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Notes to the Consolidated Financial Statements
30 June 2013
38 BRADKEN LIMITED ANNUAL REPORT 2013
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(i)
Investment allowances
(g) Leases
(h) Business combinations
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 (note 12). Finance leases are capitalised at the lease’s inception at the lower of the fair value
of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of
finance charges, are included in borrowings. Each lease payment is allocated between the liability and finance cost. The
finance cost is charged to the income statement 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 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.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Lease income from finance leases where the group is a lessor is charged to the income statement over the lease period so as
to produce a constant periodic rate of interest on the remaining balance of the receivable for each period (note 9). The
respective lease receivable is included in the balance sheet.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
Bradken Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a
consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in
the consolidated financial statements.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases (note 28). Payments made under operating leases (net of any incentives received from the lessor) are charged to the
income statement on a straight line basis over the period of the lease.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the fair value of the group's share of the net identifiable assets
acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary
acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a
bargain purchase.
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair
values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration
transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the
fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any
non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the
acquiree’s net identifiable assets.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
Companies within the group may be entitled to claim special tax deductions for investments in qualifying assets (investment
allowances). The group accounts for such allowances as tax credits, which means that the allowance reduces income tax
payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as
deferred tax assets.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
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Bradken Limited