Example Simplified Disclosures 2021-2022

Example

Simplified

Disclosures

Guide to annual reports

December 2021

www.kpmg.com/au/gpfs

trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved

under Professional Standards Legislation. 1

Example Simplified Disclosures Proprietary Limited 30 June 2022

A single Simplified Disclosures standard to replace Reduced Disclosure Requirements

AASB 1053 Application of Tiers of Australian Accounting Standards requires preparers to assess whether the

entity is publicly accountable to determine if it qualifies for the preparation of Tier 2 general purpose financial

statements under the differential reporting regime.

AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2

Entities, replaces the current suite of Reduced Disclosure Requirements (RDR) disclosures. AASB 1060 is a new

single general purpose financial statements (GPFS)-Tier 2 Simplified Disclosures (SD) standard. It is principally

based on the disclosures included in the IFRS for SMEs

Standard, with some adjustment for the Australian

context. It will apply to all entities (both for-profit and not-for-profit) preparing financial statements under Tier 2,

both those currently reporting under the existing RDR framework and those that will be required to stop preparing

special purpose financial statements (SPFS) and be required to prepare GPFS.

AASB 1060 works in conjunction with AASB 2020-2 Amendments to Australian Accounting Standards – Removal

of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities – the Australian Accounting

Standard (AAS) that removed the ability of certain for-profit private sector entities to prepare SPFS.

Key features

• Entities preparing GPFS-Tier 2 SD must comply with all recognition and measurement (R&M) requirements of

AAS, i.e. there is no impact on existing R&M requirements of AAS.

• AASB 1060 is a single standard containing all the required disclosures for an entity preparing GPFS-Tier 2 SD.

Thi

s means that those AAS only dealing with presentation and disclosure (including AASB 7 Financial

Instruments: Disclosures, AASB 12 Disclosure of Interests in Other Entities, AASB 101 Presentation of

Financial Statements, AASB 107 Statement of Cash Flows and AASB 124 Related Party Disclosures) hav

been

incorporated into AASB 1060 – but without all the additional guidance contained in those standards.

AASB 1060 instructs entities to refer to these presentation and disclosure standards for guidance w

hen

need

ed.

• Entities that comply with AASB 1060 are exempt from the disclosure requirements in specified paragraphs in

other AAS.

• There is an option – where specific conditions are met – for an entity not to present a statement of changes in

equ

ity, which if elected would result in a presentation difference to GPFS-Tier 1.

• The Standard applies whether consolidated or separate financial statements are presented.

While AASB 1060 includes certain presentation requirements, these do not result in presentations or

classifications that are different to those required for Tier 1 entities. The only exceptions are:

• the option not to include a separate statement of changes in equity in certain circumstances; and

• no requirement to separate the share of other comprehensive income of associates and joint ventures

accounted for by the equity method between items that will not be reclassified subsequently to profit or loss,

and those that will.

Effective date and transition

AASB 1060, together with AASB 2020-2 apply for financial reporting periods beginning on or after 1 July 2021.Both

standards need to be applied at the same time. Comparative disclosures are required for all disclosures.

trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved

under Professional Standards Legislation. 2

The table below sets out the available transitional relief for entities applying the standards for the first time in years

beginning on or after 1 July 2021.

The transition provisions are included in the amendments to AASB 1053 Application of Tiers of Australian Accounting

Standards. An entity need not apply the transitional relief – in which case it will apply a fully retrospective transition in

accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.

Transitional relief explained

The transitional provisions explained below must be considered in the context of the table above. The flow

diagram below illustrates the transitional relief available depending on an entity’s circumstances.

orrection of errors

For entities moving from SPFS and applying GPFS-Tier 2 SD reporting requirements for the first time there is no

requirement to distinguish between the correction of errors and changes in accounting policies if the entity

becomes aware of errors made in its most recent previous SPFS.

This means that an entity that discovered an error in its previous SPFS does not need to separately address this in

its first GPFS-Tier 2 SD financial statements and is able to apply the transitional relief in AASB 1 First-time

Adoption of Australian Accounting Standards or elect to apply AASB 108 (i.e. fully retrospectively).

trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved

under Professional Standards Legislation. 3

Application of AASB 1

When applying GPFS-Tier 2 SD reporting requirements for the first time (i.e. the entity prepared its most recent

previous financial statements in the form of SPFS):

Options – Not all R&M

The entity applies either:

• all relevant requirements of AASB 1 (i.e. provides some relief from full retrospective application), or

• GPFS-Tier 2 SD reporting requirements directly using the requirements of AASB 108 (i.e. full retrospective

application).

All R&M

For entities preparing SPFS that are already complying with the R&M requirements in AAS, and consolidating

subsidiaries and equity accounting investments in associates and joint ventures (if applicable), the transition from

SPFS to GPFS-Tier 2 SD will be limited to the provision of additional disclosures.

Transition from GPFS-Tier 2 RDR to GPFS-Tier 2 SD

While applying GPFS-Tier 2 RDR all R&M requirements will have been complied with – as such if an entity

transitions from GPFS-Tier 2 RDR to GPFS-Tier 2 SD, neither AASB 1 nor AASB 108 have to be applied as there

will not be any adjustments.

What will change are the disclosures in the first GPFS-Tier 2 SD financial statements – they will need to align to

AASB 1060.

Further resources

The following resources provide further details and discussion on the changes to the Australian Financial Reporting

Framework, and the transition to GPFS-Tier 2 SD:

• 20RU-006 Farewell SPFS… Welcome Simplified Disclosures

• KPMG’s Australian Financial Reporting Framework webpage

• Transition publication: moving from SPFS to GPFS – coming soon

• Webinar: The impacts of the new Australian financial reporting framework

trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved

under Professional Standards Legislation. 4

How to use Example Simplified Disclosures Proprietary Limited 30 June

2022

The purpose of Example Simplified Disclosures Proprietary Limited is to assist in the preparation of an entity’s

annual financial report in accordance with Australian Accounting Standards – Simplified Disclosures, and that also

meet statutory requirements under the Corporations Act 2001 for financial years ending on or after 30 June

2022. Example Simplified Disclosures Proprietary Limited is a for-profit entity preparing consolidated financial

statements.

In addition, Example Simplified Disclosures Proprietary Limited is adopting AASB 1060 for the first time, applying

GPFS-Tier 2 SD, having previously applied GPFS-Tier 2 RDR. Appendix 2

provides illustrative disclosures for a for-

profit entity adopting GPFS-Tier 2 SD for the first time having prepared special purpose financial statements in its

most recent financial statements. Appendix

2 includes disclosures where neither consolidation nor equity

accounting was previously applied and the entity applies AASB 1 First-time Adoption of Australian Accounting

Standards on transition to GPFS-Tier 2 SD.

This publication illustrates one possible format for Tier 2 statutory general purpose financial statements, based on

a fictitious corporation involved in general business. Accordingly, a number of notes are not applicable to

Example Simplified Disclosures Proprietary Limited and have not been included in the main body of the financial

report. However, Appendix 3

includes illustrations of additional notes if they were to be prepared under Tier 2

requirements.

This publication should not be used as a boiler plate template. The preparation of financial statements requires

judgement, in terms of the choice of accounting policies, how the disclosures should be tailored to reflect the

entity’s specific circumstances, and the materiality of disclosures in the context of the entity.

This publication reflects Australian Accounting Standards – Simplified Disclosures on issue as at 31 August 2021

that must be applied by an entity with an annual period beginning on 1 July 2021 (“currently effective”

requirements), including AASB 2020-2 and AASB 1060. All other Australian Accounting Standards that are

effective for annual periods beginning on or after 1 July 2022 (“forthcoming” requirements) have not been early

adopted.

trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved

under Professional Standards Legislation. 5

Example Simplified

Disclosures Proprietary

Limited

30 June 2022

Example Simplified Disclosures Proprietary Limited

Directors’ report

For the year ended 30 June 2022

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 6

S292(1), S298(1),

S299(2)

The directors present their report together with the consolidated financial statements of the Group

comprising Example Simplified Disclosures Proprietary Limited (the Company), and its subsidiaries

for the financial year ended 30 June 2022 and the auditor’s report thereon.

S300(1)(c)

1. Directors

The directors of the Company at any time during or since the end of the financial year are:

[Director_name]

Appointed [date]

and if applicable resigned [date]

[Director_name]

Appointed [date]

and if applicable resigned [date]

[Director_name]

Appointed [date]

and if applicable resigned [date]

[Director_name]

Appointed [date]

and if applicable resigned [date]

S300(1)(ca)

2. Officers who were previously partners of the audit firm

The following persons were officers of the Company during the financial year and were previously

partners of the current audit firm, KPMG, at a time when KPMG undertook an audit of the Group:

[insert names if applicable]

S299(1)(f)

RG68

3. Environmental regulation

The Group’s operations are subject to significant environmental regulation under both

Commonwealth and State legislation in relation to its [insert details if relevant].

S299(1)(c)

4. Principal activities

The principal activities of the Group during the course of the financial year were the manufacture

and sale of paper and paper-related products.

There were no other significant changes in the nature of the activities of the Group during the year.

Objectives

The Group’s objectives are to:

[insert details].

Example Simplified Disclosures Proprietary Limited

Directors’ report

For the year ended 30 June 2022

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 7

S299(1)(a)

RG230

5. Review of operations and results of those operations

Overview of the Group

These consolidated financial statements are the first general purpose financial statements prepared

in accordance with Australian Accounting Standards – Simplified Disclosures. In the prior year, the

consolidated financial statements were general purpose financial statements prepared in

accordance with Australian Accounting Standards – Reduced Disclosure Requirements.

There was no impact on the amounts recognised, measured and classified in the statements of

financial position, financial performance and cash flows of the Group as a result of the change in

basis of preparation.

[insert details]

Review of [insert details]

Products

[Insert details]

Market

[Insert details]

Operating results

[Insert details]

Commentary on operating results

[Insert details]

Strategy and future performance

[Insert details]

S299(1)(b)

6. Significant changes in the state of affairs

In August 2021, the Group sold its entire packaging line of business. The Group was committed to

a plan to sell this division due to a strategic decision to change the direction of the Group in late

2021.

