Go to top of page

Note 2: Summary of significant accounting policies

2.1 Amendments to AASBs and the new Interpretation that are mandatorily effective for the current year
The Group has adopted all of the new and revised Standards and Interpretations issued by the
Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for an accounting period that begins on or after 1 July 2019.
The following new and revised Standards and Interpretations were applicable to the current reporting period and had a material effect on the entity’s financial statements:

Standard/ Interpretation

Nature of change in accounting policy, transitional provisions1 , and adjustment to financial statements

ASB 16 Leases

AASB 16 became effective on 1 July 2019.

This new standard has replaced AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation 115 Operating Leases-Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

1 When transitional provisions apply, all changes in accounting policy are made in accordance with
their respective transitional provisions

2.1 Amendments to AASBs and the new Interpretations that are mandatorily effective for the current year (continued)
All other new and revised Standard and Interpretations applicable to the current reporting period did not have a material effect, and are not expected to have a material effect, on the disclosures or on the amounts reported in these financial statements.

Application of AASB 16 Leases
The Group adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.
The Group elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.
AASB 16 provides for certain optional practical expedients, including those related to the initial
adoption of the standard. The Group applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application when applying AASB 16 to leases previously classified as operating leases under AASB 117.
As a lessee, the Group previously classified leases as operating or finance leases based on its
assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, the Group recognises right-of-use assets and lease liabilities for most leases.
However, the Group has elected not to recognise right-of-use assets and lease liabilities for some
leases of low value assets based on the value of the underlying asset when new or for short-term
leases with a lease term of 12 months or less.
On adoption of AASB 16, the Group recognised right-of-use assets and lease liabilities in relation to leases of office space which had previously been classified as operating leases.
The lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate as at 1 July 2019. The Group’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 6.87%.

The right-of-use assets were measured as follows:
a. Office space: measured at an amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments.

Impact on transition
On transition to AASB 16, the Group recognised additional right-of-use assets and additional lease
liabilities, recognising the difference in retained earnings. The impact on transition is summarised
below:

1 July 2019

Right-of-use assets - property, plant and equipment

1,291,461

Lease liabilities

(1,291,461)

Retained earnings

-

2.1 Amendments to AASBs and the new Interpretations that are mandatorily effective for the current year (continued)

The following table reconciles the minimum lease commitments disclosed in the entity’s 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

1 July 2019

Minimum operating lease commitment at 30 June 2019

362,297

Less: GST included in minimum operating lease commitment at 30 June 2019

(32,936)

Plus: effect of extension options reasonable certain to be exercised

1,317,444

Undiscounted lease payments

1,646,805

Less: effect of discounting using the incremental borrowing rate as at the date of initial application

(355,344)

Lease liabilities recognised at 1 July 2019

1,291,461

2.2 Standards and Interpretations in issue not yet adopted

At the date of authorisation of the financial statements, the Group has not applied the following new and revised Standards and Interpretations that have been issued but not yet effective.

Standard/Interpretation

Effective for annual reporting periods beginning on or after

Expected to be initially applied in the financial year ending

AASB 2014-10 ‘Amendments to Australian Accounting Standards - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

1 January 2022

30 June 2023

AASB 17 Insurance Contracts

1 January 2021

30 June 2022

AASB 2019-1 Amendments to Australian Accounting Standards - References

1 January 2020

30 June 2021

AASB 2018-6 Amendments to Australian Accounting Standards - Definition of a Business

1 January 2020

30 June 2021

AASB 2018-7 Amendments to Australian Accounting Standards - Definition of Material

1 January 2020

30 June 2021

The potential effect of the revised Standards/Interpretations on the Group’s financial statements has not yet been determined.

2.3 Significant accounting policies
2.3.1 Statement of compliance

These financial statements are general purpose financial statements which have been prepared in
accordance with the requirements of the Australian Accounting Standards, Australian Accounting
Interpretations, other authoritative pronouncements of the Australian Accounting Standards, the
Corporations Act 2001, and other requirements of the law.
The financial statements comprise the consolidated financial statements of the Group. For the
purposes of preparing the consolidated financial statements, the Company is a for-profit entity.
Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’).
The consolidated financial statements for the year ended 30 June 2020 were approved and
authorised for issue by the Board of Directors on 26 August 2020.

