Bradken Limited Annual Report 2015 - page 77

Notes to the consolidated financial statements
30 June 2015
2 Summary of significant accounting policies (continued)
(ab) Parent entity financial information
Tax consolidation legislation
(ii) Financial guarantees
3 Financial risk management
(a) Credit risk
(b) Liquidity risk
In addition to its own current and deferred tax amounts, Bradken Limited also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Bradken
Limited for any current tax payable assumed and are compensated by Bradken Limited for any current tax receivable and
deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Bradken Limited under the tax
consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned
entities' financial statements.
The amounts receivable/payable are due upon receipt of the funding advice from the head entity, which is issued as soon as
practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist
with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts
receivable from or payable to other entities in the group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
Bradken Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions. The Group aims at
maintaining flexibility in funding by keeping committed credit lines available.
Management monitors forecasts of the Group's liquidity on the basis of expected cash flow. See note 20(d) for details of
available facilities.
Bradken's global customer base is large and diverse and subject to strict credit application and assessment criteria to minimise
impairment risk.
Details on the past due but not impaired trade receivables are disclosed at note 10(b).
The Group's activities expose it to a variety of financial risks; market risk (including currency risk, cash flow and fair value
interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.
The Group uses derivative financial instruments such as foreign exchange contracts and interest rate swaps to hedge certain
risk exposures. Derivatives are exclusively used as hedging instruments, not as trading or other speculative instruments. The
Group uses different methods to measure different types of risk to which is it exposed. These methods include sensitivity
analysis in the case of interest rate and foreign exchange risk and ageing analysis for credit risk.
Risk management is carried out centrally by the CFO and finance function under policies approved by the Board of Directors.
The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and
services are made to customers with an appropriate credit history.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions.
The maximum exposure to credit risk best represents the carrying value of the financial assets at balance date.
The standard terms and conditions on sale of goods includes a clause which allows Bradken to repossess goods which have
not been consumed should Bradken require it necessary to recoup unpaid debts owed to them.
The parent entity is a guarantor under the Bradken Group - Common Terms Deed Poll and unconditionally and irrevocably
guarantees payments due in connection with any financing facilities owed by any Group company. The parent entity is also
guarantor under the terms of the Redeemable Preference Shares Investment Agreement to unconditionally and irrevocably
guarentee all payments due in respect of the redeemable preference shares.
The financial information for the parent entity, Bradken Limited, disclosed in note 36 has been prepared on the same basis as
the consolidated financial statements, except as set out below.
The head entity, Bradken Limited, and the controlled entities in the tax consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand
alone taxpayer in its own right.
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Bradken Limited
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