Annual Report 2011 - Watercare

More documents

Recommendations

Info

Watercare Services Limited 2011 ANNUAL REPORT STATEMENT OF ACCOUNTING POLICIES (continued) FOR THE YEAR ENDED 30 JUNE 2011 15. Provisions The group provides for the cost of employees’ entitlements to annual leave, sick leave and gratuities under the terms of their employment contracts. These amounts are expected to be settled within one year and are therefore recorded in current provisions. The group provides for the liability for employees’ long service leave under the terms of their employment contracts. The liability is calculated as the present value of the expected future payments after allowing for wage and salary increases, the rate of staff turnover and term of service with the group. Long service leave is recorded in current and non-current provisions. The amount recorded in non-current provisions represents the portion which is due for payment beyond one year from the reporting date. Other provisions are recognised when the group has a present obligation as a result of a past event and it is probable that there is a future outflow of resources and the amount of the provision can be reliably measured. The amount recorded as a provision is the best estimate of the consideration required to settle the obligation at the end of each year. 16. Contract Retentions Certain construction contracts entitle the group to retain specified amounts to ensure the performance of contract obligations. These retentions are recorded as a liability, and either used to remedy contract performance or paid to the contractor at the end of the retention period. 17. Foreign Currencies The cost of assets purchased with foreign currencies is calculated using the exchange rate on the date of purchase. Any difference between this cost and the amount later required to settle the transaction is recognised as a foreign exchange gain or loss. Operating expenses in foreign currencies are converted at the rate of exchange on the date of the transaction. 18. Financial Instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument in another. As such, the group recognises all its financial instruments as soon as it becomes a party to the contractual provisions of the financial instrument. At each reporting date the group includes in its statement of financial position a range of financial assets that include cash and short-term deposits, trade and other receivables, and derivative instruments. Similarly it also reflects in its statement of financial position a number of financial liabilities that include bank overdrafts, trade and other payables, borrowings and derivative instruments. A derivative is a financial instrument or other contract that satisfies all of the following characteristics: its value changes in response to the change in a specified variable such as an interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index; it requires no initial investment or an initial investment that is smaller than would be required for other types of similar contracts and it will be settled at some future date. Sourcing fair values For financial instruments that are traded in active markets, quoted market prices are used as a measure of fair value. Where quoted market prices do not exist, fair values are estimated using present value or other market-accepted valuation techniques, using methods and assumptions that are based on market conditions and risks existing at balance date. Recognition and measurement of financial assets Financial assets are initially measured at fair value and for the purpose of subsequent measurement, the group has categorised financial assets into the following categories. Each category determines the process of subsequent measurement and how the resulting surplus or deficit should be reflected in the statement of comprehensive income. The group does not currently have financial assets in the held to maturity and availablefor-sale categories. 2011 Financial Report Loans and receivables The group’s cash and cash equivalents and trade and other receivables fall into this category of financial instruments. These are initially recorded at their fair value plus transaction costs because they have fixed or determinable payments that are not quoted in an active market. Fair value is estimated as the present value of future cash flows. After initial recognition, they are recorded at amortised cost using the effective interest method, less provision for impairment. The amount of impairment loss is the difference between the assets’ carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the impairment loss is recognised in determining the surplus or deficit for the year. The collection of trade receivables is reviewed on an ongoing basis and debts known to be uncollectible are written off. When there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables, a provision is made for doubtful receivables to recognise an impairment in the carrying value of receivables at balance date. This amount provided is recorded in determining surplus or deficit. PAGE 78 Return to Contents page
Watercare Services Limited 2011 ANNUAL REPORT STATEMENT OF ACCOUNTING POLICIES (continued) FOR THE YEAR ENDED 30 JUNE 2011 18. Financial Instruments (continued) Financial assets at fair value through profit or loss All derivative financial instruments fall into this category, except for those designated as, and effective as, hedging instruments, for which the hedge accounting requirements apply. The group does not apply hedge accounting. Financial assets carried at fair value through profit or loss are initially recorded at fair value. Financial assets can be classified as at fair value through profit or loss only if they are either classified as held for trading or upon initial recognition they are designated as at fair value through profit and loss. The group does not currently have any financial assets held for trading or designated upon initial recognition as at fair value through profit or loss. Recognition and measurement of financial liabilities Financial liabilities are initially recorded at their fair value plus transaction costs. Financial liabilities are recorded subsequently at amortised cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss. Those liabilities are recorded subsequently at fair value with gains or losses recognised in surplus or deficit. Trade and other payables represent liabilities for goods and services provided to the group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. The group does not currently have any financial liabilities held for trading or designated at fair value through profit or loss. Borrowings are recorded at fair value, net of transaction costs. Borrowings are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis. Fees and expenses for establishing new borrowings are amortised over the term of those borrowings using the effective interest method. Accrued interest is presented separately within accruals. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Derivative financial instruments Derivative instruments are used by the group to manage its exposures to interest rate and foreign currency risks. Derivative financial instruments are recorded at fair value in the statement of financial position and fair value changes are accounted for through surplus or deficit. Derecognition of financial instruments Financial assets are derecognised only when the contractual rights to the cash flows from the financial asset have expired, or when the financial asset and all substantial risks and rewards associated with it have been transferred. Financial liabilities are derecognised when they have either been extinguished, discharged, cancelled or have expired. 19. Statement of Cash Flows For the purpose of the statement of cash flows, cash and cash equivalents include cash on hand net of outstanding bank overdrafts. The following terms are used in the statement of cash flows; • “Operating activities” are amounts received for the supply of services by the group, and payments made to employees and suppliers necessary to support those services including finance costs. Operating activities also include any transactions or events that are not investing or financing activities; • “Investing activities” are amounts paid or received for the acquisition, and disposal of property, plant and equipment and other investments not included in cash equivalents; and • “Financing activities” are the receipt and repayment of the principal on borrowings, and contributions from, and distributions to, shareholders. 20. Insurance Any uninsured loss is recorded in determining the surplus or deficit for the year in which the loss is incurred. Insurance recoveries are recorded only when there is virtual certainty of receipt. PAGE 79 2011 Financial Report Return to Contents page
Page 1 and 2:
Annual Report 2011 ANNUAL REPORT 20
Page 3 and 4:
Watercare Services Limited 2011 ANN
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30: Watercare Services Limited 2011 ANN
Page 61 and 62: financial report 2011 Fletcher Cons
Page 79: Watercare Services Limited 2011 ANN
show all

Annual Report 2011 - Watercare

Create successful ePaper yourself

Delete template?

Save as template?