On 30 September 2021, the Group acquired 75% of the shares and voting interests in Papyrus for

a total cash consideration of $2,935 thousand. As a result, the Group’s equity interest in Papyrus

increased from 25 to 100%, granting it control of Papyrus.

Taking control of Papyrus will enable the Group to modernise its production process through

access to Papyrus’s patented technology. The acquisition is also expected to provide the Group

with an increased share of the standard paper market through access to Papyrus’s customer base.

The Group also expects to reduce costs through economies of scale.

In 2022, a majority of the Company’s shares were acquired by Cameron Paper Co from Brown

Products Corporation. As a result, the new ultimate controlling party of the Group is AJ

Pennypacker. The previous ultimate controlling party was Sigma Australia Investment Holdings.

Directors are not required to make this disclosure in the Directors’ report, but may choose to do so.

Example Simplified Disclosures Proprietary Limited

Directors’ report

For the year ended 30 June 2022

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 8

S300(1)(a)-(b)

7. Dividends

Dividends paid or declared by the Company to members since the end of the previous financial year

were:

Cents per

Total amount

$000

Date of payment

Declared and paid during the year 2022

Final 2021 ordinary

25.97

805

[ ]

Final 2021 preference

25.03

438

[ ]

Total amount

1,243

Declared after end of year

After the reporting date the following dividends were proposed by the directors. The dividends have

not been provided and there are no income tax consequences.

Cents per

Total amount

$000

Date of payment

Final ordinary

27.97

892

[ ]

Final preference

25.03

438

[ ]

Total amount

1,330

The financial effect of these dividends has not been brought to account in the consolidated financial

statements for the year ended 30 June 2022 and will be recognised in subsequent financial reports.

Preference shares are classified as a liability and distributions paid are recognised as interest

expense.

Dividends have been dealt with in the financial report as:

Note

Total amount

$000

- Dividends

1,243

- Interest expense

- Noted as a subsequent event

1,330

Example Simplified Disclosures Proprietary Limited

Directors’ report

For the year ended 30 June 2022

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 9

S299(1)(d)

S299(1)(e)

S299(3)

S608, S609, RG 5

S300(1)(d)-(f)

S300(5)-(7)

8. Events subsequent to reporting date

At the end of July 2022, the Group a

nnounced its intention to implement a cost-reduction

programme and to take further measures to reduce costs. Additionally, to enable the Group to

adapt its size to current market conditions, it intends to reduce the Group’s workforce by 400

positions worldwide by the end of 2022/23, by means of non-replacement whenever possible. The

Group expects the restructuring associated with the reduction in positions to cost between $600

thousand and $850 thousand in 2023 and 2024.

Subsequent to 30 June 2022, one of the Group’s major trade customers went into liquidation

following a natural disaster in August 2022 that damaged its operating plant. Of the $100 thousand

owed by the customer, the Group expects to recover less than $10 thousand. No additional

allowance for impair

ment has been made in these consolidated financial statements.

On 10 July 2022, one

of the premises of the Group’s material subsidiary, having a carrying amount

of $220 thousand, was seriously damaged by fire. Surveyors are in the process of assessing the

extent of the loss, following which t

he Group will file a claim for reimbursement with the insurance

company. The Group

is unable to estimate the incremental costs relating to refurbishment and

temporary shift of production to other locations (in excess of the reimbursement expected).

As reported in the condensed interim financial statements on 22 January 2022, the Group

announced its intention to acquire all of the shares of ABC Company for $6,500 thousand. On 4

July 2022, the Group’s shareholders approved the transaction and the Group is now awaiting

approval from regulatory authorities before proceeding with the acquisition. Management

anticipates that this approval will be received by October 2022.

Subsequent to 30 June 2022, the loan covenant maximum leverage ratio (calculated as debt to

quarterly revenue for continuing operations) related to a secured bank loan was revised from 2.5 to

.5 times.

ther than the matters discussed above, there has not arisen in the interval between the end of

the financial year and the date of this report any item, transaction or event of a material and

unusual nature likely, in the opinion of the directors of the Group, to affect significantly the

operations of the Group, the results of those operations, or the state of affairs of the Group, in

future financial years.

9. Likely developments

he Group will continue to pursue its policy of increasing the profitability and market share of its

major business sectors during the next financial year. This will require further investment in areas

such as manufacturing and sale of paper, which have performed well over recent years and offer

sound opportunities for future development.

Further information about likely developments in the operations of the Group and the expected

results of those operations in future financial years has not been included in this report because

disclosure of the information would be likely to result in unreasonable prejudice to the Group.

10. Directors’ interests and share options

[

This heading and associated disclosure is not necessary if directors do not have interests in the

company and there are no options on issue. Refer to sections 11 and 12 of the Directors’ Report in

Example Public Company Limited – Illustrative disclosures 2021-22 for example disclosures if

levant].

Example Simplified Disclosures Proprietary Limited

Directors’ report

For the year ended 30 June 2022

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 10

S300(1)(g), (8)-(9)

S199A-199B

11. Indemnification and insurance of officers and auditors

Indemnification

Since the end of the previous financial year, the Company has not indemnified or made a relevant

agreement for indemnifying against a liability any person who is or has been an officer or auditor of

the Group.

Insurance premiums

During the financial year the Company has paid premiums in respect of directors’ and officers’

liability and legal expenses insurance contracts for the year ended 30 June 2022 and since the

financial year, the Company has paid premiums in respect of such insurance contracts for the year

ending 30 June 2022. Such insurance contracts insure against certain liability (subject to specific

exclusions) persons who are or have been directors or executive officers of the Group.

The directors have not included details of the nature of the liabilities covered or the amount of the

premiums paid in respect of the directors’ and officers’ liability and legal expenses insurance

contracts, as such disclosure is prohibited under the terms of the contract.

S298(1A)

12. True and fair view

[Details of the directors’ reasons for disclosing the additional information and reference to where

this information is disclosed should be inserted here, when applicable].

S300(14)-(15)

13. Proceedings on behalf of the Company

[Details of any proceedings should be inserted here, when applicable].

S307C

14. Lead auditor’s independence declaration

The Lead auditor’s independence declaration is set out on page [xxx] and forms part of the

directors’ report for the financial year ended 30 June 2022.

ASIC Instrument

2016/191

15. Rounding off

[[Include if relevant ] The Group is of a kind referred to in ASIC Corporations (Rounding in

Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that instrument, amounts

in the consolidated financial report and directors’ report have been rounded off to the nearest

thousand dollars, unless otherwise stated.]

This report is made out in accordance with a resolution of the directors:

____________________________

[Director_name]

Dated at …...................……… [City] this ……… day of …………………… 2022

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 11

AASB 1060.25(a), 30

Consolidated statement of financial position

a,b

AASB 1060.20-21, 28-29,

31(c)-(d), 36, 42, 92

In thousands of dollars

Note

30 June 2022

30 June 2021

Assets

AASB 1060.35(a)

Cash and cash equivalents

1,504

1,849

AASB 1060.35(b), 44(b)

Trade and other receivables

34,119

24,307

AASB 1060.35(c)

Other financial assets

662

1,032

AASB 1060.35(d)

Inventories

12,148

12,119

AASB 1060.35(m)

Current tax assets

AASB 1060.35(r),

AASB 5.38, 40,

Assets held for sale

14,400

AASB 1060.37

Current assets

62,867

39,367

AASB 1060.35(c)

Other financial assets

2,672

2,497

AASB 1060.35(e)

Property, plant and equipment

29,090

33,230

AASB 1060.35(g)

Intangible assets

6,226

4,661

AASB 1060.35(i), 125(b)

Investments in associates

272

900

AASB 1060.35(n)

Deferred tax assets

1,987

1,954

AASB 1060.37

Non-current assets

40,247

43,242

Total assets

103,114

82,609

Liabilities

Bank overdraft

334

282

AASB 1060.35(k)

Trade and other payables

23,976

21,708

AASB 1060.35(l)

Other financial liabilities

2,283

5,546

AASB 1060.35(m)

Current tax liabilities

4,751

1,693

AASB 1060.35(o)

Provisions

680

1,548

AASB 1060.35(s),

AASB 5.38, 40

Liabilities held for sale

4,410

AASB 1060.37

Current liabilities

36,434

30,777

AASB 1060.35(k)

Trade and other payables

440

AASB 1060.35(l)

Other financial liabilities

17,622

9,831

AASB 1060.35(n)

Deferred tax liabilities

251

337

AASB 1060.35(o)

Provisions

1,197

173

Deferred income

1,424

1,462

AASB 1060.37

Non-current liabilities

20,934

11,803

Total liabilities

57,368

42,580

Net assets

45,746

40,029

Equity

AASB 1060.44(f)

Share capital

19,600

18,050

AASB 1060.44(f)

Reserves

22,424

12,974

AASB 1060.44(f)

Retained earnings

3,722

9,005

AASB 1060.35(q)

Equity attributable to owners of the Company

45,746

40,029

The notes on pages 18 to 67 are an integral part of these consolidated financial statements.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 12

AASB 1060.30, 42-43

An entity may also use other titles – e.g. ‘balance sheet’ – as long as the meaning is clear and the title not misleading. There is no

prescribed sequence or format in which items are to be presented in the statement of financial position. Additional line items may

be included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is

relevant to an understanding of the entity’s financial position. The descriptions used and the sequencing of items or aggregation

of similar items may be amended according to the nature of the entity and its transactions, to provide information that is relevant

to an understanding of the entity’s financial position. The judgement of whether additional line items are presented separately is

based on the assessment of the amounts, nature and liquidity of assets and liabilities, and the function of assets within the entity.

AASB 1060.35, 44

AASB 1060 sets out the minimum line items to be included in the statement of financial position. Further sub-classifications of the

line items presented, classified in a manner appropriate to the entity’s operations, may be disclosed either in the statement of

financial position or in the notes.

AASB 16.47(a)

The Group has presented right-of-use assets within ‘property, plant and equipment’ – i.e. the same line item in which it presents

underlying assets of the same nature that it owns. Alternatively, an entity may choose to present right-of-use assets separately in

the statement of financial position.

AASB 1060.44(f), 45

Although it is not specifically required, the Group has presented in the statement of financial position line items related to

classification of equity into share capital, retained earnings and reserves.

