Page 73 - Bradken Annual Report 2013_Page flip

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Notes to the consolidated financial statements
30 June 2013
1 Summary of significant accounting policies (continued)
(e) Revenue recognition
Sale of goods
(ii) Contract revenue
(iii) Interest income
(iv) Sale of non-current assets
(v) Royalties
(vi) Dividends
(f) Income tax
Interest income is recognised as it accrues, taking into account the effective yield on the financial asset.
Where the outcome of a contract cannot be reliably estimated, contract costs are expensed as incurred. Where it is probable
that the cost will be recovered, revenue is recognised to the extent of costs incurred. Where it is probable that a loss will arise
on a contract, the excess of total costs over revenue is recognised immediately as an expense.
Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of
pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence, refer note 1(m).
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
The gain or loss on disposal of non-current assets is included as other income or expense at the date control passes to the
buyer, usually when an unconditional contract of sale is signed. The gain or loss on disposal is calculated as the difference
between the carrying amount of the asset at the time of disposal and the net proceeds on disposal.
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for the major business
activities as follows:
Revenue from the sale of goods is recognised when the consolidated entity has passed the significant risks and rewards to the
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.
Contract revenue and expenses are recognised on an individual contract basis using the percentage of completion method
when the stage of contract completion can be reliably determined, costs to date can be clearly identified, and total contract
revenue and costs to complete can be reliably estimated.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
The stage of completion is measured by reference to an assessment of components completed to date as a percentage of total
components for each contract.
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Bradken Limited