39  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES i) Basis of preparation OzForex Group Limited (the Company) is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The principal accounting policies adopted in the preparation of this financial report and that of the previous financial year are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. OzForex Group Limited is a for-profit entity for the purpose of preparing the financial statements. OzForex Group Limited and its subsidiaries together are referred to in this financial report as the Group. The Directors have the power to amend and reissue the financial report. Compliance with IFRS as issued by the IASB Compliance with Australian Accounting Standards ensures that the financial report complies with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Consequently, this financial report has also been prepared in accordance with and complies with IFRS as issued by the IASB. Historical cost convention This financial report has been prepared under the historical cost convention, as modified by the revaluation of certain assets and liabilities (including derivative instruments) at fair value. Critical accounting estimates and significant judgements The preparation of the financial report in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the accounting policies. The notes to the financial statements set out areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the Group and the consolidated financial report such as: •• Fair value of financial instruments (Notes 1(viii) and 25). •• Accounting for remuneration arrangements (Notes 1(xiv), 21 and 22). Estimates and judgments are continually evaluated and are based on historical experience and other factors, including reasonable expectations of future events. Management believes the estimates used in preparing the financial report are reasonable. Actual results in the future may differ from those reported and therefore it is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from our assumptions and estimates could require an adjustment to the carrying amounts of the assets and liabilities reported. New Accounting Standards and amendments to Accounting Standards that became effective in the current financial year When a new accounting standard is first adopted, any change in accounting policy is accounted for in accordance with the specific transitional provisions (if any), otherwise retrospectively. The Group’s and parent entity’s assessment of the impact of the key new Accounting standards, amendments to Accounting Standards and Interpretations is set out below. The following key Accounting Standards and amendments to Accounting Standards became applicable in the current financial year: AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities – AASB 2012-3 amends AASB 132 Financial Instruments: Presentation to clarify that to set off an asset with a liability: – the right of set-off must be available and legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy – certain gross settlement mechanisms (such as through a clearing house) may be equivalent to net settlement – master netting arrangements where the legal right of offset is only enforceable on the occurrence of a future event (such as default of the counterparty) continue to not meet the requirements for netting. The adoption of AASB 2012-3 had no material impact on the Group. AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements – AASB 2011-4 removes the individual Key Management Personnel disclosure requirements from AASB 124 Related Party Disclosures, and is effective for annual reporting periods beginning on or after 1 July 2013. The adoption of AASB 2011-4 had no material impact on the Group. 40  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) i) Basis of preparation (continued) New Accounting Standards, amendments to Accounting Standards and Interpretations that are not yet effective AASB 9 Financial Instruments and consequential amendments – AASB 9 will replace AASB 139 Financial Instruments: Recognition and Measurement. It will lead to changes in the accounting for financial instruments, primarily relating to: Financial assets: A financial asset is measured at amortised cost only if it is held within a business model whose objective is to collect contractual cash flows and the asset gives rise to cash flows on specified dates that are payments solely of principal and interest (on the principal amount outstanding). All other financial assets are measured at fair value. Changes in fair value of financial assets carried at fair value are reported in the income statement. Financial liabilities: The component of change in fair value of financial liabilities designated at fair value through profit or loss due to an entity’s own credit risk are presented in other comprehensive income, unless this creates an accounting mismatch. If a mismatch is created or enlarged, all changes in fair value (including the effects of credit risk) are presented in profit or loss. These requirements may be applied early without applying all other requirements of AASB 9. Hedge accounting: Hedge accounting is more closely aligned with financial risk management, and may be applied to a greater variety of hedging instruments and risks. All other key requirements for classification and measurement of financial liabilities have been carried forward unamended from AASB 139. The recognition and derecognition requirements in AASB 139 have also been retained and relocated to AASB 9 unamended. AASB 9 is effective for annual reporting periods beginning on or after 1 January 2018. The Group will first apply AASB 9 in the financial year beginning 1 April 2018. The Group is continuing to assess the full impact of the new requirements on the consolidated financial statements. AASB 15 Revenue from Contracts with customers – The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for services. The new standard is based on the principle that revenue is recognised when control transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. AASB 15 is effective for annual periods beginning on or after 1 January 2017. The Group will first apply AASB 15 in the financial year beginning 1 April 2017. The impact of AASB 15 on the Group’s financial statements on initial application has not yet been assessed. ii) Principles of consolidation Subsidiaries The consolidated financial report comprises the assets and liabilities of all subsidiaries of OzForex Group Limited (“the Company”) as at 31 March 2015 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the Group has the power to direct the relevant activities, exposure to significant variable returns and the ability to utilise power to affect the Group’s own returns. The determination of control is based on current facts and circumstances and is continuously assessed. The acquisition method of accounting is used to account for business combinations by the Group (refer to Note 1(xviii)). Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Investments in subsidiaries are accounted for at cost in the separate financial statements of OzForex Limited in accordance with AASB Separate Financial Statements. iii) Segment reporting Operating segments are identified on the basis of internal reports to senior management about components of the Group that are regularly reviewed by senior management and the board of directors who have been identified as the chief operating decision makers, in order to allocate resources to the segment and to assess its performance. Information reported to senior management and the board of directors for the purposes of resource allocation and assessment of performance is specifically focused on core products and services offered, comprising five reportable segments as disclosed in Note 2. Information about products and services and geographical segments is based on the financial information used to produce the Group’s financial statements. 41  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 iv) Foreign currency translations Functional and presentation currency Items included in the financial statements of foreign operations are measured using the currency of the primary economic environment in which the foreign operation operates (the functional currency). The Group’s financial statements are presented in Australian dollars, which is the OzForex Group Limited’s functional currency and the Group’s presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as a result of meeting net investment hedge accounting requirements. Group Companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: •• Assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of the Statement of Financial Position •• Income and expense for each Statement of Comprehensive Income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and •• All resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit and loss, as part of the gain or loss on sale. v) Revenue Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised for the major revenue streams as follows: Interest income Interest income is recognised using the effective interest rate method. When a receivable is impaired, the group reduces the carrying value amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Fee and commission income Fee and commission income consists of the margin generated from foreign currency spreads, fees charged on low-value transactions and the cost or benefit of the Group’s hedging policy. The cost or benefit of the Group’s hedging policy is the result of changes in exchange rates between the time when a client rate is agreed and the subsequent hedge transaction is entered. As a result of timing differences inherent to OzForex Group Limited’s policy of aggregating and netting foreign currency contracts, these two balances should be viewed in combination to give a true reflection of revenue generated for the period. Fee and commission income is presented inclusive of realised and unrealised income earned from the sale of foreign currency contracts to customers. (i) Unrealised gain/loss on foreign exchange contracts Gains and losses on foreign exchange contract financial assets/liabilities arise from fair valuation of foreign exchange contract financial assets/liabilities recognised in profit and loss. (ii) Retranslation of foreign exchange assets and liabilities Gains and losses arise from the retranslation of foreign currency denominated assets/liabilities into functional currency. Fee and commission expense Fee and commission expenses are transaction costs which relate to fees paid to partners and transactional banking fees. Dividends and distributions Dividends and distributions are recognised as income when the entity becomes entitled to the dividend or distribution. 42  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) vi) Income taxes The income tax expense for the financial year is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences 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 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 income tax is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their respective carrying amounts which give rise to a future tax benefit, or where a benefit arises due to unused tax losses, but are only recognised in both cases to the extent that it is probable that future taxable amounts will be available to utilise those temporary differences or tax losses. Deferred tax liabilities are recognised when such temporary differences will give rise to taxable amounts being payable in future periods. Deferred tax assets and liabilities are recognised at the tax rates expected to apply when the assets are recovered or the liabilities are settled. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when there is a legally enforceable right to offset and an intention to either settle on a net basis, or realise the asset and settle the liability simultaneously. Current and deferred taxes attributable to amounts recognised directly in equity are also recognised directly in equity. The Group and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 15 October 2013. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities current and deferred tax is recognised in profit and loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Comparative changes Prior period comparatives have been restated to correct a misclassification of tax resulting from the treatment of IPO expenses which were finalised during the year ended 31 March 2015. Deferred tax assets have been restated by $3,266,000 and current tax liabilities have been restated by ($3,266,000) as at 31 March 2014. There was nil impact to the Statement of Comprehensive Income. vii) Dividends Provision for dividends to be paid by the Group are recognised on the Statement of Financial Position as a liability and a reduction in retained earnings when the dividend has been declared. viii) Derivative instruments Derivative instruments entered into by the Group include forward rate agreements and options in the foreign exchange markets. These derivative instruments are principally used for the risk management of existing financial assets and liabilities. All derivatives, including those used for Statement of Financial Position hedging purposes, are recognised on the Statement of Financial Position and are disclosed as an asset where they have a positive fair value at balance date or as a liability where the fair value at balance date is negative. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently remeasured to their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. Movements in the carrying amounts of derivatives are recognised in the Statement of Comprehensive Income, unless the derivative meets the requirements for cash flow or net investment hedge accounting. 43  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 ix) Hedge accounting The Group designates certain derivatives or financial instruments as hedging instruments in qualifying hedge relationships. On initial designation of the hedge, the Group documents the hedge relationship between hedging instruments and hedged items, as well as its risk management objectives and strategies. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether hedging relationships have been and will continue to be highly effective. Derivatives or financial instruments of the Group are designated as net investment hedge relationships. Net investment hedges For a derivative or borrowing designated as hedging a net investment in a foreign operation, the gain or loss on revaluing the derivative or borrowing associated with the effective portion of the hedge is recognised in the foreign currency translation reserve and subsequently released to the income statement when the foreign operation is disposed of. The ineffective portion is recognised in the Statement of Comprehensive Income immediately. The fair values of various financial instruments used for hedging purposes are disclosed in Note 25. x) Investments and other financial assets Classification With the exception of derivatives which are classified separately in the Statement of Financial Position, the remaining investments in financial assets are classified in the following categories: other financial assets at fair value through profit or loss, loans and receivable. The classification depends on the purpose for which the investments were acquired, which is determined at initial recognition and, except for other financial assets at fair value through profit or loss, is re-evaluated at each reporting date. (i) Other financial assets at fair value through profit or loss This category includes only those financial assets which have been designated by management as held at fair value through profit or loss on initial recognition. The policy of management is to designate a financial asset as such if the asset contains embedded derivatives which must otherwise be separated and carried at fair value; if it is part of a group of financial assets managed and evaluated on a fair value basis; or if by doing so eliminates, or significantly reduces, a measurement or recognition inconsistency that would otherwise arise. Interest income on debt securities designated as at fair value through profit or loss is recognised in the Statement of Comprehensive Income in interest income using the effective interest method as disclosed in Note 1 (v). (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Recognition and derecognition Regular purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. A regular way of purchase or sale of a financial asset under contract is a purchase or sale that requires delivery of the assets within the period established generally by regulation or convention in the market place. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Subsequent measurement Loans and receivables are carried at amortised cost using the effective interest method. Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the ‘other financial assets at fair value through profit or loss’ category are presented in the Statement of Comprehensive Income. The fair value of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgmental inputs to a minimum. Impairment Impairment is assessed at the end of each reporting period based on whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is evidence of impairment for any of the financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows. The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in the Statement of Comprehensive Income. 44  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) xi) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Assets are reviewed for impairment at each reporting date. Historical cost includes expenditure directly attributable to the acquisition of the asset. Depreciation on assets is calculated on a straight-line basis to allocate the difference between their cost and their residual values over their estimated useful lives, at the following rates: •• Furniture and fittings 10 per cent to 20 per cent •• Leasehold improvements1 20 per cent •• Computer equipment and software 33 per cent •• Plant and equipment 20 per cent to 33 per cent 1. Where remaining lease terms are less than five years, leasehold improvements are depreciated over the lease term. Useful lives and residual values are reviewed annually and reassessed in light of commercial and technological developments. If an asset’s carrying value is greater than its recoverable amount due to an adjustment to its useful life, residual value or impairment, the carrying amount is written down immediately to its recoverable amount. Adjustments arising from such items and on disposal of fixed assets are recognised in the Statement of Comprehensive Income. Gains and losses on disposal are determined by comparing proceeds with the asset’s carrying amount and are recognised in the Statement of Comprehensive Income. xii) Provisions Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits and accumulating sick and annual leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for accumulating sick and annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. (ii) Other long-term employee benefit obligations The liabilities for long service leave and employee bonus provisions that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted at the end of the reporting period using market yields of government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Provisions for unpaid employee benefits are derecognised when the benefit is settled, or is transferred to another entity and the Group is legally released from the obligation and do not retain a constructive obligation. xiii) Earnings per share Basic earnings per share is calculated by dividing the Group’s profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share is calculated by dividing the Group’s profit attributable to ordinary equity holders by the weighted average number of ordinary shares that would be issued on the exchange of all the dilutive potential ordinary shares into ordinary shares. Refer to Note 14 for information concerning the classification of securities. 