NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred income tax liabilities (DTLs) are recognised
for all taxable temporary differences.
Deferred income tax assets (DTAs) are recognised for
all deductible temporary differences, carry forward of
unused tax offsets and unused tax losses, to the extent
that it is probable that taxable profit will be available
against which the deductible temporary differences
and the carry forward of unused tax credits and unused
tax losses can be utilised.
Division 58 of the Income Tax Assessment Act
1997 (“Division 58”), has entitled the consolidated
entity to value certain assets, for taxation
purposes, using pre-existing audited book values
or the notional written down values of the assets
as appropriate. This effectively means the tax
depreciable value of these rail infrastructure and
related assets significantly exceeds the carrying
value. Accordingly, Division 58 results in significant
deductible temporary differences and potential DTAs.
The carrying amount of DTAs is reviewed at each
reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income
tax asset to be utilised.
Unrecognised DTAs are reassessed at each reporting
date and are recognised to the extent that it has
become probable that future taxable profit will allow
the DTA to be recovered.
DTAs and DTLs are measured at the tax rates that are
expected to apply to the year when the asset is realised
or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted
at the reporting date. DTAs and DTLs are offset only if
a legally enforceable right exists to set off current tax
assets against current tax liabilities and the DTAs and
DTLs relate to the same taxable entity and the same
taxation authority.
Tax consolidation legislation
Australian Rail Track Corporation Ltd and its wholly
owned Australian controlled entities implemented the
tax consolidation legislation as of 1 July 2003.
The head entity, Australian Rail Track Corporation Ltd
and the controlled entities in the tax consolidated group
continue to account for their own current and deferred
tax amounts. The Group has applied the group
allocation approach in determining the appropriate
amount of current taxes and deferred taxes to allocate
to members of the tax consolidated group. In addition
to its own current and deferred tax amounts, Australian
Rail Track Corporation Ltd also recognises the current
tax liabilities (or assets) and the DTAs arising from
unused tax losses and unused tax credits assumed
from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding
agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to
other entities in the Group.
Any difference between the amounts assumed and
amounts receivable or payable under the tax funding
agreement are recognised as a contribution to (or
distribution from) wholly owned tax consolidated entities.
(l) Leases
Group as a lessee
Leases of property, plant and equipment where the
Group, as lessee, has substantially all the risks and
rewards of ownership are classified as finance leases.
Finance leases are capitalised at the lease’s inception
at the fair value of the leased property or, if lower,
the present value of the minimum lease payments.
The corresponding rental obligations, net of finance
charges, are included in other short-term and long-
term payables. Each lease payment is allocated
between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as
to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The
property, plant and equipment acquired under finance
leases is depreciated over the asset’s useful life or over
the shorter of the asset’s useful life and the lease term
if there is no reasonable certainty that the Group will
obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and
rewards of ownership are not transferred to the Group
as lessee are classified as operating leases (note 34).
Payments made under operating leases (net of any
incentives received from the lessor) are charged to the
Consolidated Income Statement on a straight-line
basis over the period of the lease.
Group as a lessor
Leases in which the Group retains substantially all
the risks and benefits of ownership of the leased
asset are classified as operating leases. Initial direct
63
