Prospectus - Fonterra

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Fonterra Co-operative Group LimitedStatement of significant accounting policiesFor the 14 months ended 31 July 200837n) ProvisionsProvisions are recognised only in those circumstances where the Company has a present legal or constructiveobligation as a result of a past event, when it is probable that an outflow of resources will be required to settle theobligation, and a reliable estimate of the amount can be made.Provisions are measured at the present value of the expenditures expected to be required to settle the obligationusing a pre-tax discount rate that reflects current market assessments of the time value of money and the risksspecific to the obligation. The increase in the provision due to the passage of time is recognised as a finance costin the income statement.o) Co-operative sharesCo-operative shares are classified as equity. Incremental costs directly attributable to the issue of co-operativeshares are recognised as a deduction from equity.p) Revenue recognitionRevenue from the sale of goods is recognised at the fair value of the consideration received or receivable, net ofreturns, discounts and allowances. Revenue is recognised when the amount of revenue can be reliablymeasured, significant risks and rewards of ownership of the inventory items have passed to the buyer, recovery ofthe consideration is probable, the associated costs and possible return of goods can be estimated reliably, andthere is no continuing management involvement with the goods.Dividend income is recognised when the right to receive payment is established.q) Payout to suppliersPayout to shareholder suppliers comprises Cost of Milk, Supplier Premiums and Value Return.Cost of MilkThe Cost of Milk comprises the volume of milk solids supplied by shareholders at the Milk Price for the season.Milk Price for the season is based upon a model determined by an independent valuer as part of the fair valueshare process, and broadly represents the maximum amount a hypothetical efficient competitor could afford topay for milk and still make an adequate return on capital. The monthly commodity prices and hedged conversionrates achieved or forecast to be achieved by Fonterra are applied to this model to establish the Milk Price. MilkPrice is recognised within cost of goods sold.Supplier PremiumsSupplier Premiums are paid for specialty milks, such as winter milk and colostrum. Supplier Premiums arerecognised within cost of goods sold.Value ReturnThe Value Return is comprised of payout to shareholder suppliers less the Cost of Milk and Supplier Premiums.Value Return is recognised directly in equity.For accounting purposes the Value Return payout made to shareholder suppliers is treated as a transaction withthem in their capacity as shareholders. For the presentation of the interim financial statements the Value Returnpayment can not be reliably estimated and is therefore recognised within cost of goods sold as part of the totalpayout to shareholder suppliers. For presentation of the annual report, the Value Return payment is presented asa deduction directly from equity.Payment for contract milk supplied is included in other purchases within cost of goods sold.r) Employee benefitsEmployee benefits primarily include short term employee benefits and defined contribution pension plans.Short term employee benefits include salaries, wages, annual leave and sick leave, and are expensed on anundiscounted basis as the relevant service is provided.Contributions to defined contribution pension plans are recognised as an expense in the period they are due. TheCompany has no further payment obligations once the contributions have been paid.
Fonterra Co-operative Group LimitedStatement of significant accounting policiesFor the 14 months ended 31 July 200838s) Finance income and costsFinance income comprises interest income on funds on deposit. Interest income is recognised as it accrues usingthe effective interest method.Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, gains andlosses on the revaluation of debt hedges and the hedged risks on certain debt instruments, and gains and lossesrelating to forward points on forward exchange contracts. Interest expense and the unwinding of the discount onprovisions are recognised in the income statement using the effective interest method. Borrowing costs directlyattributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost ofthat asset.t) TaxationTax expense comprises current and deferred tax. Tax expense is recognised in the income statement except tothe extent that it relates to items recognised directly in equity, in which case it is recognised in equity.Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax ratesenacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respectof previous years.Deferred tax is recognised, using the balance sheet method, on temporary differences arising between the taxbases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is measured atthe tax rate that is expected to apply to the temporary differences when they reverse, based on laws that havebeen enacted or substantively enacted by the reporting date.Deferred tax is not recognised on the following temporary differences:− The initial recognition of assets and liabilities in a transaction that is not a business combination and thataffects neither accounting nor taxable profit; and− Differences relating to investments in subsidiaries to the extent that the timing of the reversal is controlledby the Company and it is probable that they will not reverse in the foreseeable future.Deferred tax assets are recognised to the extent it is probable that future taxable profits will be available againstwhich the temporary differences can be utilised.u) New International Financial Reporting StandardsThe Company has chosen to early adopt amendments made in February 2008 to NZ IAS 32: FinancialInstruments: Presentation. The amendments allow the Company to continue to classify Fonterra’s co-operativeshares as equity instruments. Mandatory adoption of the amendments to NZ IAS 32 is required for periodscommencing on or after 1 January 2009.Fonterra has chosen to early adopt the amendments made in June 2008 to NZ IFRS 1: First-time Adoption of NZIFRS and NZ IAS 27: Consolidated and Separate Financial Statements. The amendments allow Fonterra to usethe Previous NZ GAAP carrying value of its investments in subsidiaries as the deemed cost on transition to NZIFRS. Mandatory adoption of the amendments to NZ IFRS 1 and NZ IAS 27 and their related consequentialamendments is required for periods commencing on or after 1 January 2009.The Company has chosen not to early adopt amendments made in November 2007 to NZ IAS 1: Presentation ofFinancial Statements. The amendments set out changes to the presentation of the financial statements but haveno impact on recognition or measurement. Mandatory adoption of the amended NZ IAS 1 is required for periodscommencing on or after 1 January 2009, therefore the Company will adopt these amendments in the financialyear beginning 1 August 2009.The Company has chosen to early adopt NZ IFRS 8: Operating Segments. NZ IFRS 8 requires qualitative andquantitative disclosures regarding the Company’s operating segments and replaces NZ IAS 14: SegmentReporting. Mandatory adoption of NZ IFRS 8 is required for periods commencing on or after 1 January 2009.
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 36 and 37: 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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