Notes to the consolidated financial statements
30 June 2014
2 Summary of significant accounting policies (continued)
(iv) Research and development
(q) Payables
(r) Borrowings
(s) Borrowing costs
(t) Provisions
(u) Employee Benefits
Wages, salaries, annual leave, sick leave, rostered days off and non-monetary benefits
(ii) Long service leave
These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 60 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised
initially at their fair value and subsequently measured at amortised cost using the effective interest method.
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design
and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a
success considering its commercial and technical feasibility and its costs can be measured reliably. The expenditure
capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate
proportion of overheads. Other development expenditures that do not meet these criteria are recognised as an expense as
incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for
use on a straight-line basis over its useful life, which varies from 3 to 10 years.
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.
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.
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.
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.
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.
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.
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.
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.
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