acquisition changes in the Group’s shareof net assets of the associates, less any impairment in value. Theconsolidated income statement reflects the Group’s share of theresults of operations of the associates. Dividends receivable fromassociates are recognised in the parent entity’s income statement,while in the consolidated financial statements they reduce thecarrying amount of the investment.Where there has been a change recognised directly in the associate’sequity, the Group recognises its share of any changes and disclosesthis, when applicable, in the consolidated statement of changes inequity.(e) Joint venturesJoint Venture OperationsThe Group has an interest in a joint venture that is a jointly controlledoperation. The Group recognises its interest in the jointly controlledoperation by recognising its interest in the assets and liabilities of thejoint venture. The Group also recognises the expenses that it incursand its share of the income that it earns from the sale of goods orservices by the jointly controlled operation.Joint Venture EntitiesThe interest in a joint venture partnership is accounted for in theconsolidated financial statements using the equity method and iscarried at cost by the parent entity. Under the equity method, theshare of the profits or losses of the partnership is recognised inthe income statement, and the share of movements in reserves isrecognised in reserves in the consolidated balance sheet.(f) Foreign currency translationFunctional and presentation currencyBoth the functional and presentation currency of <strong>AWB</strong> <strong>Limited</strong> andits Australian subsidaries is Australian Dollars ($). The consolidatedfinancial statements are presented in Australian dollars. The Group’soffshore subsidaries use the functional currencies of the primaryeconomic environment in which the entity operates (‘the functionalcurrency’), this is primarily United States Dollars.Transactions and balancesForeign currency transactions are initially recorded in the functionalcurrency by applying the exchange rates ruling at the date of thetransaction. Monetary assets and liabilities denominated in foreigncurrencies are translated at the rate of exchange ruling at the balancesheet date.Non-monetary items that are measured in terms of historical cost in aforeign currency are translated using the exchange rate as at the dateof the initial transaction. Non-monetary items measured at fair valuein a foreign currency are translated using the exchange rates at thedate when fair value was determined.Group CompaniesThe results and financial position of all the Group’s entities that havea functional currency different from the presentation currency aretranslated into the presentation currency as follows:• assets and liabilities for balance sheet presented are translated atthe closing rate at the date of that balance sheet;• income and expenses for each income statement are translated ataverage exchange rates; and• exchange variations resulting from translation are recognised inthe foreign currency translation reserve in equity.Group entities that have a different functional currency from thepresentation currency are:• <strong>AWB</strong> Geneva SA (United States dollars);• <strong>AWB</strong> Brazil Trading SA (United States dollars);• <strong>AWB</strong> USA <strong>Limited</strong> (United States dollars);• <strong>AWB</strong> India Private <strong>Limited</strong> (Indian rupee);• <strong>AWB</strong> Krishi Suvida Parisar (Kota) Private <strong>Limited</strong> (Indian rupee);• <strong>AWB</strong> Krishi Upaaj Vipnan Parisar (Talera) Private <strong>Limited</strong>(Indian rupee);• <strong>AWB</strong> Mauritius Private Ltd (United States dollars);• AZL Ltd (Japanese Yen); and• <strong>AWB</strong> Singapore Private <strong>Limited</strong> (Singapore dollars).On disposal of a foreign entity, the deferred cumulative amountrecognised in equity relating to that particular foreign operation isrecognised in the income statement.(g) Property, plant and equipmentPlant, property and equipment is stated at historical cost lessaccumulated depreciation and any impairment losses.Depreciation is calculated on a straight-line basis at the followingrates:• Land - not depreciated;• Buildings - 2%;• Leasehold improvements - 7% to 50%; and• Plant and equipment - 5% to 33%.Depreciation rates are determined using the estimated useful life ofassets as follows:• Buildings 50 years;• Leasehold improvements 2 - 14.3 years; and• Plant and equipment 3 to 20 years.The assets’ residual values, useful lives and amortisation methods arereviewed, and adjusted if appropriate, at each financial year end.ImpairmentThe carrying values of plant and equipment are reviewed forimpairment when events or changes in circumstances indicate thecarrying value may not be recoverable.For an asset that does not generate largely independent cash inflows,the recoverable amount is determined for the cash-generating unitto which the asset belongs. If any such indication exists, and wherethe carrying values exceed the estimated recoverable amount, theassets or cash-generating units are written down to their recoverableamount.(h) GoodwillGoodwill acquired in business combinations are initially measuredat cost, being the excess of the cost of the business combinationover the Group’s interest in the net fair value of the acquiree’sidentifiable assets, liabilities and contingent liabilities. Followinginitial recognition, goodwill is measured at cost less any accumulatedimpairment losses.Goodwill is not amortised but is tested for impairment annually ormore frequently if events or changes in circumstances indicate thatthe carrying value may be impaired.62 www.awb.com.au