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Whitehaven Coal Limited : Annual Report 2013
118 Whitehaven Coal Limited Annual Report 2013 Notes to the Financial Statements 30 June 2013 b) Foreign currency translation Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date. Foreign exchange di erences arising on translation are recognised in the statement of comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. c) Segment reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete nancial information is available. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the Board of Directors. The group aggregates two or more operating segments when they have similar economic characteristics, and the segments are similar in each of the following respects: • nature of the products and services, • nature of the production processes, • type or class of customer for the products and services, • methods used to distribute the products or provide the services, and if applicable • nature of the regulatory environment. d) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term deposits. For the purpose of the Statement of Cash Flows, bank overdrafts that are repayable on demand and form an integral part of the consolidated entity's cash management are included as a component of cash and cash equivalents. e) Trade and other receivables Trade receivables, which generally have 5-21 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the e ective interest method, less an allowance for impairment. Recoverability of trade receivables is reviewed on an ongoing basis. Receivables due in more than one year are recognised initially at fair value, discounted back to net present value based on appropriate discount rates for the consolidated entity. f) Inventories Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of coal inventories is determined using a weighted average basis. Cost includes direct material, overburden removal, mining, processing, labour, mine rehabilitation costs incurred in the extraction process and other xed and variable overhead costs directly related to mining activities. Inventory are classi ed as follows: • Run of mine: material extracted through the mining process. • Finished goods: products that have passed through all stages of the production process. • Consumables: goods or supplies to be either directly or indirectly consumed in the production process. g) Derivative nancial instruments The consolidated entity uses derivative nancial instruments to hedge its risks associated with foreign currency and interest rate uctuations arising from operating activities. Derivative nancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into, and are subsequently remeasured to fair value. Any gains and losses arising from changes in the fair value of derivatives are accounted for as described below: 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Annual Report 2012