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Notes to the consolidated fnancial statements (continued)

for the year ended 30 June 2011

33. Signifcant accounting policies (continued)

33.1 Signifcant accounting policies applicable to all Group entities (continued)

33.1.5 Share-based payments (continued)

Cash-settled transactions are recognised as a liability at fair value. Until the liability is settled, the fair value of the liability is remeasured at each reporting date, and at the date of settlement, with the changes in fair value recognised in proft or loss for the period.

Equity-settled transactions with cash alternative (Company’s choice) are accounted for as a cash-settled share-based payment transaction to the extent that the Company has a present obligation to settle in cash. Otherwise, the transaction is accounted for as an equity-settled arrangement.

33.1.6 Income tax

Income tax expense comprises current and deferred tax and is recognised in the proft or loss except to the extent it relates to items recognised in equity or in other comprehensive income.

Current tax consists of the expected tax payable on the taxable income for the year, after any adjustments in respect of previous years, using tax rates enacted or substantially enacted at the reporting date.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for fnancial reporting purposes and the amounts used for taxation purposes. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised where it is probable that future taxable profts will be available against which the temporary differences can be utilised. The tax effect of income tax losses available for carry forward are recognised as an asset when it is probable that future taxable profts will be available against which these losses can be utilised. For presentation purposes, deferred tax assets and deferred tax liabilities have been offset if there is a legally enforceable right to offset current tax assets and liabilities and where they relate to income taxes levied by the same taxation authority on the same taxable entity or entities within the Suncorp Group. AASB 1038 Life Insurance Contracts requires shareholder and policyowner tax to be included in income tax expense in the proft or loss. The majority of life insurance tax is allocated to policy liabilities and does not affect proft attributable to owners of the Company.

Tax consolidation

The Company (2010: Suncorp-Metway Ltd) is the head entity in the tax-consolidated group comprising all the Australian wholly‑owned subsidiaries. As a consequence, all members of the tax-consolidated group are taxed as a single entity.

33.1.7 Goods and services tax (GST)

Revenues, expenses and assets are recognised net of GST, except where the amount of GST incurred is not recoverable. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or the amount of expense. Receivables, payables and the provision for outstanding claims are stated with the amount of GST included.

33.1.8 Cash and cash equivalents

Cash and cash equivalents include cash on hand, cash at branches, cash on deposit, balances with the Reserve Bank of Australia (RBA), highly liquid short-term investments and money at short call. Receivables due from other banks are classifed as cash equivalents for cash fow purposes. They are measured at face value or the gross value of the outstanding balance which is considered a reasonable approximation of fair value. Bank overdrafts are shown within fnancial liabilities unless there is a right of offset.

33.1.9 Receivables due from and payables due to other banks

Receivable due from and payables due to other banks include nostro balances and settlement account balances. They are carried at the gross value of the outstanding balance.

33.1.10 Non-derivative fnancial assets

(a) Financial assets at fair value through proft or loss Financial assets at fair value through proft or loss are classifed as either held for trading or are designated as such upon initial recognition. Financial assets are designated at fair value through proft or loss if the Suncorp Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Suncorp Group’s documented risk management or investment strategy. They are initially recognised on the trade date at which the Suncorp Group becomes a party to the contractual provisions of the instrument and are initially measured at fair value. Transaction costs are recognised in the proft or loss as incurred. The assets are measured at fair value each reporting date based on the quoted market price where available. Where quoted prices are not available, alternative valuation techniques are used. Movements in the fair value are taken immediately to the proft or loss. The Suncorp Group’s fnancial assets at fair value through proft or loss include trading securities and investment securities. (b) Loans and other receivables

Loans and other receivables are fnancial assets with fxed or determinable payments that are not quoted in an active market. These include all forms of lending and direct fnance provided to Banking customers. They are initially recognised on the date that they originated. For Banking loans, this would be when cash is advanced to customers. They are initially recognised at fair value plus any directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method, less any impairment losses.