44
McPHERSON’S LIMITED
ANNUAL REPORT 2015
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(B) PRINCIPLES OF CONSOLIDATION
(CONTINUED)
If the Group’s share of losses in an equity-accounted investment
equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the Group does not recognise
further losses, unless it has incurred obligations or made payments on
behalf of the other entity.
Unrealised gains on transactions between the Group and the joint
venture are eliminated to the extent of the Group’s interest in this
entity. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
Accounting policies of the joint venture have been changed where
necessary to ensure consistency with the policies adopted by the
Group.
(C) SEGMENT REPORTING
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker. The
chief operating decision maker has been identified as the Managing
Director of McPherson’s Limited.
(D) FOREIGN CURRENCY TRANSLATION
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 it operates (‘the functional currency’). The
consolidated financial statements are presented in Australian dollars,
which is McPherson’s Limited’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at year end exchange
rates are generally recognised in profit or loss. They are deferred in
equity if they relate to qualifying cash flow hedges and qualifying net
investment hedges or are attributable to part of the net investment in
a foreign operation.
Group companies
The results and financial position of foreign operations that have a
functional currency different from the presentation currency are
translated into the presentation currency as follows:
•assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of the balance sheet;
•income and expenses for each income statement and statement of
comprehensive income are translated at average exchange rates;
and
•all resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the translation of
any net investment in foreign entities, and of borrowings and other
financial instruments designated as hedges of such investments, are
recognised in other comprehensive income. When a foreign operation
is sold or any borrowings forming part of the net investment are
repaid, the associated exchange differences are reclassified to profit or
loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a
foreign operation are treated as assets and liabilities of the foreign
operation and translated at the closing rate.
(E) REVENUE RECOGNITION
Sales revenue
Sales revenue is measured at the fair value of consideration received
or receivable. Amounts disclosed as revenue are net of returns, trade
allowances and rebates. 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 the goods are
dispatched, or when title passes to the customer.
Other income
Other income is recognised when the income is received or becomes
receivable.
(F) INCOME TAX
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
any unused tax losses.
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 authorities.
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, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill. Deferred income tax is also
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.
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 liabilities and assets are not recognised for temporary
differences between the carrying amount and tax bases of
investments in foreign operations 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 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.
Investment Allowances
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.
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS CONTINUED