The Group has presented in the statement of changes in equity and in the notes further information about each class of share

capital and each reserve within equity.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 13

AASB 1060.25(b)(i), 30

Consolidated statement of profit or loss and

other comprehensive income

a,b,c

AASB 1060.31(c)

For the year ended 30 June

AASB 1060.20-21, 28-29,

31(d), 49(a), 51, 56, 92

In thousands of dollars

Note

2022

2021*

Continuing operations

AASB 1060.52(a)

Revenue

102,400

96,417

AASB 1060.58(b)

Cost of sales

(57,461)

(56,186)

Gross profit

44,939

40,231

Other income

7(A)

264

AASB 1060.58(b)

Selling and distribution expenses

(18,322)

(15,865)

AASB 1060.58(b)

Administrative expenses

(17,732)

(14,428)

AASB 1060.58(b), 139

Research and development expenses

(1,109)

(697)

AASB 1060.58(b)

Other expenses

7(B)

(870)

(190)

Operating profit

7,170

9,067

Finance income

1,034

369

AASB 1060.52(b)

Finance costs

(1,867)

(1,616)

Net finance costs

(833)

(1,247)

AASB 1060.52(c)

Share of profit of associates, net of tax

(49)

315

Profit before tax

6,288

8,135

AASB 1060.52(d),

AASB 112.77

Income tax expense

(1,837)

(2,223)

Profit from continuing operations

4,451

5,912

Discontinued operation

AASB 1060.52(e)

Profit (loss) from discontinued operation, net of tax

379

(422)

AASB 1060.52(f), 53(a)(ii)

Profit for the period

4,830

5,490

AASB 1060.51(b)

Other comprehensive income

AASB 1060.52(g)(i)

Items that will not be reclassified to profit or loss, net of tax

AASB 1060.52(g)(ii)

Items that are or will be reclassified to profit or loss when

specific conditions are met, net of tax

AASB 1060.180(b)

Foreign operations – foreign currency translation differences

680

471

AASB 1060.122(c)

Net investment hedge – net loss

(3)

(8)

AASB 1060.122(c)

Cash flow hedges – effective portion of changes in fair value

(19)

AASB 1060.122(d)

Cash flow hedges – reclassified to profit or loss

(16)

(6)

AASB 1060.180(b)

Reclassification of foreign currency differences on loss of

significant influence

(20)

622

528

AASB 1060.52(h)

Share of OCI of associates

(159)

(169)

Other comprehensive income for the period, net of tax

463

359

AASB 1060.52(i), 53(b)(ii)

Total comprehensive income

for the period

5,293

5,849

* Comparative information has been re-presented due to a discontinued operation. See Note 5.

The notes on pages 18 to 67 are an integral part of these consolidated financial statements.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 14

AASB 1060.25(b)

The Group has elected to present comprehensive income using a ‘single-statement’ approach. For an illustration of the alternative

‘two-statement’ approach, see Example Public Company Limited: Guide to annual reports – illustrative disclosures 2021-2022

[Appendix 2].

AASB 1060.50

If an entity changes its presentation of total comprehensive income for the period from the single-statement approach to the two-

statement approach, or vice versa, it has to apply AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to a

change in accounting policy.

AASB 1060.26

If the only changes to equity during the periods for which financial statements are presented arise from profit or loss, payment of

dividends, corrections of prior period errors, and changes in accounting policy, the entity may present a single statement of

income and retained earnings in place of the statement of comprehensive income and statement of changes in equity. For an

illustration of the single statement of income and retained earnings, see Appendix 1.

AASB 1060.58

The Group has elected to analyse expenses recognised in profit or loss based on functions within the Group. Alternatively, an

entity may present the analysis based on nature if this presentation provides information that is reliable and more relevant. The

analysis may also be presented in the notes.

AASB 1060.52(g)(i)

No items of OCI that will not be reclassified subsequently to profit or loss have arisen in the current or prior periods. When they

arise, an entity presents each such item of OCI classified by nature and group them accordingly. This sub-heading may be omitted

where there are no such items.

AASB 1060.52(g)-(h)

The share of OCI of associates and joint ventures accounted for under the equity method is not disclosed separately by items that

will not subsequently be reclassified to profit or loss and those that will,

AASB 1060.52(i)

If an entity has no items of OCI, another term, such as profit or loss, may be used instead of total comprehensive income.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 15

AASB 1060.25(c), 30

Consolidated statement of changes in equity

AASB 1060.20-21, 28-29,

31(d), 92

In thousands of dollars

Note

capital

Translation

reserve

Hedging

reserve

Profits

reserve

Convert-

ible notes

Retained

earnings

Total

equity

AASB 1060.61(c)

Balance at 1 July 2020

18,050

(119)

399

3,521

12,900

34,751

Total comprehensive income

AASB 1060.61(c)(i)

Profit for the period

5,490

AASB 1060.61(c)(ii)

OCI for the period

297

(3)

359

AASB 1060.61(a)

Total comprehensive income

for the period

297

5,487

5,849

Transactions with owners of

the Company

AASB 1060.61(c)(iii)

Contributions and

distributions

Transfer to profits reserve

9,382

(9,382)

Dividends

(571)

Total transactions with

owners of the Company

8,811

(9,382)

(571)

AASB 1060.61(c)

Balance at 30 June 2021

18,050

178

464

12,332

9,005

40,029

Total comprehensive income

AASB 1060.61(c)(i)

Profit for the period

4,830

AASB 1060.61(c)(ii)

OCI for the period

485

(35)

463

AASB 1060.61(a)

Total comprehensive income

for the period

485

(35)

4,843

5,293

Hedging gains and losses and

costs of hedging transferred

to the cost of inventory

Transactions with owners of

the Company

AASB 1060.61(c)(iii)

Contributions and

distributions

Issue of ordinary shares

19(A)

1,550

Issue of convertible notes

20(C)

109

Transfer to profits reserve

10,126

(10,126)

Dividends

(1,243)

Total transactions with

owners of the Company

1,550

8,883

109

(10,126)

416

AASB 1060.61(c)

Balance at 30 June 2022

19,600

663

437

21,215

109

3,722

45,746

The notes on pages 18 to 67 are an integral part of these consolidated financial statements.

AASB 1060.26

If the only changes to equity during the periods for which financial statements are presented arise from profit or loss, payment of

dividends, corrections of prior period errors, and changes in accounting policy, the entity may present a single statement of

income and retained earnings in place of the statement of comprehensive income and statement of changes in equity. Refer to

Appendix 1 for the illustrative consolidated statement of income and retained earnings.

Reporting Update

12RU-005

Amounts transferred to the profits reserve characterise profits available for distribution as dividends in future years and reflects

the amounts transferred by individuals in the Group and is therefore not necessarily equivalent to the consolidated Group profit for

the year.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 16

AASB 1060.25(d), 30

Consolidated statement of cash flows

AASB 1060.31(c)

For the year ended 30 June

AASB 1060.20-21, 28-29,

31(d), 66, 92

In thousands of dollars

Note

2022

2021

AASB 1060.70(a)

Cash flows from operating activities

Cash receipts from customers

94,352

97,996

Cash paid to suppliers and employees

(90,377)

(94,149)

Cash generated from operating activities

3,975

3,847

AASB 1060.82-83

Interest paid

b, c

(1,609)

(1,289)

AASB 1060.85

Income taxes paid

(400)

(1,913)

AASB 1060.71

Net cash from operating activities

1,966

645

AASB 1060.74, 86

Cash flows from investing activities

AASB 1060.68(a)

Acquisition of property, plant and equipment

15(A)

(15,657)

(2,228)

AASB 1060.68(a)

Development expenditure

16(A)

(1,235)

(503)

AASB 1060.68(b)

Proceeds from sale of property, plant and equipment

3,085

397

Disposal of discontinued operation, net of cash disposed of

10,890

AASB 1060.68(c), (g)

Acquisition of other investments

(359)

(363)

AASB 1060.68(d), (h)

Proceeds from sale of investments

1,476

534

AASB 1060.74

Acquisition of subsidiary, net of cash acquired

(2,560)

AASB 1060.82-83

Interest received

AASB 1060.82-83

Dividends received

Net cash used in investing activities

(4,328)

(2,112)

AASB 1060.74, 86

Cash flows from financing activities

AASB 1060.69(a)

Proceeds from issue of share capital

19(A)

1,550

AASB 1060.69(c)

Proceeds from issue of convertible notes

20(C)

5,000

AASB 1060.69(c)

Proceeds from issue of redeemable preference shares

20(D)

2,000

AASB 1060.69(c)

Proceeds from loans and borrowings

591

4,439

Transaction costs related to loans and borrowings

20(C)–(D)

(311)

AASB 1060.69(d)

Repayment of borrowings

(5,055)

(2,445)

AASB 1060.69(e)

Payment of lease liabilities

(554)

(590)

AASB 1060.82, 84

Dividends paid

(1,243)

(571)

Net cash from financing activities

1,978

833

Net decrease in cash and cash equivalents

(384)

(634)

AASB 1060.88

Cash and cash equivalents at 1 July*

1,567

2,226

AASB 1060.81

Effect of movements in exchange rates on cash held

(13)

(25)

AASB 1060.88

Cash and cash equivalents at 30 June*

1,170

1,567

AASB 1060.65

* Cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Group’s

cash management.

The notes on pages 18 to 67 are an integral part of these consolidated financial statements.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 17

AASB 1060.70

The Group has elected to present cash flows from operating activities using the direct method. Alternatively, an entity may

present operating cash flows using the indirect method, whereby profit or loss is adjusted for the effects of non-cash transactions

(see Example Public Company Limited: Guide to annual reports – illustrative disclosures 2021-2022 for example presentation).

AASB 1060.69(e),

AASB 16.50

The Group has classified:

–

cash payments for the principal portion of lease payments as financing activities;

–

cash payments for the interest portion of lease liabilities as operating activities consistent with the presentation of interest

payments chosen by the Group (see footnote (c) below); and

–

short-term lease payments and payments for leases of low-value assets as operating activities.

AASB 1060.82-84,

Insights 2.3.50.10-20

AASB 1060 requires cash flows from interest and dividends received and paid to be disclosed separately. In our view, such

disclosure is required in the statement of cash flows, rather than in the notes. In the absence of specific guidance in the

Standards, an entity chooses an accounting policy, to be applied consistently, for classifying interest and dividends paid as either

operating or financing activities, and interest and dividends received as either operating or investing activities. The Group has

elected to classify cash flows from interest paid as operating activities, cash flows from interest received and dividends received

as investing activities, and cash flows from dividends paid as financing activities.

