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(h) Leases
Finance leases
Leases under which the company assumes substantially all the risks and rewards of ownership are
classified as finance leases and are capitalised.
The finance charge is allocated to periods during the lease term so as to produce a constant
periodic rate of interest on the outstanding balance of the liability for each period.
Operating leases
Operating lease rentals are recognised evenly over the expected period of benefit to the company.
(i) Employee entitlements
Employee entitlements to annual leave, long service leave and bonuses as provided under the
terms of employment contracts are recognised in the statement of financial performance when
they accrue to employees. The annual leave liability is calculated on an actual entitlement basis at
current rates of pay while long service leave is assessed on an actuarial basis.
(j) Goodwill on acquisition
Goodwill on acquisition of other business operations is recognised as an asset and separately
disclosed. Goodwill is amortised in the statement of financial performance over the period of
expected benefits. To the extent that the unamortised balance of goodwill is no longer probable of
being recovered from the expected future economic benefits, it is immediately recognised as an
expense.
(k) Financial instruments
The company has various financial instruments with off-balance sheet risk for the primary purpose
of reducing its exposure to fluctuations in interest rates. While these financial instruments are
subject to risk that market rates may change subsequent to acquisition, such changes would
generally be offset by opposite effects on the items being hedged. For interest rate swap
agreements entered into in connection with the management of interest rate exposure, the
differential to be paid or received is accrued as interest rates change and is recognised as a
component of interest income/expense over the life of the agreement. Premiums paid for interest
rate options and net settlement on maturity of forward rate agreements, futures and options are
amortised over the period of the underlying asset/liability hedged by the instrument.
(l) Statement of cash flows
The statement of cash flows is prepared exclusive of GST, which is consistent with the method
used in the statement of financial performance.
Definitions of the terms used in the statement of cash flows:
· Cash includes coins and notes, demand deposits and other highly liquid investments readily
convertible into cash and includes at call borrowings such as bank overdrafts, used by the
company as part of its day-to-day cash management.
· Operating activities include all transactions and other events that are not investing or financing
activities.
· Investing activities are those activities relating to the acquisition and disposal of current and
non-current investments and any other non-current assets.
· Financing activities are those activities relating to changes in the equity and debt capital
structure of the company and those activities relating to the cost of servicing the company's
equity capital.
Changes in accounting policies
During the year the company changed its policy with regard to the valuation of property,
plant and equipment. Previously all property, plant and equipment were recorded at cost less
accumulated depreciation. As at 1 July 2005 the company revalued its land to fair value. The
effect of this change has been to increase total assets and revaluation reserves by $2.320
million.
Other than in respect of the above, there have been no other changes to accounting policies, which
have been applied on bases consistent with those used in previous years.
