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McPHERSON’S LIMITED

 ANNUAL REPORT 2015

NOTE 1.  SUMMARY OF SIGNIFICANT 

ACCOUNTING POLICIES (CONTINUED)

(B) PRINCIPLES OF CONSOLIDATION 

(CONTINUED)

If the Group’s share of losses in an equity-accounted investment 

equals or exceeds its interest in the entity, including any other 

unsecured long-term receivables, the Group does not recognise 

further losses, unless it has incurred obligations or made payments on 

behalf of the other entity.
Unrealised gains on transactions between the Group and the joint 

venture are eliminated to the extent of the Group’s interest in this 

entity. Unrealised losses are also eliminated unless the transaction 

provides evidence of an impairment of the asset transferred. 

Accounting policies of the joint venture have been changed where 

necessary to ensure consistency with the policies adopted by the 

Group.

(C) SEGMENT REPORTING

Operating segments are reported in a manner consistent with the 

internal reporting provided to the chief operating decision maker.  The 

chief operating decision maker has been identified as the Managing 

Director of McPherson’s Limited. 

(D) FOREIGN CURRENCY TRANSLATION

Functional and presentation currency

Items included in the financial statements of each of the Group’s 

entities are measured using the currency of the primary economic 

environment in which it operates (‘the functional currency’).  The 

consolidated financial statements are presented in Australian dollars, 

which is McPherson’s Limited’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional 

currency using the exchange rates at the dates of the transactions. 

Foreign exchange gains and losses resulting from the settlement of 

such transactions and from the translation of monetary assets and 

liabilities denominated in foreign currencies at year end exchange 

rates are generally recognised in profit or loss. They are deferred in 

equity if they relate to qualifying cash flow hedges and qualifying net 

investment hedges or are attributable to part of the net investment in 

a foreign operation.

Group companies

The results and financial position of foreign operations that have a 

functional currency different from the presentation currency are 

translated into the presentation currency as follows:

 

•assets and liabilities for each balance sheet presented are 

translated at the closing rate at the date of the balance sheet;

 

•income and expenses for each income statement and statement of 

comprehensive income are translated at average exchange rates; 

and 

 

•all resulting exchange differences are recognised in other 

comprehensive income.

On consolidation, exchange differences arising from the translation of 

any net investment in foreign entities, and of borrowings and other 

financial instruments designated as hedges of such investments, are 

recognised in other comprehensive income. When a foreign operation 

is sold or any borrowings forming part of the net investment are 

repaid, the associated exchange differences are reclassified to profit or 

loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a 

foreign operation are treated as assets and liabilities of the foreign 

operation and translated at the closing rate.

(E) REVENUE RECOGNITION

Sales revenue

Sales revenue is measured at the fair value of consideration received 

or receivable. Amounts disclosed as revenue are net of returns, trade 

allowances and rebates. The Group recognises revenue when the 

amount of revenue can be reliably measured, it is probable that future 

economic benefits will flow to the entity and the goods are 

dispatched, or when title passes to the customer. 

Other income

Other income is recognised when the income is received or becomes 

receivable.

(F) INCOME TAX

The income tax expense or revenue for the period is the tax payable 

on the current period’s taxable income based on the applicable 

income tax rate for each jurisdiction adjusted by changes in deferred 

tax assets and liabilities attributable to temporary differences and to 

any unused tax losses. 
The current income tax charge is calculated on the basis of the tax 

laws enacted or substantively enacted at the end of the reporting 

period in the countries where the company’s subsidiaries and 

associates operate and generate taxable income. Management 

periodically evaluates positions taken in tax returns with respect to 

situations in which applicable tax regulation is subject to 

interpretation. It establishes provisions where appropriate on the basis 

of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on 

temporary differences arising between the tax bases of assets and 

liabilities and their carrying amounts in the consolidated financial 

statements. However, deferred tax liabilities are not recognised if they 

arise from the initial recognition of goodwill. Deferred income tax is also 

not accounted for if it arises from initial recognition of an asset or 

liability in a transaction other than a business combination that at the 

time of the transaction affects neither accounting nor taxable profit or 

loss. Deferred income tax is determined using tax rates (and laws) that 

have been enacted or substantially enacted by the end of the reporting 

period and are expected to apply when the related deferred income tax 

asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary 

differences and unused tax losses only if it is probable that future 

taxable amounts will be available to utilise those temporary 

differences and losses.
Deferred tax liabilities and assets are not recognised for temporary 

differences between the carrying amount and tax bases of 

investments in foreign operations where the parent entity is able to 

control the timing of the reversal of the temporary differences and it is 

probable that the differences will not reverse in the foreseeable future.
Current and deferred tax is recognised in profit or loss except to the 

extent that it relates to items recognised in other comprehensive 

income or directly in equity.  In this case, the tax is also recognised in 

other comprehensive income or directly in equity, respectively.

Investment Allowances

Companies within the Group may be entitled to claim special tax 

deductions for investments in qualifying assets (investment 

allowances).  The Group accounts for such allowances as tax credits, 

which means that the allowance reduces income tax payable and 

current tax expense.  

NOTES TO AND FORMING PART OF THE  

CONSOLIDATED FINANCIAL STATEMENTS CONTINUED