Interest paid includes the interest portion of the lease liabilities. See footnote (b) above.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 18

AASB 1060.25(e), 28-30,

91–94

Notes to the consolidated financial statements

1. Reporting entity

AASB 1060.31(a), 32(a)

Example Proprietary Limited (the ‘Company’) is domiciled in Australia. The Company’s registered office is at

[address].

AASB 1060.31(b), 104(a)

These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the

‘Group’).

AASB 1060.11(b), 32(b)

The Group is a for-profit entity and is primarily involved in manufacturing paper and paper-related products.

2. Basis of preparation

AASB 1060.10, 11(a),

104(a),

Corporations Act 2001

Sect 296-297

These consolidated financial statements are general purpose financial statements for distribution to the members

and for the purpose of fulfilling the requirements of the Corporations Act 2001. They have been prepared in

accordance with Australian Accounting Standards – Simplified Disclosures made by the Australian Accounting

Standards Board and the Corporations Act 2001.

AASB 1060.208

AASB 1053.E4

These consolidated financial statements are the first general purpose financial statements prepared in accordance

with Australian Accounting Standards – Simplified Disclosures. In the prior year the consolidated financial

statements were general purpose financial statements prepared in accordance with Australian Accounting

Standards – Reduced Disclosure Requirements. There was no impact on the recognition and measurement of

amounts recognised in the statements of financial position, profit and loss and other comprehensive income and

cash flows of the Group as a result of the change in the basis of preparation.

b,c

AASB 1060.186

These consolidated financial statements were authorised for issue by the Company’s board of directors on [date].

AASB 91(a), 94

Details of the Group’s accounting policies are included in Note 35.

3. Functional and presentation currency and rounding

AASB 1060.31(d)-(e),

181,

ASIC Instrument

2016/191

These consolidated financial statements are presented in Australian dollars, which is the Company’s functional

currency. The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports)

Instrument 2016/191 and in accordance with that instrument, amounts in the consolidated financial statements

and directors’ report have been rounded to the nearest thousand, unless otherwise indicated.

AASB 1060.92–93

Notes are presented, to the extent practicable, in a systematic order and are cross-referred to/from items in the primary

statements. In determining a systematic manner of presentation, an entity considers the effect on the understandability and

comparability of the financial statements. The Group has applied judgement in presenting related information together in a manner

that it considers to be most relevant to an understanding of its financial performance and financial position. The order presented is

only illustrative and entities need to tailor the organisation of the notes to fit their specific circumstances.

AASB 1060.26

While AASB 1060 includes certain presentation requirements, these do not result in presentations or classifications that are

different to those required for Tier 1 entities. Entities are permitted to refer to other Standards for guidance on the requirements

in AASB 1060. The only exception is the option not to include a separate statement of changes in equity in certain circumstances,

as set out below.

If an entity elects to present a single statement of income and retained earnings in place of the statement of comprehensive

income and statement of changes in equity, this should be disclosed. The appropriate wording would be:

“The only changes to equity during the periods for which the financial statements are presented arise from [profit or loss,

payment of dividends, corrections of prior period errors, and changes in accounting policy] [delete those items that are not

applicable]. In accordance with the options available in the accounting standards, the Group has elected to present a single

statement of income and retained earnings in place of the statement of comprehensive income and statement of changes in

equity.”

Where prior to AASB 1060 all recognition and measurement requirements of Australian Accounting Standards (including

consolidation and equity accounting) were not applied, refer to

Appendix 2 for disclosures.

ASIC Instrument

2016/191

Where an entity applies the rounding relief available in ASIC Instrument 2016/191, certain amounts are required to be rounded to

a lower level. ASIC Instrument 2016/191 specifies those amounts with reference to particular disclosure paragraphs in AAS (e.g.

AASB 2.50, AASB 124.17). The ASIC Instrument has not been updated for the equivalent paragraphs in AASB 1060 where an

entity applies Tier 2 – Simplified Disclosures. This guide applies the requirements in the legislative instrument as if it refers to the

corresponding disclosure requirements in AASB 1060.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 19

Notes to the consolidated financial statements (continued)

4. Use of judgements and estimates

In preparing these consolidated financial statements, management has made judgements and estimates that

affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income

and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised

prospectively.

AASB 1060.96

A. Judgements

Information about judgements made in applying accounting policies that have the most significant effects on the

amounts recognised in the financial statements is included in the following notes:

–

Note 17 – investments in associates: whether the Group has significant influence over an associate;

–

Note 27(A

) – lease term: whether the Group is reasonably certain to exercise extension options;

–

Note 35(D)

– revenue recognition: whether revenue from made-to-order paper products is recognised over

time or at a point in time.

AASB 1060.97

B. Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties at 30 June 2022 that have a significant risk of

resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year is

included in the following notes:

–

Note 10(F) – recognition of deferred tax assets: availability of future taxable profit against which deductible

temporary differences and tax losses carried forward can be utilised;

–

Note 12(B)

– measurement of ECL allowances for trade receivables and contract assets: determining loss

rates;

–

Note 16(C)

– impairment test of intangible assets and goodwill: key assumptions underlying recoverable

amounts; and

–

Notes 23 and 29

– recognition and measurement of provisions and contingencies: key assumptions about the

likelihood and magnitude of an outflow of resources.

5. Discontinued operation

See accounting policy in Note 35(C).

AASB 1060.91(c)

In August 2021, the Group sold its entire packaging line of business. Management committed to a plan to sell this

business in mid-2021, following a strategic decision to place greater focus on the Group’s key competencies – i.e.

the manufacture of paper used in the printing industry and forestry.

The packaging business was not previously classified as held-for-sale or as a discontinued operation. The

comparative consolidated statement of profit or loss and OCI has been re-presented to show the discontinued

operation separately from continuing operations.

Subsequent to the disposal, the Group has continued to purchase packaging from the discontinued operation.

Although intra-group transactions have been fully eliminated in the consolidated financial results, management

has elected to attribute the elimination of transactions between the continuing operations and the discontinued

operation before the disposal in a way that reflects the continuance of these transactions subsequent to the

disposal, because management believes this is useful to the users of the financial statements.

To achieve this presentation, management has eliminated from the results of the discontinued operation the inter-

company sales (and costs thereof, less unrealised profits) made before its disposal. Because purchases from the

discontinued operation will continue after the disposal, inter-company purchases made by the continuing

operations before the disposal are retained in continuing operations.

AASB 1060.97

An entity discloses information about the key assumptions concerning the future, and other key sources of information

uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of assets and

liabilities within the next financial year

AASB 1060 only requires the impact of a discontinued operation on the financial performance of the entity to be disclosed. No

other specific disclosures are required. The Group has disclosed information relating to the discontinued operation to provide

users of the financial statements with an understanding of the transactions that occurred during the financial year.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 20

Notes to the consolidated financial statements (continued)

6. Revenue

See accounting policy in Note 35(D).

The Group generates revenue primarily from sale of paper and provision of forestry services to its customers.

Other sources of revenue include immaterial amounts related to hedge accounting and hedging gains.

AASB 1060.157(b)

In the following table, revenue from contracts with customers (excluding revenue related to a discontinued

operation) is disaggregated by primary geographical market, major products and service lines and timing of

revenue recognition.

For the year ended 30 June

Total

In thousands of dollars

2022

2021

Primary geographical markets

Australia and New Zealand

81,903

78,098

United States

20,491

18,323

102,394

96,421

Major products/service lines

Standard paper products

70,855

66,862

Made-to-order paper products

23,618

22,287

Forestry services

3,967

3,483

Other

3,954

3,789

102,394

96,421

Timing of revenue recognition

Products transferred at a point in time

74,386

70,205

Products and services transferred over time

28,008

26,216

Revenue from contracts with customers

102,394

96,421

Other revenue

(4)

External revenue

102,400

96,417

AASB 15.B87–B89

The extent to which an entity’s revenue is disaggregated for the purposes of this disclosure depends on the facts and

circumstances of the entity’s contracts with customers.

In determining the appropriate categories, an entity considers how revenue is disaggregated in:

–

disclosures presented outside the financial statements;

–

information reviewed by the chief operating decision maker for evaluating the financial performance of operating segments;

and

–

other similar information that is used by the entity or users of the entity’s financial statements to evaluate performance or

make resource allocation decisions.

Examples of categories that might be appropriate in disclosing disaggregated revenue include, but are not limited to, the

following.

Type of category

Example

Type of good or service

Major product lines

Geographic region

Country or region

Market or type of customer

Government and non-government customers

Type of contract

Fixed-price and time-and-materials contracts

Contract duration

Short-term and long-term contracts

Timing of transfer of goods or services

Goods or services transferred to customers:

–

at a point in time

–

over time

Sales channels

Goods or services sold:

–

directly to consumers

–

through intermediaries

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 21

Notes to the consolidated financial statements (continued)

7. Income and expenses

A. Other income

In thousands of dollars

Note

2022

2021

AASB 1060.160(a),

AASB 120.29

Government grants

22(A)

238

Gain on sale of property, plant and equipment

264

AASB 1060.91(c)

B. Other expenses

In thousands of dollars

Note

2022

2021

Impairment loss on goodwill

16(C)

116

Impairment loss on remeasurement of disposal group

Impairment loss on trade receivables and contract assets

12(B)

200

190

Onerous contract charge

23(D)

160

Earthquake-related expenses

359

870

190

8. Net finance costs

See accounting policies in Notes 35(G) and (L).

In thousands of dollars

Note

2022

2021

AASB 1060.119(b)

Finance income under the effective interest method on

financial assets not measured at FVTPL

202

124

Remeasurement to fair value of pre-existing interest in an

acquiree

250

AASB 1060.119(a)(i)

Financial assets at FVTPL – net change in fair value

582

245

Finance income – other

832

245

AASB 1060.119(c)

Finance costs – impairment loss on debt securities

(62)

(13)

AASB 1060.119(a)(iv)

Financial liabilities at amortised cost – interest expense

(1,523)

(1,299)

AASB 1060.180(a)

Net foreign exchange loss

(239)

(266)

AASB 1060.122(d)

Cash flow hedges – reclassified from OCI

Unwind of discount on site restoration provision

(60)

(50)

Finance costs – other

(1,805)

(1,603)

Net finance costs recognised in profit or loss

(833)

(1,247)

AASB 1060.162

The Group has capitalised $231 thousand (2021: $12 thousand) of borrowing costs related to the acquisition of

land, the construction of the factory and the development of a new process in one of the factories.

