Where there are a number of similar obligations,
the likelihood that an outflow will be required in
settlement is determined by considering the class of
obligations as a whole. A provision is recognised even
if the likelihood of an outflow with respect to any one
item included in the same class of obligations may
be small.
Provisions are measured at the present value of
management’s best estimate of the expenditure
required to settle the obligation at the reporting date.
(w) Employee benefits
(i)
Short term obligations
Liabilities for wages and salaries, including non
monetary benefits and annual leave expected to be
settled within 12 months of the reporting date are
recognised in respect of employees’ services up to
the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled.
(ii) Other long term employee benefit obligations
The liability for long service leave and associated
on costs is accumulated from the date of
commencement. They are measured at the
amounts expected to be paid when the liabilities
are settled and discounted to determine their
present value. Consideration is given to expected
future wage and salary levels with an allowance for
expected future increases.
The revised standard has also changed the
accounting for the Group’s annual leave
obligations. As the entity does not expect all
annual leave to be taken within 12 months of
the respective service being provided, annual
leave obligations are now classified as long term
employee benefits in their entirety. Annual leave is
measured on a discounted basis.
(x) Financial Instruments
The Group’s principal financial instruments
comprise receivable, payables, borrowings, bonds,
cash, short term deposits and derivatives. The
carrying amount equates to the fair value of the
financial instruments.
(i)
Non-derivative financial assets
Receivables are financial assets with fixed or
determinable payments that are not quoted in an
active market. Such assets are recognised initially at
fair value plus any directly attributable transaction
costs. Subsequent to initial recognition measured at
amortised cost using the effective interest method.
Receivables comprise cash and cash equivalents and
trade and other receivables. Cash and cash equivalents
in the balance sheet includes cash on hand, deposits
held at call with financial institutions, other short
term, highly liquid investments with original maturities
of three months or less that are readily convertible to
known amounts of cash and which are subject to an
insignificant risk of changes in value.
(ii) Non-derivative financial liabilities
Financial liabilities are recognised initially on the
trade date and derecognised when contractual
obligations are discharged, cancelled or expired.
Such liabilities are recognised at fair value less any
directly attributable transaction costs, subsequently
measured at amortised cost using the effective
interest method. Other financial liabilities comprise
loan facilities (see note 12), bonds, bank overdrafts
and trade and other payables.
(iii) Derivative financial instruments
The Group holds derivative financial instruments
to hedge its foreign currency and interest rate risk
exposures. On initial designation of the derivative
as the hedging instrument, the Group formally
documents the relationship between the hedging
instrument and the hedged item, including the risk
management objectives and strategy in undertaking
the hedge transaction and the hedged risk, together
with the methods that will be used to assess the
effectiveness of the hedging relationship.
The Group makes an assessment, both at the
inception of the hedge relationship as well as on an
ongoing basis, of whether the hedging instruments
are expected to be highly effective in offsetting the
changes in the fair value or cash flows of the respective
hedged items attributable to hedged risk and whether
the actual results of each hedge are within a range of
80 - 125 percent. For a cash flow hedge of a forecast
transaction, the transaction should be highly probable
to occur and should present an exposure to variations
in cash flows that ultimately could affect reported
profit or loss.
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
50