45  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 xiv) Performance based remuneration Share-based payments OzForex Group long-term incentive plan The Group provides benefits to its employees (including key management personnel) in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity settled transactions). The fair value of each performance right is estimated at grant date using a trinomial model and discounted for the probability of employee retention and the probability of achieving performance levels. The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the income statement is in accordance with the vesting conditions as set out under the Group’s Long-Term Incentive Plan (Note 22). Equity settled awards granted by the Company to employees of subsidiaries are recognised in the subsidiaries’ separate financial statements as an expense with a corresponding credit to equity. As a result, the expense recognised by the Group is the total expense associated with all such awards. Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated. The Group currently does not provide benefits in the form of cash settled share-based payments. Share option plan During the year ended 31 March 2014, OzForex Limited operated share options plans which were granted to employees and employees of its subsidiaries. OzForex Limited recognised a share option expense in relation to options granted to its employees with the offsetting adjustment recognised as a contribution of capital from the shareholders. The options were measured at their grant dates based on their fair value and using the number expected to vest. This amount was recognised as an expense evenly over the respective vesting periods. The fair value of each option was estimated on the date of grant using a trinomial option pricing framework. No grants were made in the current financial year. The following key assumptions were adopted for grants made in prior financial years: Grant 2013 Risk free Rate Expected life Volatility of share price Dividend yield Grant 2010 3 per cent 5.5 per cent 7 years 7 years 20 per cent 35 per cent Nil Nil When options were issued by OzForex Limited to employees of subsidiaries, OzForex Limited recognised the equity provided as an investment in the subsidiary. OzForex Limited annually revises its estimates of the number of options that are expected to become exercisable. Where appropriate, the impact of revised estimates is reflected in the income statement over the remaining vesting period, with a corresponding adjustment to the share option reserve. The two option grants above were cancelled and cash settled by the pre-restructure shareholders as a result of listing on the ASX. No share option plans were operational during the year ended 31 March 2015. Short-term incentives Staff profit share scheme The Group recognises a liability and an expense for profit share based on a formula that takes into consideration the growth rate of the Group’s earnings before tax and the employee’s performance over the financial year. Short-term incentive plan The Group recognises a liability and an expense for 15-30% of the Total Reward Remuneration (TRR) of Executives and select employees. The short-term incentive awards are based on the achievement of annual Key Performance Indicators (KPIs). xv) Cash and cash equivalents Cash and cash equivalents include cash on hand and deposits held at short call with financial institutions with original maturity of 3 months or less. 46  / OZFOREX GROUP NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 31 MARCH 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) xvi) Receivables due from financial institutions Receivables due from financial institutions are primarily short-term deposits with an original maturity of greater than 3 months that are brought to account at the gross value of the outstanding balance. Interest is brought to account in the Statement of Comprehensive Income as interest income (see Note 1(v)). xvii) Leases Leases entered into by the Group as lessee, are operating leases. The total fixed payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. xviii) 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, •• liabilities incurred, •• equity interests issued by the group, •• fair value of any asset or liability resulting from a contingent consideration arrangement, and •• fair value of any pre-existing equity interest in the subsidiary. Identifiable 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. Acquisition-related costs are expensed as incurred. The excess of the: •• consideration transferred, •• amount of any non-controlling interest in the acquired entity, and •• acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit and loss as a bargain purchase. xix) Client liabilities Client liabilities represent an obligation of the Group for amounts unpaid to customers that transacted with the Group prior to the end of the financial year. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. xx) GST Revenues, expenses and fixed assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amounts of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position. Cash flows are presented on a gross basis. The GST components of the cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. xxi) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. xxii) Rounding of amounts The Company is of a kind referred to in Australian Securities and Investments Commission Class Order 98/100 (as amended), relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars unless otherwise indicated.