Annual Report 2007 - Antofagasta plc

2 Principal Accounting Policiesa) Accounting conventionThese financial statements have been prepared under the historical cost convention as modified by the useof fair values to measure certain financial instruments, principally provisionally priced sales as explained inNote 2(d) and financial derivative contracts as explained in Note 2(s).b) Basis of consolidationThe financial statements comprise the consolidated financial statements of Antofagasta plc (“the Company”)and its subsidiaries (collectively “the Group”).(i) Subsidiaries – A subsidiary is an entity over which the Group has power to govern the operating andfinancial policies in order to obtain benefits from its activities. The consolidated financial statements include allthe assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminatinginter-company balances and transactions. For partly-owned subsidiaries, the net assets and net earningsattributable to minority shareholders are presented as “Minority Interests” in the consolidated balance sheetand consolidated income statement.(ii) Associates – An associate is an entity over which the Group is in a position to exercise significantinfluence, but not control or jointly control, through the power to participate in the financial and operating policydecisions of that entity. The Group’s share of the net assets, the results post tax and post acquisition reservesof associates are included in the financial statements. This requires recording the investment initially at cost tothe Group and then, in subsequent periods, adjusting the carrying amount of the investment to reflect theGroup’s share of the associate’s results less any impairment of goodwill and any other changes to theassociate’s net assets such as dividends.(iii) Jointly controlled entities – A jointly controlled entity is an entity in which the Group holds a long-terminterest and shares joint control over the operating and financial decisions with one or more other venturersunder a contractual arrangement.Jointly controlled entities are accounted for using proportionate consolidation, which combines the Group’sshare of the results of the jointly controlled entity on a line by line basis with similar items in the Group’sfinancial statements.(iv) Other investments – The accounting treatment of investments which are not subsidiaries, associates orjointly controlled entities is set out in Note 2(s) relating to other financial instruments.(v) Acquisitions and disposals – Acquisitions and disposals are treated as explained in Note 2(e) relating tobusiness combinations and goodwill.c) Currency translationThe functional currency for each entity in the Group is determined as the currency of the primary economicenvironment in which it operates. Transactions other than those in the functional currency of the entity aretranslated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominatedin currencies other than the functional currency are retranslated at year end exchange rates. Gains and losses onretranslation are included in net profit or loss for the period within other finance items.FINANCIAL STATEMENTSAntofagasta plc Annual Report and Financial Statements 2007 83