King Island Council Annual Report 2011-2012 (1921 kb)

King Island CouncilNotes to the Financial ReportFor the Year Ended 30 June 2012(n)Employee benefitsWages and salariesLiabilities for wages and salaries and rostered days off are recognised and measured as the amount unpaid at balancedate and include appropriate oncosts such as workers compensation and payroll costs.Annual leaveAnnual leave entitlements are accrued on a pro-rata basis in respect of services provided by employees up to balancedate. Annual leave expected to be paid within 12 months is measured at nominal value based on the amount, includingappropriate oncosts, expected to be paid when settled.Annual leave expected to be paid later than one year has been measured at the present value of the estimated futurecash outflows to be made for these accrued entitlements. Commonwealth bond rates are used for discounting future cashflows.Long service leaveLong service leave entitlements payable are assessed at balance date having regard to expected employee remunerationrates on settlement, employment related oncosts and other factors including accumulated years of employment, onsettlement, and experience of employee departure per year of service.Long service leave expected to be paid within 12 months is measured at nominal value based on the amount expected tobe paid when settled. Long service leave expected to be paid later than one year has been measured at the presentvalue of the estimated future cash outflows to be made for these accrued entitlements. Commonwealth bond rates areused for discounting future cash flows.Long service leave expected to be paid later than one year has been measured at the present value of the estimatedfuture cash outflows to be made for these accrued entitlements. Commonwealth bond rates are used for discountingfuture cash flows.Sick LeaveAn accrual is made for sick leave in accordance with Council's policy to partially pay out unused sick leave upon ceasingemployment with Council.Classification of employee benefitsAn employee benefit liability is classified as a current liability if the Council does not have an unconditional right to defersettlement of the liability for at least 12 months after the end of the period. This includes all annual leave and unconditionallong service leave entitlements.(o)Interest bearing liabilitiesThe borrowing capacity of Council is limited by the Local Government Act 1993 . Interest bearing liabilities are initiallyrecognised at fair value, net of transaction costs incurred. Subsequent to initial recognition these liabilities are measuredat amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount isrecognised in the Statement of Comprehensive Income over the period of the liability using the effective interest method.(p)LeasesFinance leasesLeases of assets where substantially all the risks and rewards incidental to ownership of the asset, are transferred to theCouncil are classified as finance leases. Finance leases are capitalised, recording an asset and a liability at the lower ofthe fair value of the asset and the present value of the minimum lease payments, including any guaranteed residual value.Lease payments are allocated between the reduction of the lease liability and the interest expense. Leased assets aredepreciated on a straight line basis over their estimated useful lives to Council where it is likely that Council will obtainownership of the asset or over the term of the lease, whichever is the shorter. Council does not currently have anyfinance leases.Operating leasesLease payments for operating leases are required by the australian accounting standard to be recognised on a straightline basis, rather than expensed in the years in which they are incurred.11