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BRADKEN LIMITED ANNUAL REPORT 2013 43
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(r) Borrowings
(s) Borrowing costs
(t) Provisions
(i)
Warranties
(u) Employee Benefits
(i)
Wages, salaries, annual leave, sick leave, rostered days off and non-monetary benefits
(ii) Long service leave
(iii) Bonus plans
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss
as other income or finance costs.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for
at least 12 months after the reporting period.
A liability for employee benefits in the form of bonus plans is recognised in current provisions when there is no realistic
alternative but to settle the liability and at least one of the following conditions is met:
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid
when they are settled.
the amounts to be paid are determined before the time of completion of the financial report
past practice gives clear evidence of the amount of the obligation.
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to
complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
Products are warranted against faulty workmanship and in some cases these are specifically extended to periods up to seven
years or hours used depending on the type of product and contract in place. Rectification claims are settled in cash or by repair
of the item, at the discretion of the Group. Provision for warranty claims are made for claims received and claims expected to
be received in relation to sales made prior to reporting date adjusted for specific information arising from internal quality
assurance processes.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable
that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised
over the period of the facility to which it relates.
there are formal terms in the plan for determining the amount of the benefit
The provision for long service leave represents the present value of the expected future cash outflows to be made resulting
from employees’ services provided to reporting date.
Liabilities for annual leave, accumulating sick leave and rostered days off, including non monetary benefits, expected to be
settled within 12 months of the reporting date are recognised in current provisions 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. Liabilities for non
accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Liabilities for
unpaid wages and salaries up to the reporting date are recognised in current payables.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.
A provision is recognised in the accounts when there is a present legal or constructive obligation as a result of past events; it is
probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
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.
Page 43
Bradken Limited