53
FLEXIGROUP LIMITED FINANCIAL REPORT 2011
f. Government grants
Grants from the government are recognised at their fair
value where there is reasonable assurance that the grant
will be received and the Group will comply with all the
attached conditions.
Government grants relating to costs are deferred and
recognised in the income statement over the period
necessary to match them with the costs that they are
intended to compensate.
Government grants relating to the purchase of property,
plant and equipment are included in current liabilities as
other payables and are credited to the income statement
on a straight-line basis over the expected lives of the
related assets.
g. Income tax
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary diferences and to unused tax losses.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of
the reporting period in the countries where the Company’s
subsidiaries and associates operate and generate taxable
income. Management periodically evaluates positions taken
in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred tax assets and liabilities are recognised for
temporary diferences at the tax rates expected to apply
when the assets are recovered or liabilities are settled,
based on those tax rates which are enacted or substantively
enacted for each jurisdiction. The relevant tax rates are
applied to the cumulative amounts of deductible and taxable
temporary diferences to measure the deferred tax asset
or liability. An exception is made for certain temporary
diferences arising from the initial recognition of an asset
or a liability. No deferred tax asset or liability is recognised
in relation to these temporary diferences if they arose in a
transaction, other than a business combination, that at the
time of the transaction did not afect either accounting or
taxable proft or loss.
Deferred tax assets are recognised for deductible temporary
diferences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary diferences and losses.
Deferred tax liabilities and assets are not recognised for
temporary diferences between the carrying amount and tax
bases of investments in controlled entities where the parent
entity is able to control the timing of the reversal of the
temporary diferences and it is probable that the diferences
will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly
in equity.
Tax consolidation legislation
FlexiGroup Limited and its wholly-owned Australian
controlled entities have implemented the tax consolidation
legislation.
The head entity, FlexiGroup Limited, and the controlled
entities in the tax consolidated group, account for their own
current and deferred tax accounts. These tax amounts are
measured as if each entity in the tax consolidation was a
stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts,
FlexiGroup Limited also recognises the current tax liabilities
(assets) and the deferred tax assets arising from unused
tax losses and unused tax credits assumed from controlled
entities in the tax consolidation group.
Assets or liabilities arising under tax funding agreements
with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities
in the Group. Details about the tax funding agreement
are disclosed in note 6. Any diference between the
amounts assumed and amounts receivable or payable
under the tax funding agreement are recognised as a
contribution to (or distribution from) wholly-owned tax
consolidation entities.
h. Business combinations
The acquisition method of accounting is used to account
for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration
transferred for the acquisition of a subsidiary comprises
the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The
consideration transferred also includes the fair value of any
asset or liability resulting from a contingent consideration
arrangement and the fair value of any pre-existing equity
interest in the subsidiary. Acquisition-related costs are
expensed as incurred. Identifable assets acquired and
liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. On an
acquisition-by-acquisition basis, the Group recognises any
non-controlling interest in the acquiree either at fair value
or at the non-controlling interest’s proportionate share of
the acquiree’s net identifable assets.