Bradken Limited Annual Report 2015 - page 69

Notes to the consolidated financial statements
30 June 2015
2 Summary of significant accounting policies (continued)
(iv) Sale of non-current assets
(v) Royalties
(vi) Dividends
(f) Income tax
Investment allowances
(g) Leases
The gain or loss on disposal of non-current assets is included as other income or expense at the date control passes to the
buyer, usually when an unconditional contract of sale is signed. The gain or loss on disposal is calculated as the difference
between the carrying amount of the asset at the time of disposal and the net proceeds on disposal.
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.
Companies within the group may be entitled to claim special tax deductions for investments in qualifying assets (investment
allowances). The group accounts for such allowances as tax credits, which means that the allowance reduces income tax
payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as
deferred tax assets.
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of
pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence, refer note 2(m).
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
Bradken Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a
consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in
the consolidated financial statements.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
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