Page 52 - Bauxite Resources Annual Report 2013

Notes to the Financial Statements cont.
(t) Critical accounting estimates and judgements
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are:
(u) Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes
option pricing model, using the assumptions detailed in note 27.
(v) Impairment of assets
The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group
that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using estimated net
realisable values which incorporate various assumptions such as current indicative values and expected future cash inflows.
2. FINANCIAL RISK MANAGEMENT
The Group’s activities potentially expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and
price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the Group.
Risk management is carried out by the full Board of Directors as the Group believes that it is crucial for all Board members to be
involved in this process. The Chairman, with the assistance of senior management as required, has responsibility for identifying,
assessing, treating and monitoring risks and reporting to the Board on risk management.
(a) Market risk
(i) Foreign exchange risk
As all operations are currently within Australia, the Group is not exposed to material foreign exchange risk.
(ii) Price risk
Given the current level of operations, the Group is not exposed to price risk.
(iii) Interest rate risk
The Group is exposed to movements in market interest rates on cash and cash equivalents. The Group policy is to monitor
the interest rate yield curve out to six months to ensure a balance is maintained between the liquidity of cash assets and the
interest rate return. The entire balance of cash and cash equivalents for the Group and the parent entity $43,881,153 (2012:
$48,031,090) is subject to interest rate risk. The proportional mix of floating interest rates and fixed rates to a maximum of
six months fluctuate during the year depending on current working capital requirements. The weighted average interest rate
received on cash and cash equivalents by the Group and the parent entity was 4.66% (2012: 5.75%).
Sensitivity analysis
At 30 June 2013, if interest rates had changed by -/+ 80 basis points from the weighted average rate for the year with all other
variables held constant, post-tax loss for both the Group and the parent entity would have been $367,649 lower/higher (2012:
$404,631 lower/higher) as a result of lower/higher interest income from cash and cash equivalents.
50 Bauxite Resources Annual Report 2013