Bradken Limited Annual Report 2015 - page 70

35 l BRADKEN LIMITED ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the consolidated financial statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(h) Business combinations
(i) Impairment of assets
(j) Cash and cash equivalents
(k) Receivables
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.
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.
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.
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.
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.
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.
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.
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.
Sale & Lease Back transactions
The Group accounts for sale and leaseback transactions depending upon the type of lease involved.
If a sale and leaseback transaction results in a finance lease, any excess of sales proceeds over the carrying amount is not be
immediately recognised as income by a seller-lessee. Instead, it is deferred and amortised over the lease term.
If a sale and leaseback transaction results in an operating lease, and it is clear that the transaction is established at fair value,
any profit or loss is recognised immediately. If the sale price is below fair value, any profit or loss is recognised immediately
except that, if the loss is compensated for by future lease payments at below market price, it is deferred and amortised in
proportion to the lease payments over the period for which the asset is expected to be used. If the sale price is above fair value,
the excess over fair value is deferred and amortised over the period for which the asset is expected to be used.
For operating leases, if the fair value at the time of a sale and leaseback transaction is less than the carrying amount of the
asset, a loss equal to the amount of the difference between the carrying amount and fair value is recognised immediately.
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