AASB 1060.BC81

Entities applying AASB 1060 are still expected to disclose information that is not presented elsewhere but that is relevant to an

understanding of the financial statement in accordance with paragraph 91(c). This would include information about individually

material items of income and expense where information about these items is necessary to assess the entity’s financial

performance.

Insights 4.1.30.10–40

There is no guidance in the Standards on how specific expenses are allocated to functions. An entity establishes its own

definitions of functions. In our view, cost of sales includes only expenses directly or indirectly attributable to the production

process. Only expenses that cannot be allocated to a specific function are classified as ‘other expenses’.

AASB 1060.169-170,

Insights 3.10.410.20

The Group has classified expenses by function and has therefore allocated the impairment loss to the appropriate function, where

possible. In our view, in the rare case that an impairment loss cannot be allocated to a function, it should be included in ‘other

expenses’ as a separate line item if it is significant (e.g. impairment of goodwill), with additional information given in a note.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 22

Notes to the consolidated financial statements (continued)

9. Share-based payment arrangements

See accounting policy in Note 35(E)(ii).

AASB 1060.164(a)

At 30 June 2022, the Group had only one type of share-based payment arrangements

b,c

– cash-settled share

appreciation rights (SARs).

On 1 July 2016 and 1 July 2021, the Group granted 100,000 and 300,000 SARs, respectively, to employees that

entitle them to a cash payment after three years of service. The SARs expire at the end of a five-year period after

grant date. The amount of the cash payment is determined based on the increase in the share price of the

Company between grant date and the time of exercise.

Details of the liabilities arising from the SARs were as follows.

In dollars

Note

2022

2021

AASB 1060.168(b)

Total carrying amount of liabilities for SARs

439,950

379,500

AASB 1060.166,

AASB 2.33A

The fair value of the SARs has been measured using the Black-Scholes formula. Service and non-market

performance conditions attached to the arrangements were not taken into account in measuring fair value.

AASB 1060.168(a)

The Group has recognised in profit or loss the share-based expense of $439,950 (2021: $5,850).

10. Income taxes

See accounting policy in Note 35(H).

A. Amounts recognised in profit or loss

In thousands of dollars

2022

2021

Current tax expense

AASB 1060.177(a)

Current year

1,707

3,352

AASB 1060.177(b)

Changes in estimates related to prior years

116

(34)

1,823

3,318

Deferred tax expense

AASB 1060.177(c)

Origination and reversal of temporary differences

(865)

AASB 1060.177(e)

Recognition of previously unrecognised tax losses

(50)

(240)

AASB 1060.177(e)

Recognition of previously unrecognised (derecognition of

previously recognised) deductible temporary differences

(13)

(1,095)

Tax expense on continuing operations

1,837

2,223

ASIC Instrument

2016/191

Where an entity applies the rounding relief available in ASIC Instrument 2016/191, certain amounts are required to be rounded to

a lower level. ASIC Instrument 2016/191 specifies those amounts with reference to particular disclosure paragraphs in AAS (e.g.

AASB 2.50, AASB 124.17). The ASIC Instrument has not been updated for the equivalent paragraphs in AASB 1060 where an

entity applies Tier 2 – Simplified Disclosures. This guide applies the requirements in the legislative instrument as if it refers to the

corresponding disclosure requirements in AASB 1060.

AASB 1060.164(b)

Where an entity has share options, it discloses the number and weighted average exercise prices for each of the following groups

of options:

–

outstanding at the beginning of the period;

–

granted during the period;

–

forfeited during the period;

–

exercised during the period;

–

expired during the period;

–

outstanding at the end of the period; and

–

exercisable at the end of the period.

AASB 1060.165

Where an entity has equity-settled share-based payment arrangements, it discloses how it measured the fair value of goods or

services received or the value of equity instruments granted. If a valuation methodology was used, the entity discloses the

method and its reason for choosing it.

The changes in tax laws and the tax rates disclosed or applied throughout this guide to calculate the tax impact amounts are for

illustrative purposes only and do not reflect actual changes in tax laws or corporate tax rates in the respective jurisdictions. In

practice, the applicable changes in tax laws need to be considered. All tax impacts are calculated using the tax rate of 33%.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 23

Notes to the consolidated financial statements (continued)

10. Income taxes

(continued)

B. Amounts recognised in OCI and equity

In thousands of dollars

2022

2021

Tax expense (benefit)

AASB 1060.178(a)

Items recognised in OCI

(16)

AASB 1060.178(b)

Items recognised directly in equity

C. Reconciliation of effective tax rate

In thousands of dollars

2022

2021

AASB 1060.178(c)

Profit before tax from continuing operations

6,288

8,135

Tax using the Company’s domestic tax rate

33.00%

2,075

33.00%

2,685

Effect of tax rates in foreign jurisdictions

(1.06%)

(88)

(0.66%)

(54)

Tax effect of:

- Share of profit of associates, net of tax

4.53%

(377)

2.38%

(194)

- Non-deductible expenses

2.95%

245

0.44%

- Tax-exempt income

(0.29%)

(24)

(0.61%)

(50)

- Tax incentives

(1.06%)

(88)

(0.77%)

(63)

- Current-year losses for which no deferred tax asset is

recognised

0.49%

1.56%

127

Recognition of previously unrecognised tax losses

(0.60%)

(50)

(2.95%)

(240)

Recognition of previously unrecognised (derecognition of

previously recognised) deductible temporary differences

(0.16%)

(13)

0.12%

Changes in estimates related to prior years

1.39%

116

(0.42%)

(34)

32.06%

1,837

26.82%

2,223

AASB 1060.178(c)

Rather than presenting either a numerical reconciliation between total tax expense and the product of accounting profit multiplied

by the applicable tax rates, or a numerical reconciliation between the average effective tax rate and the applicable tax rate, the

Group has elected to present both. Only one form is required to be presented.

The Group’s reconciliation of the effective tax rate is based on its domestic tax rate, with a reconciling item in respect of tax rates

applied by Group companies in other jurisdictions. The reconciliation of the effective tax rate is based on an applicable tax rate that

ovides the most meaningful information to users. In some cases, it might be more meaningful to aggregate separat

reconciliations prepared using the domestic tax rate in each individual jurisdiction.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 24

Notes to the consolidated financial statements (continued)

10. Income taxes (continued)

AASB 1060.178(e)

D. Movement in deferred tax balances

Balance at 30 June

In thousands of dollars

Net

balance

at 1 July

Recogn.

in profit

or loss

Recogn.

in OCI

Recogn.

directly

in equity

Acquired

in bus.

comb.

Other

Net

Deferred

tax

assets

Deferred

tax

liabilities

2022

Property, plant and

equipment

443

(241)

(35)

210

377

553

(176)

Leases

132

186

Intangible assets

(38)

(76)

Investment in securities

(7)

(27)

Trade and other receivables

Derivatives

(40)

(5)

(29)

(31)

Inventories

(3)

197

Loans and borrowings

(54)

(9)

(63)

Provisions

417

(24)

407

661

(254)

Deferred income

(15)

Other items

(11)

Tax losses carried forward

386

436

Tax assets (liabilities)

before set-off

1,617

(14)

(54)

(79)

250

1,736

2,374

(638)

Set-off of tax

(387)

387

Net tax assets (liabilities)

1,736

1,987

(251)

2021

Property, plant and

equipment

359

443

526

(83)

Leases

125

132

Intangible assets

(38)

Investment in securities

(18)

(5)

(54)

Trade and other receivables

Derivatives

(12)

(29)

(40)

(43)

Inventories

Provisions

200

212

417

658

(241)

Deferred income

Other items

(4)

Tax losses carried forward

146

240

386

Tax assets (liabilities)

before set-off

551

1,095

(29)

1,617

2,080

(463)

Set-off of tax

(126)

126

Net tax assets (liabilities)

1,697

1,954

(337)

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 25

Notes to the consolidated financial statements (continued)

10. Income taxes (continued)

E. Unrecognised deferred tax assets

AASB 1060.178(f)

Deferred tax assets have not been recognised in respect of the following items, because it is not probable that

future taxable profit will be available against which the Group can use the benefits therefrom.

In thousands of dollars

2022

2021

Deductible temporary differences

161

200

Tax losses

644

672

805

872

F. Tax losses carried forward

AASB 1060.178(f)

Tax losses for which no deferred tax asset was recognised expire as follows.

In thousands of dollars

2022

Expiry date

2021

Expiry date

Expire

644

2023–2027

520

2025–2026

Never expire

152

11. Inventories

See accounting policies in Notes 35(D) and 35(I).

AASB 1060.123(b)

In thousands of dollars

2022

2021

AASB 1060.44(c)(i)

Finished goods

4,200

4,705

AASB 1060.44(c)(iii)

Raw materials and consumables

7,415

6,914

Right to recover returned goods

533

500

Inventories

12,148

12,119

AASB 1060.123(e)

Carrying amount of inventories pledged as security for liabilities

1,650

2,090

AASB 1060.123(c)

In 2022, inventories of $54,019 thousand (2021: $53,258 thousand) were recognised as an expense during the

year and included in ‘cost of sales’.

AASB 1060.123(d)

In 2021, the Group tested the related product line for impairment (see Note 16(C)(i)) and wrote down the related

inventories to their net realisable value, which resulted in a loss of $42 thousand. In 2022, following a change in

estimates, $10 thousand of the write-down was reversed.

In addition, inventories have been reduced by $345 thousand (2021: $125 thousand) as a result of the write-down

to net realisable value. This write-down was recognised as an expense during 2022.

The write-downs and reversals are included in ‘cost of sales’.

AASB 15.B21

AASB 15 Revenue from Contracts with Customers and other standards do not specify where assets for rights to recover products

from customers with regards to sales with a right of return should be presented. The Group has included the assets in

‘inventories’ and disclosed them separately in the note.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 26

Notes to the consolidated financial statements (continued)

12. Trade and other receivables

See accounting policies in Notes 35(M)(i)–(ii) and (P)(i).

