BRADKEN LIMITED ANNUAL REPORT 2014 l 40
Notes to the consolidated financial statements
30 June 2014
(continued)
2 Summary of significant accounting policies (continued)
(g) Leases
(h) Business combinations
(i) Impairment of assets
(j) Cash and cash equivalents
(k) Receivables
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 14). 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 11). The
respective lease receivable is included in the balance sheet.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A
provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s
carrying amount and the value of estimated future cash flows. The amount of the provision is recognised in the income
statement.
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.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets
other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
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 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.
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with
financial institutions and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance
sheet.
Trade receivables are recognised initially at fair value and subsequently, less provision for doubtful debts. Trade receivables
are normally due for settlement no more than 30 days from the date of recognition. They are presented as current assets
unless collection is not expected for more than 12 months after the reporting date.
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.
Page 40
Bradken Limited
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(CONTINUED)
1...,67,68,69,70,71,72,73,74,75,76 78,79,80,81,82,83,84,85,86,87,...136