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.
In addition to its own current and deferred tax amounts, Transfield
Services 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.
Assets or liabilities arising under tax funding agreements with the
tax-consolidated entities are recognised as amounts receivable from or
payable to other entities in the Group. Details about the tax funding
agreement are disclosed in Note 7(e).
A similar regime operates in the United States. The Group’s whollyowned
subsidiaries have adopted the equivalent arrangement in that
(g) L eases
Leases of property, plant and equipment, where the Group has
substantially all the risks and rewards of ownership are classified as
finance leases. 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 loans and borrowings.
Each lease payment is allocated between the liability and finance
charges so as to achieve a constant rate on the finance balance
outstanding. The interest element of the finance cost is charged to the
statement of comprehensive income 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 lease are depreciated over the shorter of the asset’s useful
life or the lease term where there is no certainty that ownership of the
asset will transfer. Lease assets held at reporting date are being
depreciated over periods ranging from three to eight years.
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases (net of any incentives received
from the lessor) are charged to the statement of comprehensive income
on a straight-line basis over the period of the lease. Lease income from
operating leases is recognised in income on a straight-line basis over the
lease term.
(h) Business combinations
The Group has adopted revised AASB 3 Business Combinations (2008)
and amended AASB 127 Consolidated and Separate Financial Statements
(2008) for business combinations occurring in the financial year
commencing 1 July 2009.
Business combinations are accounted for using the acquisition method.
For every business combination the Group identifies the acquirer, which is
the combining entity that obtains control of the combining entities or
businesses. Control is the power to govern the financial and operating
policies of an entity so as to obtain benefit from its activities. In
assessing control, the Group takes into consideration potential voting
rights that currently are exerciseable. The acquisition date is the date on
which control is transferred to the acquirer. Judgement is applied in
determining the acquisition date and determining whether control is
transferred from one party to another.
Goodwill arising in a business combination is measured at the fair value
of the consideration transferred including the recognised amount of any
non-controlling interest in the acquiree, less the net recognised amount
(generally fair value) of the identifiable assets acquired and liabilities
assumed, all measured as at acquisition date.
Consideration transferred includes the fair values of the assets transferred,
liabilities incurred by the Group to the previous owners of the acquiree, and
equity interests issued by the Group. Consideration transferred also
includes the fair value of any contingent consideration and share-based
payment awards of the acquiree that are replaced mandatorily in the
business combination. If a business combination results in the termination
of previously existing relationships between the Group and the acquiree,
then the lower of the termination amount as contained in the agreement,
and the value of the off-market element is deducted from the consideration
transferred and recognised in other expenses.
When share based payment awards exchanged (replacement awards) for
awards held by the acquiree’s employees (acquiree’s awards) relate to
past services, then a part of the market-based measure of the awards
replaced is included in the consideration transferred. If they require future
services, then the difference between the amount included in
consideration transferred and the market-based measure of the
replacement awards is treated as a post-combination compensation cost.
A contingent liability of the acquiree is only assumed in a business
combination if such a liability represents a present obligation and arises
from a past event and its fair value can be measured reliably.
The Group measures any non-monetary interest at its proportionate
interest in the identifiable net assets of the acquiree.
Transaction costs that the Group incurs in connection with the business
combination are expensed as incurred.
The above accounting policy is applied prospectively and had no material
impact on earnings per share. Previously, business combinations were
accounted for using the purchase method. Transaction costs directly
attributable to the acquisition formed part of the acquisition costs.
(i) I mpairment of assets
Goodwill and intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be
impaired. Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash generating units).
For the purposes of goodwill impairment testing, cash generating units to
which goodwill has been allocated are aggregated so that the level at
which impairment is tested reflects the lowest level at which goodwill is
monitored for internal reporting purposes.
Non-financial assets other than goodwill that have previously suffered
impairment are reviewed for possible reversal of the impairment at each
reporting date.
Impairment policies in respect of financial assets are set out in Note 1(k)
and Note 1(o).
(j) Revenue recognition
The Group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits will flow
to the entity and specific criteria have been met for each of the Group’s
activities as described below. The amount of revenue is not considered to
be reliably measurable until all material contingencies relating to the sale
or service have been resolved. The Group bases its estimates on
historical results, taking into consideration the type of customer, the type
of transaction and the specifics of each arrangement.