INSTRUCTIONS - Realview

NOTES TO THEFINANCIAL STATEMENTSFor the year ended 30 June 2009Note 1 Summary of significant accountingpolicies cont.(j) Business combinations cont.Where settlement of any part of cash consideration isdeferred, the amounts payable in the future are discountedto their present value as at the date of exchange. The discountrate used is the entity’s incremental borrowing rate, beingthe rate at which a similar borrowing could be obtainedfrom an independent financier under comparable termsand conditions.(k) Impairment of assetsThe carrying value of all assets are reviewed half yearly todetermine whether there is an indication of impairment.Where an indicator of impairment exists, a formal estimateof the recoverable amount is made. An impairment loss isrecognised for the amount by which the asset’s carryingamount exceeds its recoverable amount. The recoverableamount is the higher of an asset’s fair value less costs to selland value in use. In assessing value in use, the estimatedfuture cash flows are discounted to their present valueusing a pre-tax discount rate which reflects current marketassessments of the time value of money and the risks specificto the asset. For the purposes of assessing impairment,assets are grouped at the lowest levels for which there areseparately identifiable cash inflows, largely independentof the cash inflows from other assets or groups of assets(cash-generating units).An impairment loss is recognised if the carrying amountof an asset or its cash generating unit exceeds therecoverable amount. Impairment losses are recognisedin the income statement.(l) Cash and cash equivalentsFor cash flow statement presentation purposes, cash andcash equivalents include cash on hand, deposits held at callwith financial institutions, other short term, highly liquidinvestments with original maturities of three months orless that are readily convertible to known amounts of cashand which are subject to an insignificant risk of changesin value, and bank overdrafts. Bank overdrafts are shownwithin borrowings in current liabilities on the balance sheet.(m) Trade receivablesTrade receivables are recognised initially at fair value andsubsequently measured at amortised cost, less provisionfor doubtful debts. Trade receivables are usually due forsettlement no more than 30 days from the date of recognition.Collectibility of trade receivables is reviewed on an ongoingbasis. Debts which are known to be uncollectible are writtenoff. A provision for doubtful receivables is established whenthere is objective evidence that the Group will not be ableto collect all amounts due according to the original termsof receivables. The amount of the provision is the differencebetween the asset’s carrying amount and the present valueof estimated future cash flows, discounted at the effectiveinterest rate. The amount of the provision is recognised inthe income statement.Funds placed on deposit with financial institutions tosecure bank guarantees are classified in the balance sheetas other receivables.(n) InventoriesRaw materials and stores, ore stockpiles, work-in-progressand finished gold stocks are valued at the lower of costand net realisable value.Cost comprises direct materials, direct labour and anappropriate proportion of variable and fixed overheadexpenditure relating to mining activities, the latter beingallocated on the basis of normal operating capacity. Costsare assigned to individual items of inventory on the basisof weighted average costs. Net realisable value is theestimated selling price in the ordinary course of business,less the estimated costs of completion and the estimatedcosts necessary to make the sale.(o) Non-current assets held for saleNon-current assets are classified as held for sale and statedat the lower of their carrying amount and fair value, lesscosts to sell, if their carrying amount is to be recoveredprincipally through a sale transaction rather than throughcontinued use.An impairment loss is recognised for any initial or subsequentwrite down of the asset to fair value less costs to sell. A gainis recognised for any subsequent increases in fair value lesscosts to sell an asset, but not in excess of any cumulativeimpairment loss previously recognised. A gain or lossnot previously recognised by the date of the sale of thenon-current asset is recognised at the date of de-recognition.Non-current assets are not depreciated or amortised whilethey are classified as held for sale.Non-current assets classified as held for sale are presentedseparately from the other assets in the balance sheet.(p) Investments and other financial assetsThe Group classifies its investments and other financialassets in the following categories: financial assets atfair value through profit or loss, loans and receivables, heldto maturity investments, and available-for-sale financialassets. The classification depends on the purpose for whichthe investments were acquired. Management determinesthe classification of its investments at initial recognitionand reevaluates this designation at each reporting date.54