Notes to and forming part of the consolidated financial
statements for the year ended 30 June 2010
Note 1. Summary of significant accounting
policies (continued)
Profits or losses on transactions establishing the joint venture entity or
partnership and transactions with the joint venture entity or partnership
are eliminated to the extent of the Group’s ownership interest until such
time as they are realised by the joint venture entity or partnership on
consumption or sale, unless they relate to an unrealised loss that
provides evidence of the impairment of an asset transferred.
Joint venture operations
Where the Group conducts business through alliance contracts with other
service providers, the Group’s assets, liabilities, income and expenses
relating to the activity are recorded in the records of the trading subsidiary
company and no further consolidation procedures are performed.
(c) S egment reporting
As of 1 July 2009 the Group determines and presents operating segments
based on the information that internally is provided to the Managing
Director and Chief Executive Officer Dr Peter Goode, who is the Group’s
chief operating decision maker. This change in accounting policy is due to
the adoption of AASB 8 Operating Segments. Previously operating
segments were determined and presented in accordance with AASB 114
Segment Reporting. Comparative segment information has been
re-presented in conformity with the transitional requirements of AASB 8.
Since the change in accounting policy only impacts presentation and
disclosure there is no impact on earnings per share. The new accounting
policy in respect of segment operating disclosures is presented below.
An operating segment is a component of the Group that engages in
business activities from which it may earn revenue and incur expenses,
including revenues and expenses that relate to transactions with any of
the Group’s other components. All operating segments are regularly
reviewed by the Group’s Managing Director and Chief Executive Officer to
make decisions about resources to be allocated to the segment and
assess its performance and for which discrete financial information is
available.
Segment results that are reported to the Managing Director and Chief
Executive Officer include items directly attributable to a segment as well
as those that can be allocated on a reasonable basis.
(d) Foreign currency transactions
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities
are measured using the currency of the primary economic environment in
which the entity operates (‘the functional currency’). The consolidated
financial statements are presented in Australian dollars, which is
Transfield Services Limited’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the approximate dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the statement of comprehensive income,
except when deferred in equity as qualifying cash flow hedges and
qualifying net investment hedges.
Translation differences on non-monetary financial assets and liabilities
are reported as part of the fair value gain or loss. Translation differences
on non-monetary financial assets and liabilities such as equities held at
fair value through comprehensive income are recognised in
comprehensive income as part of the fair value gain or loss.
Group companies
The results and financial position of all the Group entities (none of which
has the currency of a hyperinflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
• assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of that
statement of financial position;
• income and expenses for each statement of comprehensive income are
translated at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at
the approximate dates of the transactions); and
• all resulting exchange differences are recognised as a separate
component of equity.
On consolidation, exchange differences arising from the translation of
any net investment in foreign entities are taken to shareholder’s equity.
When a foreign operation is sold or borrowings repaid, a proportionate
share of such exchange differences is recognised in the statement of
comprehensive income as part of the gain or loss on sale or repayment.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate
(e) I ncome tax
The income tax expense or benefit for the period is the tax payable or
refundable 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.
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 reporting date and are expected to apply
when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
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.
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 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.
Current and deferred tax balances attributable to amounts recognised
directly in equity are also recognised directly in equity.
(f) T ax consolidation legislation
The head entity, Transfield Services Limited, and the controlled entities in
the Australian tax consolidated group continue to account for their own