Prospectus - Fonterra

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Fonterra Co-operative Group LimitedStatement of significant accounting policiesFor the 14 months ended 31 July 200835g) Trade receivablesTrade receivables are carried at their net realisable value.h) BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequentlymeasured at amortised cost using the effective interest method, with the hedged risks on certain debt instrumentsmeasured at fair value. Changes in fair value of those hedged risks are recognised in the income statement.Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlementof the liability for at least 12 months after balance date.i) Trade and other payablesTrade and other payables are carried at amortised cost.j) Derivative financial instruments and hedging activitiesThe Company uses derivative financial instruments within predetermined policies and limits in order to reduce theFonterra Group’s exposure to fluctuations in foreign currency exchange rates and interest rates.The Company does not engage in speculative transactions or hold derivative financial instruments for tradingpurposes.Derivatives are initially recognised at fair value on the date a derivative contract is entered into (the trade date)and transaction costs are expensed immediately. They are subsequently remeasured to their fair value.The Company designates certain derivatives as hedges of the fair value of recognised assets or liabilities, or afirm commitment (fair value hedges).The Company documents, at the inception of the transaction, the relationship between hedging instruments andhedged items, as well as its risk management objectives and strategy for undertaking various hedgingtransactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, ofwhether the derivatives used in hedging transactions are highly effective in offsetting changes in fair values ofhedged items.The full fair value of a hedging derivative is classified as a non-current asset or liability when maturity of theFonterra Group’s hedged item exceeds 12 months. It is classified as a current asset or liability when the maturityof the hedged item is less than 12 months.Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in theincome statement, together with any changes in the fair value of the hedged asset or liability attributable to thehedged risk.If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedgeditem for which the effective interest method is used is amortised to profit or loss over the period to maturity.k) Property, plant and equipmentOwned assetsItems of property, plant and equipment are measured at cost less accumulated depreciation and impairmentlosses. Cost includes the purchase consideration and those costs directly attributable to bringing the asset to thelocation and condition necessary for its intended use. Costs cease to be capitalised when substantially all theactivities necessary to bring an asset to the location and condition for its intended use are complete. Subsequentcosts are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when itis probable that future economic benefits associated with the item will flow to the Company and the cost of theitem can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs andmaintenance are charged to the income statement during the financial period in which they are incurred.The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end.Gains and losses on disposals are determined by comparing the proceeds with the carrying amount, and arerecognised in the income statement.
Fonterra Co-operative Group LimitedStatement of significant accounting policiesFor the 14 months ended 31 July 200836DepreciationDepreciation is calculated on a straight line basis to allocate the cost of the asset, less any residual value, over itsestimated useful life. The range of estimated useful lives for each class of property, plant and equipment is asfollows:LandBuildings and leasehold improvementsPlant, vehicles and equipmentIndefinite15 – 50 years3 – 50 yearsLeased assetsLeases of property, plant and equipment where the Company assumes substantially all the risks and rewards ofownership are classified as finance leases.Assets under finance leases are recognised as property, plant and equipment in the balance sheet. They arerecognised initially at their fair value, or if lower, at the present value of the minimum lease payments. Acorresponding liability is established and each lease payment allocated between the liability and interest expenseusing the effective interest method. The assets recognised are depreciated on the same basis as equivalentproperty, plant and equipment.Leases that are not finance leases are classified as operating leases and the assets are not recognised on theCompany’s balance sheet. Operating lease payments are recognised as an expense on a straight line basis overthe term of the lease.l) Intangible assetsComputer softwareAcquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to usethe specific software. These costs are amortised over their estimated useful lives, being three to eight years.Costs associated with developing or maintaining computer software programmes are recognised as an expenseas incurred. Costs that are directly associated with the development of identifiable and unique software productscontrolled by the Company, and that will generate economic benefits exceeding costs beyond one year, arerecognised as intangible assets. Costs include the employee costs incurred as a result of developing softwareand an appropriate portion of relevant overheads.Computer software development costs recognised as assets are amortised over their estimated useful lives,being three to eight years.Research and development expenditureAll research expenditure is recognised in the income statement as incurred. Significant development expenditureis recognised as an asset when it can be demonstrated that the commercial production of the material or product,or use of the process, will commence.Development expenditure recognised as an asset is stated at cost and amortised over the period of expectedbenefits on a straight line basis, not exceeding five years. Amortisation begins at the time that commercialproduction or use of the process commences. All other development expenditure is recognised in the incomestatement as incurred.m) Impairment of non-financial assetsIntangible assets that have an indefinite useful life are not subject to amortisation and are tested annually forimpairment. Other assets are tested for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. If the estimated recoverable amount of an asset is less than itscarrying amount, the asset is written down to its estimated recoverable amount and an impairment loss isrecognised in the income statement. The recoverable amount of an asset is the higher of its fair value less coststo sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level forwhich there are separately identifiable cash inflows (cash-generating units).Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at eachreporting date.
Page 2 and 3: 1TABLE OF CONTENTSSUMMARY OF MAIN T
Page 4 and 5: 3SUMMARY OF MAIN TERMS OF THE OFFER
Page 6 and 7: 5PROFILE OF THE FONTERRA GROUPFor t
Page 8 and 9: 7Innovation and SustainabilityThe F
Page 11 and 12: 10STATUTORY INFORMATIONThe order of
Page 13 and 14: 12Africa, Latin America and Oceania
Page 15 and 16: 14• the creation of new mortgages
Page 17 and 18: 16• a failure to make any payment
Page 19 and 20: 18the right to cast not less than 7
Page 21 and 22: 20• in the event of a change in c
Page 23 and 24: 22maximum of 5%, of raw milk suppli
Page 25 and 26: 24Brands ownershipNumerous brands a
Page 27: 26General risksOther special factor
Page 30 and 31: 29FONTERRA FINANCIAL STATEMENTSFont
Page 32 and 33: 31Fonterra Co-operative Group Limit
Page 34 and 35: Fonterra Co-operative Group Limited
Page 38 and 39: Fonterra Co-operative Group Limited
Page 66 and 67: 65FONTERRA GROUP SUMMARY FINANCIAL
Page 68 and 69: 67Registrar means Computershare Inv
Page 70 and 71: 69APPLICATION INSTRUCTIONS1. Comple
Page 72: 717. SIGNATURE(S) OF APPLICANT(S)I/

Prospectus - Fonterra

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