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NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2009Note 1 Summary of significant accountingpolicies cont.(v) Borrowings cont.Borrowings are classified as current liabilities unless the Grouphas an unconditional right to defer settlement of the liabilityfor at least 12 months after the balance sheet date.(w) Borrowing costsBorrowing costs incurred for the construction of any qualifyingasset are capitalised during the period of time it is requiredto complete and prepare the asset for its intended use orsale. Other borrowing costs are recognised as expensesin the period in which they are incurred.(x) ProvisionsProvisions for legal claims and rehabilitation and restorationcosts are recognised when the Group has a present legalor constructive obligation as a result of past events, it ismore likely than not that an outflow of resources will berequired to settle the obligation, and the amount has beenreliably estimated. Provisions are not recognised for futureoperating losses.Where there are a number of similar obligations, the likelihoodthat an outflow will be required in settlement is determinedby considering the class of obligations as a whole. A provisionis recognised even if the likelihood of an outflow with respectto any one item included in the same class of obligationsmay be small.A provision for restructuring is recognised when the Grouphas approved a detailed and formal restructuring plan, andthe restructuring has commenced or has been announcedpublicly. Future operating costs are not provided for.Provisions are measured at the present value of management’sbest estimate of the expenditure required to settle thepresent obligation at the balance sheet date. The discountrate used to determine the present value reflects currentmarket assessments of the time value of money and therisks specific to the liability. The increase in the provisiondue to the passage of time is recognised as interest expense.(y) Employee benefits(i) Wages and salaries, and annual leaveLiabilities for wages and salaries, including nonmonetarybenefits and annual leave expected to be paid within12 months of the reporting date are recognised in otherpayables in respect of employees’ services up to the reportingdate and are measured at the amounts expected to be paid,including expected on-costs, when the liabilities are settled.(ii) Long service leaveThe liability for long service leave is recognised in the provisionfor employee benefits and measured as the present valueof expected future payments to be made, plus expectedon-costs, in respect of services provided by employeesup to the reporting date. Consideration is given to theexpected future wage and salary levels, experience ofemployee departures and periods of service. Expectedfuture payments are discounted using market yields atthe reporting date on national government bonds withterms to maturity and currency that match, as closely aspossible, the estimated future cash outflows.(iii) Share-based paymentsShare-based compensation benefits are provided to employeesvia the St Barbara Limited Employees’ Option Plan andshareholder approved executive options. Informationrelating to these schemes is set out in Note 36.The fair value of Executive Options and options grantedunder the St Barbara Limited Employees’ Option Planis recognised as an employee benefit expense with acorresponding increase in equity. The fair value is measuredat grant date and recognised over the period during whichthe employees become unconditionally entitled to theoptions. The amount recognised is adjusted at each reportingdate to reflect the actual number of share options notexpected to vest.The fair value at grant date is independently determinedusing a Black-Scholes option pricing model that takes intoaccount the exercise price, the term of the option, thevesting and performance criteria, the impact of dilution,the nontradeable nature of the option, the share price atgrant date and expected price volatility of the underlyingshare, the expected dividend yield and the risk-free interestrate for the term of the option.Upon the exercise of options, the balance of the sharebasedpayments reserve relating to those options istransferred to share capital.(iv) Retirement benefit obligationsContributions to defined contribution funds are recognisedas an expense as they are due and become payable. Prepaidcontributions are recognised as an asset to the extent thata cash refund or a reduction in future payments is available.The Group has no obligations in respect of definedbenefit funds.(v) Executive bonusesSenior executives may be eligible for annual bonusessubject to achievement of Key Performance Indicators,as recommended by the Remuneration Committee andapproved by the Board of Directors. The Group recognises aliability and an expense for bonuses in the reporting periodduring which the service was provided by the employee.(vi) Termination benefitsTermination benefits are recognised as an expense whenthe Group is demonstrably committed, without realisticpossibility of withdrawal, to a formal detailed plan toterminate employment before normal retirement date.stbarbara.com.au – Annual Report 2009: 57