2.3.2 Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis, except for
financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 16, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 102 ‘Inventories’ or value in use in AASB 136 ‘Impairment of Assets’.
The principal accounting policies adopted are set out below.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
− Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
− Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
for the asset or liability, either directly or indirectly; and
− Level 3 inputs are unobservable inputs for the asset or liability.

2.3.3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and
entities controlled by the Company (its subsidiaries) up to 30 June each year. Control is achieved
when the Company:
− has power over the investee;
− is exposed, or has rights, to variable returns from its involvement with the investee; and
− has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over
the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:
− the size of the Company’s holding of voting rights relative to the size and dispersion of holdings
of the other vote holders;
− potential voting rights held by the Company, other vote holders or other parties;
− rights arising from other contractual arrangements; and
− any additional facts and circumstances that indicate that the Company has, or does not have,
the current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries
acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the
accounting policies used in line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation. Refer to note 11 for related party disclosures.
Profit or loss and each component of other comprehensive income are attributed to the owners of
the Company and to the non-controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Company.

(a) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
(b) Cash and cash equivalents
Cash comprises cash on hand and on demand deposits. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. The Group did not have an overdraft during the financial period.
(c) Employee benefits
Short-term and long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal
values using the remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.
Termination benefit
A liability for a termination benefit is recognised at the earlier of when the entity can no longer
withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
(d) Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
Trade receivables, loans and other receivables that are held for the purpose of collecting the
contractual cash flows where the cash flows are solely payments of principal and interest, that are
not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

Classification of financial assets
i. Debt instruments that meet the following conditions are measured subsequently at amortised
cost:
− the financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; and
− the contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. Interest income is recognised in profit or loss and is included in the “interest income” line item.
ii. By default, all other financial assets are measured subsequently at fair value through profit or
loss (FVTPL).
iii. Despite the foregoing, the Group may make the following irrevocable election/designation at
initial recognition of a financial asset:
− the Group may irrevocably elect to present subsequent changes in fair value of an equity
investment in other comprehensive income if certain criteria are met (see (iii) below); and
− the Group may irrevocably designate a debt investment that meets the amortised cost or
fair value through other comprehensive income (FVTOCI) criteria as measured at FVTPL if
doing so eliminates or significantly reduces an accounting mismatch.

Impairment of financial assets
The Group recognises a loss allowance for expected credit losses (ECL) on investments in debt
instruments that are measured at amortised cost and trade receivables. The amount of expected
credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL for trade receivables. The ECL on these financial assets
are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a
significant increase in credit risk since initial recognition. However, if the credit risk on the financial
instrument has not increased significantly since initial recognition, the Group measures the loss
allowance for that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

Financial liabilities and equity
Classification of debt and equity instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Movements in equity instruments in the Group during the reporting period are outlined in the statement of changes in equity and note 9.

Financial liabilities
All financial liabilities are measured subsequently at amortised cost using the effective interest
method.

Financial liabilities measured subsequently at amortised cost
Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination,
(ii) held-for-trading, or (iii) designated as at FVTPL, are measured subsequently at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.

Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.

e) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
− where the amount of GST incurred is not recoverable from the taxation authority, it is
recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
− for receivables and payables which are recognised inclusive of GST, the net amount of GST
recoverable from, or payable to, the taxation authority is included as part of receivables or
payables.

Cash flows are included in the statement of cash flow on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

(f) Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, as the difference between proceeds received and the fair value of the loan based on
prevailing market interest rates. Government assistance which does not have conditions attached
specifically relating to the operating activities of the entity is recognised in accordance with the
accounting policies above.

