Lead Manager

BABCOCK & BROWN PROSPECTUS
Any lease incentive liability in relation to non-cancellable operating leases is being reduced on an imputed
interest basis over the lease term at the interest rate implicit in the lease. Contingent rentals are recognised as an
expense in the financial year in which they are incurred.
The cost of improvements to or on leasehold property is capitalised and depreciated in accordance with note 1(l).
(u) Joint Ventures
Interests in joint venture operations are recognised by including in the respective classifications, the share of
individual assets employed, revenue earned and share of liabilities and expenses incurred.
(v) Foreign Currencies
Transactions in foreign currencies of entities within the consolidated group are converted to local currency at the
rate of exchange prevailing at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date are translated using the spot rate at
the end of the financial year.
The financial reports of overseas operations are translated using the current rate method and any exchange
differences are taken directly to the foreign currency translation reserve.
(w) Derivative Financial Instruments
Forward exchange contracts
The consolidated entity enters into forward exchange contracts where it agrees to sell specified amounts of
foreign currencies in the future at a predetermined exchange rate.The objective is to match the contract with
anticipated future cash flows from sales and purchases in foreign currencies, to protect the consolidated entity
against the possibility of loss from future exchange rate fluctuations.The forward exchange contracts are usually
for no longer than 12 months.
Forward exchange contracts are recognised at the date the contract is entered into. Exchange gains or losses on
forward exchange contracts are recorded at their fair values through the statement of financial performance.
These have been eliminated as a pro-forma adjustment (refer note 3).
Interest rate swaps
Babcock & Brown enters into interest rate swap agreements that are used to convert the variable interest rate of
its short-term borrowings to medium-term fixed interest rates.The swaps are entered into with the objective of
reducing the risk of rising interest rates.
Interest rate swaps are carried at fair value, with movements in fair value recorded in net profit. Interest rate swaps
with a positive fair value are included as a component of Other Assets. Interest rate swaps with a negative fair
value are included as a component of Other Liabilities.
(x) Employee Benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date, in accordance with local statutory requirements.These benefits include wages and salaries, annual
leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be
settled within 12 months of the reporting date are measured at their nominal amounts based on remuneration
rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are
measured at the present value of the estimated future cash outflow to be made in respect of services provided by
employees up to the reporting date. In determining the present value of future cash outflows, the market yield as
at the reporting date on national government bonds, which have terms to maturity approximating the terms of
the related liability, are used.
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