NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (B) STATEMENT OF COMPLIANCE (CONTINUED) Reference Title Summary Application Date of Standard* Impact on Company Financial Report Application date for Company AASB Interpretation 12 Service Concession Arrangements Clarifies how operators recognise the infrastructure as a financial asset and/or an intangible asset – not as property, plant and equipment. 1 January 2007 Refer to AASB 2007-2 above. 1 July 2007 *Designates the beginning of the applicable annual reporting period. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). The financial report also complies with International Financial Reporting Standards (IFRS). (C) SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (I) SIGNIFICANT ACCOUNTING JUDGEMENTS In the process of applying the Company's accounting policies, management has not made any judgements, apart from those involving estimations, which have a significant effect on the amounts recognised in the financial statements. (II) SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. At balance date there are however no key estimates and assumptions that could have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period. (D) REVENUE RECOGNITION Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (I) DAIRY SERVICE LEVY The Primary Industries (Excise) Levies Act 1999 provides the basis for the collection of Dairy Service Levies. The Company is entitled to receive amounts equal to amounts received by the Commonwealth under the Dairy Produce Act 1986. Dairy Service Levy revenue is brought to account at the time the milk is harvested, when it is probable that the levy will be received by the Company and the value of the levy can be reliably measured. That portion of levies which has been collected by the government collection agency but not remitted to the Company at balance date is reported as levies receivable. Remaining amounts receivable relating to milk harvested in respect of which processors have not remitted levies to the government collection agency, are reported as accrued levies receivable. (II) GOVERNMENT MATCHING PAYMENTS The estimated receipt from Government matching payments is accrued when expenditure is incurred, up to the lesser of: o 0.5% of the gross value of whole milk production for the year, and o 50% of the amount that is spent by the Company on qualifying research and development expenditure. Any unmatched qualifying R&D expenditure is carried forward and becomes subject to matching payment in the next financial year. That portion of Government matching payments which is owed but not remitted to the Company at balance date is reported as Government matching payments receivable. (III) COMPANY CONTRIBUTIONS Revenue from company contributions is recognised when an invoice is raised, in accordance with the terms specified in contracts with co-funding partners. (IV) INTEREST INCOME Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (E) LEASES The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Leases in which the lessor retains substantially all the risks and benefits incidental to ownership of a leased item are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense.
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