Annual Report - AWB Limited

AWB LIMITED Notes to and forming part of the financial statements for the year ended 30 September 2008AWB 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 AWB Limited 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:• AWB Geneva SA (United States dollars);• AWB Brazil Trading SA (United States dollars);• AWB USA Limited (United States dollars);• AWB India Private Limited (Indian rupee);• AWB Krishi Suvida Parisar (Kota) Private Limited (Indian rupee);• AWB Krishi Upaaj Vipnan Parisar (Talera) Private Limited(Indian rupee);• AWB Mauritius Private Ltd (United States dollars);• AZL Ltd (Japanese Yen); and• AWB Singapore Private Limited (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