In thousands of dollars

Note

2022

2021

AASB 1060.44(b)

Trade receivables due from related parties

30(C)

585

516

AASB 1060.44(b)

Trade receivables due from other parties

31,933

21,809

AASB 1060.44(b), 159

Contract assets

1,271

782

AASB 1060.44(b)

Prepayments

330

1,200

34,119

24,307

The contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the

reporting date on made-to-order paper products.

A. Transfer of trade receivables

AASB 1060.116(a)-(b),

117

The Group sold with recourse trade receivables to a bank for cash proceeds. These trade receivables have not

been derecognised from the statement of financial position, because the Group retains substantially all of the

risks and rewards – primarily credit risk. The amount received on transfer has been recognised as a secured bank

loan (see

Note 20(A)). The arrangement with the bank is such that the customers remit cash directly to the Group

and the Group transfers the collected amounts to the bank.

The receivables are considered to be held within a held-to-collect business model consistent with the Group’s

continuing recognition of the receivables.

The following information shows the carrying amount of trade receivables at the reporting date that have been

transferred but have not been derecognised and the associated liabilities.

In thousands of dollars

Note

2022

2021

AASB 1060.116(c)

Carrying amount of trade receivables transferred to a bank

600

1,000

AASB 1060.116(c)

Carrying amount of associated liabilities

20(A)

598

985

B. Impairment losses

AASB 1060.119(c)

Impairment losses on financial assets and contract assets recognised in profit or loss were as follows.

In thousands of dollars

2022

2021

Impairment loss on trade receivables and contract assets*

210

192

Impairment loss on lease receivable

211

193

* Of which, $11 thousand (2021: $3 thousand) related to a discontinued operation.

AASB 1060.97

The loss allowances for trade receivables and contract assets are based on assumptions about risk of default and

expected loss rates. The expected loss rates applied as at 30 June 2022 vary from 1% for receivables that are

more than 30 days past due to 44% for receivables that are more than 120 days past due (30 June 2021 – from

1% to 40%).

AASB 1060.44(b),

AASB 15.109

Although this guide uses the term ‘contract assets’, an entity may also use another term.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 27

Notes to the consolidated financial statements (continued)

13. Cash and cash equivalents

See accounting policies in Notes 35(M)(i)–(ii) and (P)(i).

AASB 1060.88

In thousands of dollars

2022

2021

Bank balances

988

Call deposits

1,454

861

Cash and cash equivalents in the statement of financial position

1,504

1,849

Bank overdrafts repayable on demand and used for cash management purposes

(334)

(282)

Cash and cash equivalents in the statement of cash flows

1,170

1,567

14. Disposal group held for sale

See accounting policy in Note 35(L).

AASB 1060.47(a)-(b)

In December 2021, management committed to a plan to sell part of a manufacturing facility. Accordingly, part of

that facility is presented as a disposal group held for sale. Efforts to sell the disposal group have started and a sale

is expected by October 2022.

At 30 June 2022, the disposal group was stated at fair value less costs to sell and comprised the following assets

and liabilities.

AASB 5.38

In thousands of dollars

Note

Property, plant and equipment

7(B), 15(A)

8,129

Inventories

2,775

Trade and other receivables

3,496

Assets held for sale

14,400

In thousands of dollars

Note

Trade and other payables

4,270

Deferred tax liabilities

10(D)

140

Liabilities held for sale

4,410

The part of the Group’s manufacturing facility that has been presented as a disposal group held for sale does not meet the

definition of a discontinued operation in AASB 5.

AASB 5.38

The Group has elected to disclose major classes of assets and liabilities classified as held-for-sale in the notes. Alternatively, this

information may be provided in the statement of financial position.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 28

Notes to the consolidated financial statements (continued)

15. Property, plant and equipment

See accounting policies in Notes 35(J), (P)(ii) and (R)(ii).

A. Reconciliation of carrying amount

AASB 1060.44(a)

In thousands of dollars

Note

Land and

buildings

Plant and

equipment

Fixtures

and fittings

Under

construction

Total

Balance at 1 July 2021:

AASB 1060.134(d)

Gross carrying amount

10,624

30,284

6,135

47,043

AASB 1060.134(d)

Accumulated depreciation and

impairment losses

(1,738)

(10,318)

(1,757)

(13,813)

AASB 1060.134(e)

Net carrying amount at 1 July 2021

8,886

19,966

4,378

33,230

AASB 1060.134(e)(i)

Additions

(B)

1,750

9,694

657

4,100

16,201

AASB 1060.134(e)(ii)

Reclassification to assets held for sale:

gross carrying amount

(9,222)

Reclassification to assets held for sale –

depreciation offset

1,058

AASB 1060.134(e)(iii)

Acquisitions through business

combinations

185

1,580

190

1,955

AASB 1060.134(e)(vi)

Reversal of impairment loss

393

AASB 1060.134(e)(vii)

Depreciation

(120)

(4,478)

(741)

(5,339)

AASB 1060.134(e)(viii)

Disposals: gross carrying amount

(89)

(11,972)

(2,100)

(14,161)

Disposals: depreciation offset

3,808

1,127

4,935

AASB 1060.134(e)(viii)

Effect of movements in exchange rates:

gross carrying amount

141

Effect of movements in exchange rates:

depreciation and impairment

(63)

(38)

(101)

Net carrying amount at 30 June 2022

10,612

10,855

3,523

4,100

29,090

Balance at 30 June 2022:

AASB 1060.134(d)

Gross carrying amount

12,470

20,455

4,932

4,100

41,957

AASB 1060.134(d)

Accumulated depreciation and

impairment losses

(1,858)

(9,600)

(1,409)

(12,867)

Net carrying amount at 30 June 2022

10,612

10,855

3,523

4,100

29,090

[AASB 16.47]

Property, plant and equipment includes right-of-use assets of $3,593 thousand related to leased properties (see

Note 27(A)(i)).

B. Property, plant and equipment under construction

In 2022, the Group acquired a piece of land for $3,100 thousand, with the intention of construction a new factory

on the site.

The Group has started construction and costs incurred up to 30 June 2022 totalled $1,000 thousand (2021: nil).

AASB 1060.136

If items of property, plant and equipment are stated at revalued amounts, an entity discloses the effective date of revaluation,

whether an independent valuer was involved, the methods and significant assumptions applied in estimating the items’ fair

values, and the revaluation surplus indicating the change for the period and any restrictions on the distribution of the balance to

shareholders.

AASB 1060.134(e)

This reconciliation need not be presented for prior periods.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 29

Notes to the consolidated financial statements (continued)

15. Property, plant and equipment (continued)

C. Change in estimates

AASB 1060.109

In 2022, the Group conducted an operational efficiency review at one of its plants, which resulted in changes in

the expected usage of certain dyeing equipment. The dyeing equipment, which management had previously

intended to sell after five years of use, is now expected to remain in production for 12 years from the date of

purchase. As a result, the expected useful life of the equipment increased and its estimated residual value

decreased. The effect of these changes on actual and expected depreciation expense, included in ‘cost of sales’,

was as follows.

In thousands of dollars

2022

2023

2024

2025

2026

Later

(Decrease) increase in depreciation expense

(256)

(113)

150

130

170

16. Intangible assets

See accounting policies in Notes 35(K) and (P)(ii).

A. Reconciliation of carrying amount

a,b,c

In thousands of dollars

Note

Goodwill

Patents and

trademarks

Development

costs

Customer

relationships

Total

Balance at 1 July 2021:

AASB 1060.137(c)

Gross carrying amount

3,545

1,093

4,551

9,189

AASB 1060.137(c)

Accumulated depreciation and

impairment losses

(138)

(639)

(3,751)

(4,528)

Net carrying amount at 1 July 2021

3,407

454

800

4,661

AASB 1060.137(e)(i)

Acquisitions – internally developed

1,272

AASB 1060.137(e)(iii),

143(a)

Acquisitions through business

combinations

541

170

791

AASB 1060.137(e)(v)

Amortisation

(B)

(129)

(646)

(10)

(785)

AASB 1060.137(e)(vi),

143(b)

Impairment loss

(C), 7(B)

(116)

AASB 1060.137(e)(vi)

Reversal of impairment loss

(C)

100

AASB 1060.137(e)(vii)

Effect of movements in exchange

rates: gross carrying amount

186

195

381

Effect of movements in exchange

rates: depreciation and impairment

(61)

(17)

(78)

Net carrying amount at 30 June

2022

3,832

620

1,704

6,226

Balance at 30 June 2022

AASB 1060.137(c)

Gross carrying amount

4,086

1,449

6,018

11,633

AASB 1060.137(c)

Accumulated depreciation and

impairment losses

(254)

(829)

(4,314)

(10)

(5,407)

Net carrying amount at 30 June

2022

3,832

620

1,704

6,226

AASB 1060.137(e)

This reconciliation need not be presented for prior periods.

AASB 1060.138(a)

Where any individual intangible asset (other than goodwill) is material to the entity’s financial statements, the entity discloses a

description, the carrying amount and remaining amortisation period of that intangible asset.

AASB 1060.141

Where an intangible asset (other than goodwill) is assessed as having an indefinite useful life, the entity discloses the carrying

amount of that asset and the reasons for supporting the assessment of an indefinite useful life. In giving these reasons, the entity

discloses the factor(s) that played a significant role in determining that the asset has an indefinite useful life.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 30

Notes to the consolidated financial statements (continued)

16. Intangible assets (continued)

B. Amortisation

AASB 1060.137(d)

The amortisation of patents, trademarks and development costs is allocated to the cost of inventory and is

included in ‘cost of sales’ as inventory is sold; the amortisation of customer relationships is included in ‘cost of

sales’.

C. Impairment test

AASB 1060.169

The impairment loss and its subsequent reversal were recognised in relation to the manufacture of a new product

in the non-recycled papers business, and in relation to the goodwill in the manufacturing and distribution CGU as

follows.

In thousands of dollars

Note

2022

2021

AASB 1060.170(a)

Non-recycled papers

: Plant and equipment

(i)

(393)

1,123

AASB 1060.170(d)

Non-recycled papers

: Development costs

(i)

(100)

285

AASB 1060.170(c)

Manufacturing and distribution

: Goodwill

116

The impairment loss and subsequent reversal of plant and equipment and development costs were included in

‘cost of sales’.