(g) Impairment of assets
At each reporting date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Where it is not possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease and to the extent that the impairment loss is greater than the related revaluation surplus, the excess impairment loss is recognised in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in profit or loss to the extent that it
eliminates the impairment loss which has been recognised for the asset in prior years. Any increase in excess of this amount is treated as a revaluation increase.

(h) Intangible assets
Patents, trademarks and licences
Patents, trademarks and licences are recorded at cost less accumulated amortisation and impairment losses. Amortisation is recognised on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

IT software
IT software is recorded at cost less accumulated amortisation and impairment. Amortisation is
recognised on a straight line basis over their estimated useful lives. The estimated useful life and
amortisation method is reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Estimated useful lives are:

Class of intangible assets

2020

2019

Trademarks

10 years

10 years

IT software

3 years

3 years

(i) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first in first out method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

(j) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net
profit as reported in profit or loss because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are never taxable or deductible. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in
subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting date.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that
are recognised in other comprehensive income or directly in equity, in which case the current and
deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

(k) Leased assets
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the
relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

The Group as lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The
Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets (such as tablets and personal computers,
small items of office furniture and telephones).
For these leases, the Group recognises the lease payments as an operating expense on a straightline basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid
at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot bereadily determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
− Fixed lease payments (including in-substance fixed payments), less any lease incentives
receivable;
− Variable lease payments that depend on an index or rate, initially measured using the index or
rate at the commencement date;
− The amount expected to be payable by the lessee under residual value guarantees;
− The exercise price of purchase options, if the lessee is reasonably certain to exercise the
options; and
− Payments of penalties for terminating the lease, if the lease term reflects the exercise of an
option to terminate the lease.

The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest onthe lease liability (using the effective interest method) and by reducing the carrying amount to reflectthe lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related rightof-
use asset) whenever:

− The lease term has changed or there is a significant event or change in circumstances resulting
in a change in the assessment of exercise of a purchase option, in which case the lease liability
is remeasured by discounting the revised lease payments using a revised discount rate.

− The lease payments change due to changes in an index or rate or a change in expected
payment under a guaranteed residual value, in which cases the lease liability is remeasured by
discounting the revised lease payments using an unchanged discount rate (unless the lease
payments change is due to a change in a floating interest rate, in which case a revised discount
rate is used).

− A lease contract is modified and the lease modification is not accounted for as a separate lease,
in which case the lease liability is remeasured based on the lease term of the modified lease by
discounting the revised lease payments using a revised discount rate at the effective date of the
modification.

The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease
payments made at or before the commencement day and initial direct costs less any lease incentives received. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the
underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are included in non-current assets in the consolidated statement of financial position.
The Group applies AASB 136 ‘Impairment of Assets’ to determine whether a right-of-use asset is
impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and
Equipment’ policy per note 2(1).

(l) Property, plant and equipment
Property represents land, portable housing and fixtures in remote communities and are stated at
cost less accumulated depreciation and accounting impairment losses. Land is not depreciated and recorded at cost.
Depreciation on buildings is charged to profit or loss.
Furniture and fittings, containers, leasehold improvements, motor vehicles and components and
equipment under finance lease are stated at cost less accumulated depreciation and accumulated
impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the item.
In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.
Depreciation is provided on property, plant and equipment, including freehold buildings. Depreciation is calculated on a straight line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value.
Leasehold improvements and equipment under finance lease are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis. Assets acquired under $1,000 are written off immediately for financial accounting purposes.

The following depreciation rates were used for each class of asset:

Class of Property, Plant and Equipment

2020

2019

Containers

20%

20%

Furniture and Fittings

20%

20%

Housing

10%

10%

IT Equipment

10% - 66.67%

10% - 66.67%

Leasehold improvements

2.50%

2.50%

Motor vehicles and components

20% - 33.33%

20% - 33.33%

Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

(m) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be
recovered from a third party, the receivable is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of the receivable can be measured reliably.

(n) Revenue
Revenue is measured based on the consideration to which the Group expects to be entitled in a
contract with a customer and excludes amounts collected on behalf of third parties. The Group
recognises revenue which it transfers control of a product or service to a customer.
Revenue from the sale of goods is recognised when the control has been transferred to the buyer,
being at the time when the customer purchases the goods at the store.

