Home' Nufarm Annual Report : Nufarm Annual Report 2016 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
The group’s finance income and finance costs include the following: interest income, interest expense, dividend income,
dividends on preference shares issued classified as financial liabilities, the net gain or loss on the disposal of available-for-sale
financial assets, the net gain or loss on financial assets at fair value through profit or loss, the foreign currency gain or loss on
financial assets and financial liabilities, the gain on the remeasurement to fair value of any pre-existing interest in an acquiree
in a business combination, the fair value loss on contingent consideration classified as a financial liability, impairment losses
recognised on financial assets (other than trade receivables), the net gain or loss on hedging instruments that are recognised
in profit or loss, and the reclassification of net gains previously recognised in other comprehensive income.
Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or loss
on the date on which the group’s right to receive payment is established.
(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.
NOTES TO THE FINANCIAL STATEMENTS continued
NUFARM LIMITED ANNUAL REPORT 2016
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