The impairment loss on goodwill was included in ‘other expenses’ (see Note 7(B)).

i. Impairment loss and subsequent reversal in relation to a new product

In 2021, a regulatory inspection revealed that a new product did not meet certain environmental standards,

necessitating substantial changes to the manufacturing process. Before the inspection, the product was expected

to be available for sale in 2022; however, as a result of the regulatory restrictions, production and the expected

launch date were deferred.

Accordingly, management estimated the recoverable amount of the CGU (the product line) in 2021, assuming that

the production line would go live in April 2023.

In 2022, following certain changes to the recovery plan, the Group reassessed its estimates and reversed part of

the initially recognised impairment.

AASB 1060.97

The estimate of value in use was determined using a pre-tax discount rate of 10.5% (2021: 9.8%) and a terminal

value growth rate of 3% from 2026 (2021: 3% from 2025).

AASB 1060.169-170,

Insights 3.10.410.20

The Group has classified expenses by function and has therefore allocated the impairment loss to the appropriate function. In our

view, in the rare case that an impairment loss cannot be allocated to a function, it should be included in ‘other expenses’ as a

separate line item if it is significant (e.g. impairment of goodwill), with additional information given in a note.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 31

Notes to the consolidated financial statements (continued)

17. Investments in associates

See accounting policies in Notes 35(A)(v)–(vi) and (P)(i).

In thousands of dollars

2022

2021

AASB 1060.125(b)

Investments in associates

272

900

On 30 September 2021, the Group’s equity interest in its material associate, Papyrus (2021: $453 thousand),

increased from 25 to 100% and Papyrus became a subsidiary from that date (see Note 26). Papyrus is one of the

Group’s strategic suppliers and is principally engaged in the production of paper pulp.

The Group’s share of results of Papyrus for the period from 1 July 2021 to 30 September 2021 (the acquisition

date) comprised profit and OCI of $69 thousand and minus $102 thousand respectively (2021: $213 thousand and

minus $138 thousand respectively).

The Group also has interests in a number of individually immaterial associates. For one of these associates; the

Group owns 20% of the equity interests but has less than 20% of the voting rights; however, the Group has

determined that it has significant influence because it has meaningful representation on the board of the investee.

The following table analyses, in aggregate, the carrying amount and share of profit and OCI of these associates.

In thousands of dollars

2022

2021

Carrying amount of interests in associates

272

447

AASB 1060.127

Share of:

–

Profit from continuing operations

(133)

102

–

Other comprehensive income

(57)

(31)

(190)

18. Other financial assets

See accounting policies in Notes 35(L) and (P)(i).

In thousands of dollars

2022

2021

Current investments

Government bonds – mandatorily at FVTPL

243

591

AASB 1060.120(b)

Forward exchange contracts used for hedging

419

441

662

1,032

Non-current investments

Equity securities – mandatorily at FVTPL

251

254

Corporate debt securities – at amortised cost

2,421

2,243

2,672

2,497

AASB 1060.114

Government bonds at FVTPL have stated interest rates of 3.5–4.0% (2021: 3.2–3.8%) and are held for trading.

Corporate debt securities classified as at amortised cost have interest rates of 6.3–7.8% (2021: 7.5–8.3%) and

mature in two to five years.

AASB 1060.119(c)

The Group has recognised an impairment loss on debt securities at amortised cost of $62 thousand (2021: $13

thousand).

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 32

Notes to the consolidated financial statements (continued)

19. Capital and reserves

See accounting policies in Notes 35(B)(i)–(ii), (E)(iv), (M)(v), (N) and (O).

A. Share capital

AASB 1060.45(a)(iv)

In thousands of shares

Ordinary shares

Non-redeemable

preference shares

AASB 1060.45(a)(ii)

In issue at 1 July 2021

3,100

1,750

Issued for cash

130

AASB 1060.45(a)(ii)

In issue at 30 June 2022 – fully paid

3,230

1,750

AASB 1060.45(a)(i), (iii)

The Company does not have authorised capital or par value in respect of its issued shares.

AASB 1060.45(a)(v)

All ordinary shares rank equally with regard to the Company’s residual assets. Preference shareholders participate

only to the extent of the face value of the shares.

i. Ordinary shares

AASB 1060.45(a)(v)

Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per

share at general meetings of the Company. All rights attached to the Company’s shares held by the Group are

suspended until those shares are reissued.

In April 2022, the general meeting of shareholders approved the issue of 130,000 ordinary shares at a price of

$11.92 per share (2021: nil).

ii. Non-redeemable preference shares

AASB 1060.45(a)(v)

Holders of these shares receive a non-cumulative dividend of 25.03 cents per share at the Company’s discretion,

or whenever dividends to ordinary shareholders are declared. They do not have the right to participate in any

additional dividends declared for ordinary shareholders. These shares do not have voting rights.

AASB 1060.45(b)

B. Nature and purpose of reserves

i. Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial

statements of foreign operations, as well as the effective portion of any foreign currency differences arising from

hedges of a net investment in a foreign operation (see Note 35(M)(v)).

ii. Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging

instruments used in cash flow hedges pending subsequent recognition in profit or loss or directly included in the

initial cost or other carrying amount of a non-financial asset or non-financial liability.

iii. Convertible notes

The reserve for convertible notes comprises the amount allocated to the equity component for the convertible

notes issued by the Group in November 2021 (see Note 20(C)).

iv. Profits reserve

Reporting Update

12RU-005

The profits reserve represents profits of entities within the Group transferred to a separate reserve to preserve

their profit character. Such profits are available to enable payment of franked dividends in future years. Dividends

amounting to $1,243 thousand (2021: $571 thousand) were distributed from the profits reserve during the year.

AASB 1060.101

C. Dividends

In thousands of dollars

2022

2021

Dividend franking account

Amount of franking credits available to shareholders of Example

Simplified Disclosures Proprietary Limited for subsequent years

3,092

1,030

1,348

726

The ability to utilise the franking credits is dependent upon the ability to declare dividends. In accordance with the

tax consolidation legislation, the Company as the head entity in the tax-consolidated group has also assumed the

total benefit of $4,122 thousand (2021: $2,074 thousand) franking credits.

AASB 1060.45(a)(iv)

The reconciliation of the number of shares outstanding at the beginning and at the end of the period need not be presented for

prior periods.

AASB 1060.100

Separate disclosure is required in respect of any New Zealand imputation credits and any Australian imputation credits.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 33

Notes to the consolidated financial statements (continued)

AASB 1060.113(d)

20. Loans and borrowings

See accounting policies in Notes 35(B)(i)–(ii), (M)(i), (M)(iii), (P)(ii), (Q) and (R).

In thousands of dollars

Note

2022

2021

Current

Secured bank loans

1,055

3,985

Unsecured bank loans

503

117

Loan from associate

30(C)

1,000

Dividends payable on redeemable preference shares

Lease liabilities

674

444

2,283

5,546

Non-current

Secured bank loans

7,554

8,093

Unsecured bank loans

Redeemable preference shares

1,939

Dividends payable on redeemable preference shares

Lease liabilities

3,451

1,738

17,622

9,831

AASB 1060.114

A. Terms and repayment schedule

The terms and conditions of outstanding loans are as follows.

30 June

2022

30 June

2021

In thousands of dollars

Currency

Nominal

interest rate

Year of

maturity

Carrying

amount

Carrying

amount

Secured bank loan (see Note 12(A))

AUD

3.60–3.90%

2022–23

598

985

Secured bank loan

NZD

3.90-4.70%

2022-26

1,240

1,257

Secured bank loan

USD

4.70%

2024–25

1,447

1,521

Secured bank loan (see (B))

AUD

4.50%

2024–25

3,460

Secured bank loan

AUD

3.50-3.70%

2022–24

1,864

4,855

Unsecured bank loan

AUD

3.80%

2023

503

Unsecured bank loan

AUD

5.50%

2022

117

Loan from associate

AUD

4.80%

2022

1,000

Convertible notes

AUD

3.00%

2025

4,678

Redeemable preference shares

AUD

4.40%

2028

1,990

Lease liabilities

AUD

6.0–7.0%

2022–36

4,125

2,182

Total interest-bearing liabilities

19,905

15,377

AASB 1060.114, 116(c),

117, 123(e), 135(a)

The secured bank loans are secured over land and buildings, inventories and trade receivables with a carrying

amount of $5,000 thousand (2021: $4,700 thousand), $1,650 thousand (2021: $2,090 thousand) and $600

thousand (2021: $1,000 thousand) respectively.

AASB 1060.114, 144(b),

BC78

AASB 1060 requires an entity to disclose information that enables users of its financial statements to evaluate the significance of

financial instruments for its financial position and performance. For example, for long-term debt such information would normally

include the terms and conditions of the debt instrument (such as interest rate, maturity, repayment schedule, and restrictions that

the debt instrument imposes on the entity). AASB 1060 does not mandate a maturity analysis by time bands, except for lease

payments – see

Note 27(A); however, an entity may present such analysis if it determines it is an appropriate disclosure to satisfy

the requirements in paragraph 114.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 34

Notes to the consolidated financial statements (continued)

20. Loans and borrowings (continued)

A. Terms and repayment schedule (continued)

As disclosed below, the Group has a secured bank loan that contains a loan covenant. A future breach of

covenant may require the Group to repay the loan earlier than indicated in the above table. In addition, convertible

notes will become repayable on demand in the Group’s net debt to adjusted equity ratio exceeds 1.95. Under the

agreement, the covenant is monitored on a regular basis and reported to management to ensure compliance with

the agreement.

B. Breach of loan covenant

AASB 1060.118

The Group has a secured bank loan with a carrying amount of $3,460 thousand at 30 June 2022 (2021: $3,460

thousand). This loan is repayable in tranches within five years. However, the loan contained a covenant stating

that at the end of each quarter the Group’s debt (defined in the covenant as the Group’s loans and borrowings

and trade and other payables) cannot exceed 2.5 times the Group’s quarterly revenue from continuing operations,

otherwise the loan will be repayable on demand.

