IGO Annual Report 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2015

Annual Report 2015 105

Notes to the consolidated financial statements

30 June 2015

2 Summary of significant accounting policies (continued)

(u) Leases

Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of

ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair value of the

leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net

of finance charges, are included in other current and non-current borrowings. Each lease payment is allocated between

the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a

constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and

equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter of the asset's

useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the

lease term.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee

are classified as operating leases (note 32). Payments made under operating leases (net of any incentives received

from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

(v) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently

measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption

amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is

probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs.

To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is

capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

(w) Borrowing costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a

qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its

intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their

intended use or sale.

Other borrowing costs are expensed in the period in which they are incurred.

(x) Employee benefits

(i)

Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits and accumulating sick 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 annual leave is recognised in trade and other

payables presented as current employee benefit obligations in the balance sheet.

(ii)

Long service leave

The liability for long service leave is recognised and measured as the present value of expected future payments to be

made in respect of services provided by employees up to the reporting date. Consideration is given to expected future

wage and salary levels, experience of employee departures, and periods of service. Expected future payments are

discounted using market yields at the reporting date on national Government bonds with terms to maturity and

currencies that match, as closely as possible, the estimated future cash outflows.

(y) Share-based payment transactions

Equity-settled transactions

The Company provides benefits to employees (including directors) of the Group in the form of share-based payment

transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled

transactions).

There is currently a plan in place to provide these benefits, the Employee Performance Rights Plan ("PRP"), which

provides benefits to executive directors and other employees.

Independence Group NL