Page 48 - Bauxite Resources Annual Report 2014

46 | Bauxite Resources Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements cont.
Annual Report 2014 Bauxite Resources 46
Investments in Associates
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the entity but is not control or joint control of those policies. Investments in associates
are accounted for in the consolidated financial statements by applying the equity method of accounting, whereby the investment
is initially recognised at cost (including transaction costs) and adjusted thereafter for the post-acquisition change in the Group’s
share of net assets of the associate. In addition, the Group’s share of the profit or loss of the associate is included in the
Group’s profit or loss.
The carrying amount of the investment includes, when applicable, goodwill relating to the associate. Any discount on acquisition,
whereby the Group’s share of the net fair value of the associate exceeds the cost of investment, is recognised in profit or loss in
the period in which the investment is acquired.
Profits and losses resulting from transactions between the Group and the associate are eliminated to the extent of the Group’s
interest in the associate.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group discontinues
recognising its share of further losses unless it has incurred legal or constructive obligations or made payments on behalf of the
associate. When the associate subsequently makes profits, the Group will resume recognising its share of those profits once its
share of the profits equals the share of the losses not recognised.
(c) Interests in Joint Ventures Arrangements
Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous
decisions about relevant activities are required.
Separate joint venture entities providing joint venturers with an interest to net assets are classified as a joint venture and
accounted for using the equity method. Refer to Note 1(b) for a description of the equity method of accounting.
Joint venture operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure to
each liability of the arrangement. The Group’s interests in the assets, liabilities, revenue and expenses of joint operations are
included in the respective line items of the consolidated financial statements.
Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties’ interests. When the
Group makes purchases from a joint operation, it does not recognise its share of the gains and losses from the joint
arrangement until it resells those goods/assets to a third party.
(d) Segment reporting
A business segment is identified for a group of assets and operations engaged in providing products or services that are subject
to risks and returns that are different to those of other business segments. A geographical segment is identified when products
or services are provided within a particular economic environment subject to risks and returns that are different from those of
segments operating in other economic environments.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts
and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of
interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised
and the amount ultimately received is interest revenue.
Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and
rewards of ownership of the goods and the cessation of all involvement in those goods.
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate
inherent in the instrument.
Proceeds from a Research & Development tax incentive is recognised as a government grant in accordance with AASB 120
Accounting for Government Grants, and disclosed as Other Income.