Annual Report 2007 - Antofagasta plc

Notes to the Financial Statements continued2 Principal Accounting Policies continuedc) Currency translation continuedThe presentational currency of the Group and the functional currency of the Company is the US dollar.On consolidation, income statement items for entities with a functional currency other than the US dollarare translated into US dollars at average rates of exchange. Balance sheet items are translated at period endexchange rates. Exchange differences on translation of the net assets of such entities are taken to equity andrecorded in a separate currency translation reserve. Cumulative translation differences arising after the transitiondate to IFRS are recognised as income or as expenses in the income statement in the period in which anoperation is disposed of.On consolidation, exchange gains and losses which arise on balances between Group entities are taken toreserves where that balance is, in substance, part of a parent’s net investment in its subsidiary, i.e. wheresettlement is neither planned nor likely to occur in the foreseeable future. All other exchange gains and losseson Group balances are dealt with in the income statement.Fair value adjustments and any goodwill arising on the acquisition of a foreign entity are treated as assets of theforeign entity and translated at the period end rate.d) Revenue recognitionTurnover represents the value of goods and services supplied to third parties during the year. Turnover ismeasured at the fair value of consideration received or receivable, and excludes any applicable sales tax.A sale is recognised when the significant risks and rewards of ownership have passed. This is generally whentitle and any insurance risk has passed to the customer, and the goods have been delivered to a contractuallyagreed location or when any services have been provided.Turnover from mining activities is recorded at the invoiced amounts with an adjustment for provisional pricing ateach reporting date, as explained below. For copper and molybdenum concentrates, which are sold to smeltersand roasting plants for further processing, the invoiced amount is the market value of the metal payable by thecustomer, net of deductions for tolling charges. Turnover includes revenues from the sale of by-products.FINANCIAL STATEMENTSCopper and molybdenum concentrate sale agreements and copper cathode sale agreements generally providefor provisional pricing of sales at the time of shipment, with final pricing based on the monthly average LondonMetal Exchange (“LME”) copper price or the monthly average market molybdenum price for specified futureperiods. This normally ranges from 30 to 180 days after delivery to the customer. Such a provisional salecontains an embedded derivative which is required to be separated from the host contract. The host contractis the sale of metals contained in the concentrate or cathode at the provisional invoice price less tolling chargesdeducted, and the embedded derivative is the forward contract for which the provisional sale is subsequentlyadjusted. At each reporting date, the provisionally priced metal sales together with any related tolling chargesare marked-to-market, with adjustments (both gains and losses) being recorded in turnover in the consolidatedincome statement and in trade debtors in the balance sheet. Forward prices at the period end are used forcopper concentrate and cathode sales, while period-end average prices are used for molybdenum concentratesales due to the absence of a futures market.Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interestrate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset’s net carrying amount.Dividend income from investments is recognised when the shareholders’ right to receive payment have beenestablished.84Antofagasta plc Annual Report and Financial Statements 2007