Lead Manager

APPENDIX A PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using
consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that
may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have
been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
(e) Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks and highly liquid investments with original maturities of three
months or less.These assets are stated at nominal values.
Bank overdrafts are carried at the principal amount. Interest is recognised as an expense as it accrues.
(f) Receivables
Fees receivable from financing transactions are recognised and carried at original invoice amount less a provision
for any uncollectible amounts. Fees receivable are non-interest bearing and are generally on 30 day terms. An
estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are
written off as incurred.
Notes receivable are recorded at the principal amount outstanding plus accrued interest. All notes receivable are
reviewed regularly for impairment. A note receivable is considered impaired when, based on current information
and events, it is probable that the group will be unable to collect all amounts due.The amount of the specific
impairment provision is equal to the difference between the current carrying amount of a receivable and the
greater of: (a) the net present value of the expected cash flows from the borrower, discounted at the original
effective interest rate of the transaction, or (b) the net fair value of the collateral, if any. Any impairment
provisions are included in the statement of financial performance in the period in which the asset is impaired.
Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as
income on an accrual basis.
(g) Investments in Financial Assets
Investments in listed shares and other marketable securities, including those held for three months or less, are
held for trading and are carried at net market value. Changes in net market value are recognised as a revenue or
expense in the statement of financial performance during the period in which the net market value changed.
Investments in unlisted shares are carried at the lower of cost or net realisable value. Under this method, the
investment is adjusted only for the additional cash investments and any impairment in the value of the
investment.
(h) Investments Accounted for Using the Equity Method
Investments in associates are carried at the lower of the equity accounted amount and recoverable amount in the
consolidated financial report. Under the equity method of accounting, the investment is initially recorded at cost,
subsequently adjusted for Babcock & Brown’s share of undistributed earnings or losses, and increased by
additional investments in the associates and reduced by cash distributions received.
(i) Transportation Equipment
Transportation equipment consists primarily of aircraft and railcars.
Aircraft and railcars are recorded at cost.The depreciable amount of these assets is depreciated on a straight line
basis over the asset’s remaining useful life.
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