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Whitehaven Coal Limited : Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) k) Provisions (continued) (i) Mine rehabilitation and closure (continued) At each reporting date the rehabilitation liability is re-measured in line with changes in discount rates, and timing or amount of the costs to be incurred. Changes in the liability relating to rehabilitation of mine infrastructure and dismantling obligations are added to or deducted from the related asset, other than the unwinding of the discount which is recognised as a finance cost in the income statement as it occurs. If the change in the liability results in a decrease in the liability that exceeds the carrying amount of the asset, the asset is written-down to nil and the excess is recognised immediately in the income statement. If the change in the liability results in an addition to the cost of the asset, the recoverability of the new carrying amount is considered. Where there is an indication that the new carrying amount is not fully recoverable, an impairment test is performed with the write-down recognised in the income statement in the period in which it occurs. The amount of the provision relating to rehabilitation of environmental disturbance caused by on-going production and extraction activities is recognised in the income statement as incurred. l) Revenue (i) Coal sold Revenue from the sale of coal is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Risk and rewards are considered to have passed to the buyer at the time of delivery which is usually on a Free On Board (FOB) basis. (ii) Rental income Revenue received before it is earned is recorded as unearned lease income in the balance sheet at its net present value determined by discounting the expected notional future cash flows at a pre-tax rate that reflects current market assessments of the time value of money. Rental income is recognised in the income statement on a straight-line basis over the term of the lease. (iii) Hire of plant The consolidated entity hires plant under operating leases to its subsidiaries and joint ventures. Revenue from the plant hire is recognised in the income statement as earned. m) Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. n) Finance income and expense Finance income comprises interest income on funds invested, dividend income, changes in the fair value of financial assets at fair value through profit or loss and foreign currency gains. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the consolidated entity’s right to receive payment is established. Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method, except where capitalised as part of a qualifying asset. Foreign currency gains and losses are reported on a net basis. 50
Annual Report 2009