ar11-lr-final

Notes to and forming part of the Financial Statements – continued
For the 52 WEEK period ended 31 July 2011
Notes to and forming part of the Financial Statements – continued
For the 52 WEEK period ended 31 July 2011
1. Summary Of Accounting Policies (CONTINUED) (f) Income tax
1. Summary Of Accounting Policies (CONTINUED)
(d) Revenue recognition
The income tax expense or revenue for the period is the tax
(k) Trade receivables
Revenue is measured at the fair value of the consideration
payable on the current year’s taxable income based on the
Trade receivables are recognised initially at fair value. Trade
received or receivable. Amounts disclosed as revenue are net of
income tax rate adjusted by changes in deferred tax assets and
receivables arise from sales made to customers on credit or
returns, trade allowances and duties and taxes paid. Revenue is
liabilities attributable to temporary differences between the tax
through the collection of rebates from suppliers not otherwise
recognised for the major business activities as follows:
bases of assets and liabilities and their carrying amounts in the
deducted from suppliers’ payable accounts.
financial statements, and to unused tax losses.
• Retail Sales – Revenue is recognised at the point of sale
Trade receivables are usually due for settlement no more than
Deferred tax assets and liabilities are recognised for temporary
when delivery takes place and the associated risks of
120 days from the date of recognition for intercompany debtors,
differences at the tax rates expected to apply when the assets
ownership have passed to the customer. Products sold
and no more than 60 days for other debtors.
are recovered or liabilities are settled, based on those tax rates
to customers have a right of return and an estimate for
which are enacted or substantively enacted. The relevant tax
Collectability of trade receivables is reviewed on an ongoing
such returns are provided for at the time of sale based on
rates are applied to the cumulative amounts of deductible and
basis. Debts which are known to be uncollectible are written off.
historical return rates.
taxable temporary differences to measure the deferred tax asset
A provision for impaired receivables is established when there is
• Vouchers – Revenue from the sale of vouchers (gift cards, or liability.
objective evidence that the Group will not be able to collect all
refunds and Christmas club) are recognised when the voucher
amounts due according to the original terms of receivables. The
Deferred tax assets are recognised for deductible temporary
is redeemed and the customer purchases goods, or when
amount of the provision is the difference between the asset’s
differences and unused tax losses only if it is probable that
the customer voucher is no longer expected to be redeemed,
carrying amount and the estimated recoverable amount. The
future taxable amounts will be available to utilise those
based on an analysis of historical redemption rates.
amount of the provision is recognised in the income statement.
temporary differences and losses. Deferred tax liabilities
• Lay-by sales – Lay-by sales are recognised when legal title to and assets are not recognised for temporary differences
(l) Leases
the goods passes to the customer.
between the carrying amount and tax bases of investments in
Leases in which a significant portion of the risks and rewards of
subsidiaries and associates where the parent entity is able to
ownership are retained by the lessor are classified as operating
• Interest revenue – Interest revenue is recognised when it is
control the timing of the reversal of the temporary differences
leases. Payments made under operating leases (net of any
earned, using the effective interest method.
and it is probable that the differences will not reverse in the
incentives received from the lessor) are charged to the income
• Dividend income – Dividend income is recognised when the foreseeable future.
statement on a straight-line basis over the period of the lease.
Lease income from operating leases is recognised in income on
dividend is declared.
Current and deferred tax balances attributable to amounts
a straight-line basis over the lease term.
(e) Property, plant and equipment
recognised in equity are similarly recognised in equity.
(m) Intangible assets
Cost
(g) Goods and services tax (“GST”)
Computer software – All costs directly incurred in the purchase
The cost of purchased property, plant and equipment is the The income statement and statement of cash flows have
or development of major computer software or subsequent
value of the consideration given to acquire the assets and been prepared so that all components are stated exclusive of
upgrades and material enhancements, which can be reliably
the value of other directly attributable costs, which have been GST. All items in the balance sheet are stated net of GST with
measured and are not integral to a related asset, are capitalised
incurred in bringing the assets to the location and condition the exception of receivables and payables which include GST
as intangible assets. Direct costs may include internal payroll
necessary for their intended use.
invoiced.
and on-costs for employees directly associated with the project.
Cost may also include transfers from equity of any gains/losses (h) Cash and cash equivalents
Costs incurred on computer software maintenance are expensed
on qualifying cash flow hedges of foreign currency purchases of Cash and cash equivalents includes cash on hand, deposits
to the income statement as they are incurred.
property, plant and equipment.
held at call with financial institutions, other short-term, highly
The cost of self-constructed assets includes the cost of all liquid investments with original maturities of three months or
Computer software is amortised over the period of time during
materials used in construction, direct labour on the project, less that are readily convertible to known amounts of cash and
which the benefits are expected to arise, being two to ten
financing costs, and costs of obtaining regulatory consents that which are subject to an insignificant risk of changes in value,
years. Amortisation commences once the computer software is
are directly attributable to the project.
and bank overdrafts.
available for use.
