FirstChoice Wholesale Investments - Colonial First State

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COLONIAL FIRST STATE - FIRSTCHOICE WHOLESALE INVESTMENT FUNDSNOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 30 JUNE 20111. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a)Basis of PreparationThe financial report is a general purpose financial report, which has been prepared in accordance with the Funds'Constitutions and the requirements of the Corporations Act 2001, which includes Accounting Standards. Othermandatory professional reporting requirements have also been complied with.The financial report is prepared on the basis of fair value measurement of assets and liabilities except where otherwisestated.The Balance Sheets are presented on a liquidity basis. Assets and liabilities are presented in decreasing order ofliquidity and are not distinguished between current and non-current. All balances are expected to be settled within twelvemonths, except for financial assets held for trading, loans and net assets attributable to unitholders. The amountsexpected to be recovered or settled after more than twelve months in relation to these balances cannot be reliablydetermined, except as otherwise stated.The financial report was authorised for issue by the Directors of the Responsible Entity on 26 August 2011.The current reporting period for the financial report is from 1 July 2010 to 30 June 2011. The comparative reportingperiod is from 1 July 2009 to 30 June 2010.Both the functional and presentation currency of the Funds are Australian dollars.(b)Statement of ComplianceThe financial report complies with Australian Accounting Standards, which include Australian equivalents to InternationalFinancial Reporting Standards ('AIFRS'). Compliance with AIFRS ensures that the financial report, comprising thefinancial statements and notes thereto, complies with International Financial Reporting Standards ('IFRS').(c)Investments in Financial Assets and Liabilities Held for TradingClassificationThe Funds' investments are classified as held for trading and initially recognised at fair value not including transactioncosts, which are expensed in the Statements of Comprehensive Income.Recognition/DerecognitionThe Funds recognise financial assets and financial liabilities on the date it becomes party to the contractual agreement(trade date) and recognises changes in fair value of the financial assets or financial liabilities from this date.The derecognition of a financial instrument takes place when the Funds no longer control the contractual rights thatcomprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flowsattributable to the instrument are passed through to an independent third party.MeasurementAfter initial recognition, the financial assets held for trading are revalued to fair value at each reporting date.For financial assets held for trading that are actively traded in organised financial markets, fair value is determined byreference to Exchange quoted market bid prices at the close of business on the balance date.Page 43
COLONIAL FIRST STATE - FIRSTCHOICE WHOLESALE INVESTMENT FUNDSNOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 30 JUNE 20111. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(c)Investments in Financial Assets and Liabilities Held for Trading (continued)Measurement (continued)Share price index (SPI) futures contracts are marked to market according to the bid price on the relevant futuresexchange.For investments where there is no quoted market price, fair value is determined by reference to the current market valueof another instrument which is substantively the same or is calculated based on the expected cash flows of theunderlying net asset base of the investment. The fair value of units in unlisted Managed Investment Schemes isdetermined by reference to published bid prices at the close of business on the Balance Sheet date being theredemption price as established by the underlying Fund's Responsible Entity.Gains or losses on investments held for trading are recognised in the Statements of Comprehensive Income. Investmentsof the Funds which are considered to be held for trading are derivatives and investments in Managed InvestmentSchemes.(d)Investment IncomeIncome is recognised to the extent that it is probable that the economic benefits will flow to the Funds and the incomecan be reliably measured. The following specific recognition criteria must also be met before income is recognised:Distribution incomeIncome is recognised when the right to receive the payment is established.Interest incomeIncome is recognised as the interest accrues (using the effective interest rate method, which is the rate that exactlydiscounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amountof the financial asset.Changes in fair value of financial assets held for tradingGains or losses on investments held for trading are calculated as the difference between the fair value at sale, or at yearend, and the fair value at the previous valuation point. This includes both realised and unrealised gains and losses.(e)Cash and cash equivalentsCash and cash equivalents in the Balance Sheets comprise cash at bank, deposits at call with futures clearing houseand short-term deposits with an original maturity of three months or less.For the purposes of the Cash Flow Statements, cash and cash equivalents are as defined above, net of outstanding bankoverdrafts.(f)Trade and Other ReceivablesReceivables are recognised and carried at the original invoice amount, less a provision for any uncollectible debts. Anestimate for doubtful debts is made when collection of an amount is no longer probable. Bad debts are written off whenidentified.Amounts are generally received within 30 days of being recorded as receivables.Page 44
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