FirstChoice Wholesale Investments - Colonial First State

COLONIAL FIRST STATE - FIRSTCHOICE WHOLESALE INVESTMENT FUNDSNOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 30 JUNE 20111. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(m)Goods and Services Tax (GST)Income, expenses and assets, with the exception of receivables and payables, are recognised net of the amount of GSTto the extent that the GST is recoverable from the taxation authority. Where GST is not recoverable, it is recognised aspart of the cost of acquisition of the asset or as part of the expense item as applicable.Receivables and payables are stated inclusive of GST.Reduced input tax credits (RITC) recoverable by the Funds from the Australian Taxation Office are recognised asreceivables in the Balance Sheets.Cash flows are included in the Cash Flow Statements on a gross basis. The GST component of cash flows, which isrecoverable from, or payable to, the taxation authority is classified as operating cash flows.(n)Expense RecognitionExpenses are recognised in the Statements of Comprehensive Income when the Funds have a present obligation (legalor constructive) as a result of a past event that can be reliably measured. Expenses are recognised in the Statements ofComprehensive Income if expenditure does not produce future economic benefits that qualify for recognition in theBalance Sheets.(o)Use of estimatesThe Funds make estimates and assumptions that affect the reported amounts of assets and liabilities within the nextfinancial year. Estimates are continually evaluated and based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances.For the majority of the Funds' financial instruments, quoted market prices are readily available. However, certain financialinstruments, for example, over-the-counter derivatives or unquoted securities are fair valued using valuation techniques.Where valuation techniques (for example, pricing models) are used to determine fair values, they are validated andperiodically reviewed by experienced personnel of the Responsible Entity, independent of the area that created them.Models are calibrated by back-testing to actual transactions to ensure that outputs are reliable.Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty),volatilities and correlations require management to make estimates. Changes in assumptions about these factors couldaffect the reported fair value of financial instruments.(p)Foreign CurrencyForeign Currency TransactionsTransactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the dateof the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate ofexchange ruling at the Balance Sheets date.Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different fromthose at which they were translated on initial recognition during the period or in a previous financial report, are recognisedin the profit or loss in the period in which they arise.Page 46