Home' Nufarm Annual Report : Nufarm Annual Report Contents 3. Significant accounting policies (continued)
(m) Lease payments (continued)
Determining whether an arrangement contains a lease
At the inception of an arrangement, the group determines whether such an arrangement is or contains a lease. A specific
asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement
conveys the right to use the asset if the arrangement conveys to the group the right to control the use of the underlying asset.
At inception or upon reassessment of the arrangement, the group separates payments and other consideration required by
such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the group
concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and liability are recognised at
an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an
imputed finance charge on the liability is recognised using the group’s incremental borrowing rate.
(n) Finance income and finance costs
Finance income comprises interest income on funds invested, changes in the fair value of financial assets at fair value through
profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it
accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings, transaction costs, unwinding of the discount on provisions, changes
in the fair value of financial assets classified as fair value through profit or loss, dividends on preference shares classified as
liabilities, impairment losses recognised on financial assets and losses on hedging instruments that are recognised in profit
or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset
are recognised in profit or loss using the effective interest rate method.
(o) Income tax
Income tax expense comprises current and deferred tax. Current and deferred taxes are recognised in profit or loss except to
the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following
temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled
entities to the extent that they will probably not reverse in the foreseeable future. In addition, deferred tax is not recognised
for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that
are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right
to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that
it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of cash dividends are recognised at the same time as the liability
to pay the related dividend is recognised. The group does not distribute non-cash assets as dividends to its shareholders.
(i) Tax consolidation
The company and its wholly-owned Australian resident entities are part of a tax-consolidated group. As a consequence,
all members of the tax-consolidated group are taxed as a single entity. The head entity within the tax-consolidated group
is Nufarm Limited.
NOTES TO THE FINANCIAL STATEMENTS continued
68 | NUFARM LIMITED ANNUAL REPORT 2014
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