Qantas 2007 Annual Report Download - page 86

84 Qantas |Annual Report 2007
(U) Employee Benefits continued
Employee Termination Benefits
Provisions for termination benefits are only recognised when there is a
detailed formal plan for the termination and where there is no realistic
possibility of withdrawal.
(V) Provisions
A provision is recognised when there is a present legal or constructive
obligation as a result of a past event and it is probable that an outflow
of economic benefits will be required to settle the obligation, the timing
or amount of which is uncertain.
If the effect is material, a provision is determined by discounting the
expected future cash flows required to settle the obligation at a pre-tax
rate that reflects current market assessments of the time value of money
and the risks specific to the liability. The unwinding of the discount is
treated as a finance charge.
Dividends
A provision for dividends payable is recognised in the financial year in
which the dividends are declared, for the entire amount, regardless of the
extent to which the dividend will be paid in cash.
Insurance
Qantas is a licensed self-insurer under the New South Wales Workers’
Compensation Act, the Victorian Accident Compensation Act and the
Queensland Workers’ Compensation and Rehabilitation Act. Qantas has
made provision for all notified assessed workers’ compensation liabilities,
together with an estimate of liabilities incurred but not reported, based on
an independent actuarial assessment discounted using government bond
rates that have maturity dates approximating the terms of Qantas’
obligations. Workers’ compensation for all remaining employees is
commercially insured.
(W) Earnings per Share
Basic earnings per share is determined by dividing the Qantas Group’s net
profit attributable to members of Qantas by the weighted average number
of shares on issue during the current year (refer Note 31).
Diluted earnings per share is calculated after taking into account the
number of ordinary shares to be issued for no consideration in relation
to dilutive potential ordinary shares (refer Note 31).
(X) Cash and Cash Equivalents
Cash and cash equivalents includes cash at bank and on hand, cash at
call and short-term money market securities and term deposits with an
original maturity of three months or less.
(Y) Net Finance Costs
Net finance costs comprise interest payable on borrowings calculated
using the effective interest method, interest receivable on funds invested,
dividend and coupon income, and foreign exchange gains and losses.
Finance income is recognised in the Income Statement as it accrues, using
the effective interest method. Where interest costs relate to qualifying
assets, they are capitalised to the cost of the assets. Qualifying assets are
assets that necessarily take a substantial period of time to be made ready
for intended use. Where funds are borrowed generally, borrowing costs
are capitalised using the average interest rate applicable to the Qantas
Group’s debt facilities being 7.4 per cent (2006: 7.2 per cent) in the
current year. During the year, borrowing costs totalling $83.3 million
(2006: $68.4 million) were capitalised into the cost of qualifying assets.
(Z) Interest-bearing Liabilities
Interest-bearing liabilities are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing liabilities are stated at amortised cost with any difference
between cost and redemption value being recognised in the Income
Statement over the period of the borrowings on an effective interest basis.
Interest-bearing liabilities that are designated as hedged items are subject
to measurement under the hedge accounting requirements.
(AA) Assets Classified as Held for Sale
Immediately before classification as held for sale, the measurement
of the assets is brought up-to-date in accordance with applicable
accounting standards. Then, on initial classification as held for sale,
assets are recognised at the lower of carrying amount and fair value
less costs to sell.
Impairment losses on initial classification as held for sale are included
in the Income Statement, even when there is a revaluation. The same
applies to gains and losses on subsequent remeasurement.
(AB) Share Capital
Ordinary Shares
Incremental costs directly attributable to issue of ordinary shares are
recognised as a deduction from equity, net of any related income tax
benefit.
Repurchase of Share Capital
When share capital recognised as equity is repurchased, the amount of the
consideration paid, including directly attributable costs, is recognised as a
deduction from equity.
In Qantas’ Financial Report, the transactions of the Qantas sponsored
employee share plan trust are treated as being executed directly by Qantas
(as the trust acts as Qantas’ agent). Accordingly, repurchased shares held
by the trust are recognised as treasury shares and deducted from equity.
(AC) Comparatives
Various comparative balances have been reclassified to align with current
year presentation. These amendments have no material impact on the
Financial Statements.
Notes to the Financial Statements
for the year ended 30 June 2007
1. Statement of Significant Accounting Policies continued