The following is a description of principal activities from which the Group generates its revenue:

Rendering of services
Revenue from a contract to provide services is recognised as performance obligation is
satisfied over time. Revenue from service contracts is recognised based on the stage of
completion of the contract.
The stage of completion of the contract is determined as follows:
− management and accounting fees are recognised by reference to the management
service contract which reflect the performance of contracted services.

Rental income
The Group’s policy for recognition from operating leases is described in note 2(k).

Interest income
Interest income from a financial asset is recognised when it is probable that the economic
benefits will flow to the Group and the amount of revenue can be measured reliably.
Interest income is accrued on a time basis, by reference to the principal outstanding and at
the effective interest rate applicable, which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset to that asset’s net carrying
amount on initial recognition.

Government grants
Government grants are recognised in accordance with the accounting policy outlined in Note 2(f)

Dividends received
Dividends received on investments are recognised when the shareholder’s right to receive
payment has been established (provided that it is probable that the economic benefits
will flow to the Group and the amount of income can be measured reliably). Dividends are included in the ‘distributions received’ line in the Statement of Comprehensive Income.

Rebate income
Rebate income from suppliers is recognised when it is probable that economic benefits will
flow to the Group and the amount of revenue can be measured reliably.

Store recoveries and charges
Store recoveries and charges are recognised when it is probable that the economic benefits
will flow to the Group and the amount of revenue can be measured reliably.

The transaction price is the total amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.
Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

2.4 Critical accounting judgments and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described below, management is
required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if
the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

2.4.1 Critical judgements in applying accounting policies
The following are the critical judgements, apart from those involving estimations that the directors
have made in the process of applying the Group’s accounting policies and that have the most
significant effect on the amounts recognised in the consolidated financial statements.

Useful lives of property, plant and equipment
As described in note 2(1), the Group reviews the estimated useful lives of property, plant and
equipment at the end of each annual reporting period. No changes were made to the useful lives for existing assets.

Employee entitlements
Management judgement is applied in determining the following key assumptions used in the
calculation of long service leave:
− future increases in wage and salaries;
− future on cost rates; and
− experience of employee departures and period of service.
The potential effect of a change in these assumptions is not expected to be material.

Intangible assets
Useful lives for trademarks are based on contractual life for trademark registrations. In determining the estimated useful lives for IT Software, management relies on guidance provided by the Australian Taxation Office. The potential effect of a change in these estimates is not expected to be material.

Inventories
Inventory set out in note 18 represents finished goods purchased for sale in the retail stores owned and managed by the Group and is calculated at the lower of cost and net realisable value as stated in note 2(i). The net realisable value of inventories is the estimated selling price in the ordinary course of business less estimated cost to sell which approximates fair value less cost to sell. The key assumptions require the use of management judgement and are reviewed annually. These key assumptions are the variables affecting the estimated costs to sell and the expected selling price.
Any reassessment of cost to sell or selling price in a particular year will affect the cost of goods sold. The potential effect of a change in these assumptions is not expected to be material.

Calculation of loss allowance
When measuring ECL the Group uses reasonable and supportable forward looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit enhancements.

Recovery of deferred tax assets
Deferred tax assets have been recognised as assets in the Statement of Financial Position as
management expects the Group to generate future taxable profits in excess of profits arising from the reversal of existing taxable temporary differences for the foreseeable future. Tax losses have been recognised to the extent of net timing differences.

Lease term
When determining the lease term of the operating lease recognised in the Statement of Financial
Position and set out in note BC, management made the judgement that the Group would be likely to renew for a further 6 years ending 31 December 2026.

Incremental borrowing rate
The operating lease recognised in the Statement of Financial Position was initially measured using
the incremental borrowing rate of 6.87%. This was determined based on the Commonwealth Bank
variable base rate other than the residential security as the rate implicit in the lease cannot be readily determined.