Costs incurred on repairs and maintenance are charged to the (i) Inventories
(n) Impairment of non-financial assets
income statement during the financial period in which they are Inventories are stated at the lower of cost and net realisable
Assets that are subject to amortisation or depreciation are
incurred.
value. Cost comprises direct purchase cost and an appropriate
reviewed annually for impairment or whenever events or changes
proportion of supply chain variable expenditure. Cost also
in circumstances indicate that the carrying amount of the asset
Depreciation
includes the transfer from equity of any gains or losses on
may not be recoverable.
Property, plant and equipment are depreciated on a straight line
qualifying hedges related to inventories. Costs are assigned to
An impairment loss is recognised for the amount by which the
basis to allocate the cost, less any residual value, over their
individual items of inventory on the basis of weighted average
asset’s carrying amount exceeds its recoverable amount. The
useful life.
costs. Net realisable value is the estimated selling price in the
recoverable amount is the higher of an asset’s fair value less costs
Estimated useful life of property, plant and equipment:
ordinary course of business less the estimated costs necessary
to sell and value in use. For the purposes of assessing impairment,
Freehold land
indefinite
to make the sale.
assets are grouped at the lowest levels for which there are
Freehold buildings
50 to 100 years
(j) Investments in subsidiaries
separately identifiable cash flows (cash generating units).
Store fittings and equipment 4 to 12 years
Investments are stated at the lower of cost or net realisable
(o) Employee benefits
Vehicles
5 to 8 years
value.
(i) Wages and salaries, annual leave and sick leave
Work in progress
not depreciated
Liabilities for wages and salaries, including non-monetary
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
benefits, annual leave and accumulating sick leave expected
to be settled within 12 months of the reporting date are
recognised in provisions in respect of employees’ services up to
the reporting date and are measured at the amounts expected
Gains and losses on disposals are determined by comparing
to be paid when the liabilities are settled. Liabilities for nonaccumulating
sick leave are recognised when the leave is taken
proceeds with the carrying amount. These gains and losses are
included in the income statement.
and measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in the provision
for employee benefits and measured as the present value of
expected future payments to be made in respect of services
provided by employees up to the reporting date. Consideration
is given to expected future wage and salary levels, experience
of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date
on New Zealand government bonds with terms to maturity that
match, as closely as possible, the estimated future cash outflows.
(iii) Performance incentive payments
The Group recognises a liability and an expense for performance
incentive payments (bonuses) based on a formula that takes
into consideration individual performance and company
performance linked to the profit attributable to the company’s
shareholders. The Group recognises a provision where
contractually obliged or where there is a past practice that has
created a constructive obligation.
(iv) Equity settled share-based compensation
Equity settled share-based compensation benefits are provided
to employees in accordance with the Group’s employee executive
share rights plan. The fair value of share rights granted under
the plan are recognised as an employee benefit expense with
a corresponding increase in equity. The fair value is measured
at grant date and recognised over the period during which the
employees become unconditionally entitled to the share rights.
The fair value at grant date of the share right’s are
independently determined using an appropriate valuation model
that takes into account the exercise price, the term of the share
right, the vesting and performance criteria, the impact of dilution,
the non-tradeable nature of the share right, the share price at
grant date and expected price volatility of the underlying share,
the expected dividend yield and the risk-free interest rate for the
term of the share right.
At each balance date, the Group revises its estimate of the
number of share rights that are expected to become exercisable.
The employee benefit expense recognised each period takes
into account the most recent estimate.
Upon the vesting of share rights, the balance of the share-based
payments reserve relating to the share rights is netted against
the cost of treasury stock purchased to satisfy the obligation
of settling the share based payment and any residual balance
transferred to retained earnings.
(v) Cash settled share-based payments
The Group introduced a cash settled share-based compensation
plan for holders of ‘performance shares’ (refer note 15) granted
in November 2007.
Cash-settled share-based payments are recognised at the fair
value of the liability incurred and are expensed over the period
of the plan. The liability is remeasured at each balance sheet
date to its fair value, with all changes recognised immediately
as either a profit or a loss. Fair value is determined based on
management’s assessment of achieving the share price targets.
(vi) Employee share purchase plan
The employee share purchase plan provides employees with the
opportunity to acquire shares in the Group. The fair value of shares
granted is recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured at
grant date and recognised over the vesting period. The fair value
of the shares granted has been assessed as being equal to the
discount provided to participants when the shares are granted.
FINANCIAL STATEMENTS 36
FINANCIAL STATEMENTS 37