The Group exceeded its maximum leverage threshold (loan covenant ratio, calculated as debt to quarterly revenue

for continuing operations) associated with a bank loan in the first quarter of 2022 and the threshold was still

exceeded as at 30 June 2022. However, management obtained a waiver from the bank in April 2022, which

extended for a period of 18 months until September 2023. Accordingly, the loan was not payable on demand at

30 June 2022.

Subsequent to 30 June 2022, the bank revised the loan covenant ratio from 2.5 to 3.5 times and the waiver was

lifted. On the basis of the new covenant and its forecasts, management believes that the risk of the new

covenant being breached is low.

AASB 1060.114

C. Convertible notes

In thousands of dollars

Proceeds from issue of convertible notes (1,250,000 notes at $4 face value)

5,000

Transaction costs

(250)

Net proceeds

4,750

Amount classified as equity (net of transaction costs of $9 thousand)

(163)

Accreted interest

Carrying amount of liability at 30 June 2022

4,678

These notes were issued on 29 November 2021. They are convertible into 250,000 ordinary shares in November

2023 at the option of the holder. Any unconverted notes become payable on demand.

AASB 1060.114

D. Redeemable preference shares

In thousands of dollars

Proceeds from issue of redeemable preference shares

2,000

Transaction costs

(61)

Accrued dividend

Carrying amount at 30 June 2022

1,990

In 2022, 1,000,000 redeemable preference shares were issued as fully paid with a face value of $2 per share

(2021: nil). The redeemable preference shares are mandatorily redeemable at par on 30 November 2026 and the

Group is obliged to pay holders of these shares annual dividends of 4.4% of the face amount on 30 November

each year until and including on maturity. Redeemable preference shares do not carry the right to vote.

Insights 3.1.40.130

In some circumstances, an entity may – before the reporting date – obtain from a lender an agreement to amend a lending

arrangement. Such amendments may defer the date as at which information is assessed for testing covenant compliance from a

date at or before the reporting date to a later date. We believe that in these situations whether the entity would have breached

the related covenant had the agreement not been amended does not affect the classification of the liability at the reporting date.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 35

Notes to the consolidated financial statements (continued)

21. Trade and other payables

See accounting policies in Notes 35(M)(iii)-(iv).

AASB 1060.44(d),

In thousands of dollars

Note

2022

2021

Trade payables due to related parties

137

351

Trade payables due to other parties

22,531

19,600

Accrued expenses

312

487

Trade payables

22,980

20,438

Forward exchange contracts used for hedging

24(C)

Refund liabilities

988

883

AASB 1060.168(b)

Cash-settled share-based payment liability

440

380

Other payables

1,436

1,270

24,416

21,708

22. Deferred income

See accounting policy in Note 35(F).

In thousands of dollars

Note

2022

2021

Government grants

(A)

1,424

1,462

1,424

1,462

A. Government grants

AASB 1060.160(a)-(b)

The Group has been awarded two government grants. One of the grants, received in 2021, amounted to $1,462

thousand and was conditional on the acquisition of factory premises in a specified region. The factory has been in

operation since late 2021 and the grant, recognised as deferred income, is being amortised over the useful life of

the building. In accordance with the terms of the grant, the Group is prohibited from selling the factory premises

for a period of 15 years from the date of the grant.

The second grant, received in 2022, was unconditional and amounted to $200 thousand. It was included in ‘other

income’ when it became receivable (see Note 7(A)).

AASB 15.55

The Group has presented its refund liabilities under AASB 15 Revenue from Contracts with Customers as ‘trade and other

payables’. The Group’s returns policy offers only an exchange for another good – i.e. the Group does not offer a cash refund.

Therefore, refund liabilities do not meet the definition of a financial liability in AASB 132 Financial Instruments: Presentation.

AASB 1060.160(d),

AASB 120.24,

Insights 4.3.130.60

The Group has elected to present government grants related to assets as deferred income. Alternatively, an entity may present

these grants as a deduction in arriving at the carrying amount of the related asset.

The deferred income is generally classified as a non-current liability when an entity presents a classified statement of financial

position.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 36

AASB 1060.153

An entity is not required to disclose comparative information for prior periods.

Notes to the consolidated financial statements (continued)

23. Provisions

See accounting policies in Notes 35(E) and (Q).

In thousands of dollars

Note

2022

2021

Current provisions

AASB 1060.44(e)

Employee benefits

AASB 1060.44(e)

Other provisions

660

1,540

680

1,548

Non-current provisions

AASB 1060.44(e)

Employee benefits

187

173

AASB 1060.44(e)

Other provisions

1,010

1,197

173

AASB 1060.172

Contributions to defined contribution plans recognised as an expense in profit or loss in 2022 were $455

thousand (2021: $419 thousand).

A reconciliation for each class of other provisions is provided below.

In thousands of dollars

Note

Warranties

Restructuring

Site

restoration

Onerous

contracts

Legal

Total

AASB 1060.153(a)(i)

Balance at 1 July 2021

200

600

740

1,540

Assumed in a business

combination

150

170

AASB 1060.153(a)(ii)

Provisions made during

the year

280

400

720

160

1,560

AASB 1060.153(a)(iii)

Provisions used during

the year

(200)

(500)

(800)

(1,500)

AASB 1060.153(a)(iv)

Provisions reversed

during the year

(100)

AASB 1060.153(a)(i)

Balance at 30 June 2022

280

400

810

160

1,670

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 37

Notes to the consolidated financial statements (continued)

23. Provisions (continued)

A. Warranties

AASB 1060.153(b)-(d)

The provision for warranties relates mainly to paper sold in 2021 and 2022. The provision has been estimated

based on historical warranty data associated with similar products and services. The Group expects to settle the

majority of the liability over the next year. An expected reimbursement of warranty expense incurred of $25

thousand has been included in ‘trade receivables due from other parties’ (see

Note 12) following a supplier

accepting responsibility for the defective products.

B. Restructuring (including termination benefits)

AASB 1060.153(b)-(c),

174

In 2022, a provision of $400 thousand was made to cover the costs associated with restructuring part of a

manufacturing facility that will be retained when the remainder of the facility is sold (see Note 14). Estimated

restructuring costs mainly include employee termination benefits of $325 thousand, which are fully provided for,

and are based on a detailed plan agreed between management and employee representatives. The restructuring

and the sale are expected to be completed by December 2022.

In 2021, the Group committed to a plan to restructure a product line in the paper manufacturing and distribution

division due to a decrease in demand as a result of a deterioration in economic conditions. Following the

announcement of the plan, the Group recognised a provision of $600 thousand for expected restructuring costs,

including contract termination costs of $128 thousand, consulting fees of $271 thousand and employee

termination benefits of $201 thousand. Estimated costs were based on the terms of the relevant contracts. The

restructuring was completed in 2022, and $500 thousand of the provision was used during the year (noting that

the full amount of employee termination benefits provided for was paid). The unused provision of $100 thousand

was reversed and has been included in ‘cost of sales’.

C. Site restoration

i. Australia

AASB 1060.153(b)

A provision of $740 thousand was made in 2021 and an unwind of the discount of $60 thousand was recognised

in 2022 in respect of the Group’s obligation to rectify environmental damage in Australia. The required work was

completed during 2022 at a cost of $800 thousand.

ii. New Zealand

AASB 1060.153(b)-(c)

Under New Zealand law, the Group’s subsidiary in New Zealand is required to restore contaminated land to its

original condition before the end of 2025. In 2022, the Group provided $660 thousand for this purpose.

Because of the long-term nature of the liability, the greatest uncertainty in estimating the provision is the costs

that will be incurred. In particular, the Group has assumed that the site will be restored using technology and

materials that are currently available. The Group has been provided with a range of reasonably possible outcomes

for the total cost, which range from $500 thousand to $700 thousand, reflecting different assumptions about

pricing of the individual components of the cost. The provision has been calculated using a discount rate of 5.9%.

The rehabilitation is expected to occur in the next two to three years.

iii. Acquisition of Papyrus

AASB 1060.153(b)

As part of the acquisition of Papyrus, the Group recognised environmental provisions of $150 thousand,

measured on a provisional basis (see Note 26).

D. Onerous contracts

AASB 1060.153(b)

As a result of a non-cancellable sales contract related to standard paper products and the expected increase in

costs to fulfil the contract arising from supply chain disruptions, the Group is no longer expected to cover the

consideration receivable and recognised an onerous contract provision of $160 thousand.

E. Legal

AASB 1060.154, 142(e)

As a result of the acquisition of Papyrus, the Group assumed a contingent liability of $20 thousand, measured on

a provisional basis (see Note 26).

AASB 1060.175

When there is uncertainty about the number of employees who will accept an offer of termination benefits, an entity discloses

information about this contingent liability unless the possibility of an outflow in settlement is remote.

This disclosure is not specifically required in AASB 1060 but is included to provide context for the termination benefits that were

previously provided for and actually paid.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 38

Notes to the consolidated financial statements (continued)

24. Financial instruments

A. Accounting classifications

AASB 1060.113

The following table shows the carrying amounts of financial assets and financial liabilities.

30 June

In thousands of dollars

Note

2022

2021

AASB 1060.113(a)

Financial assets measured at fair value through profit or loss

Forward exchange contracts used for hedging

419

441

Government bonds

243

591

Equity securities

251

254

913

1,286

AASB 1060.113(b)

Financial assets measured at amortised cost

Trade receivables*

32,518

22,325

Cash and cash equivalents

1,504

1,849

Corporate debt securities

2,421

2,243

36,443

26,417

AASB 1060.113(c)

Financial liabilities measured at fair value through profit or

loss

Forward exchange contracts used for hedging

(8)

(7)

(8)

(7)

AASB 1060.113(d)

Financial liabilities measured at amortised cost

Bank overdrafts

(334)

(282)

Secured bank loans

(8,609)

(12,078)

Unsecured bank loans

(503)

(117)

Convertible notes – liability component

(4,678)

Redeemable preference shares

(1,939)

Dividends payable on redeemable preference shares

(51)

Loan from associate

(1,000)

Trade payables*

(22,980)

(20,438)

(39,094)

(33,915)

* Other receivables and payables that are not financial instruments (contract assets, prepayments and refund

liabilities) are not included.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 39

Notes to the consolidated financial statements (continued)

24. Financial instruments (continued)

B. Measurement of fair values

AASB 1060.115

The following tables show the valuation techniques used in measuring fair values for financial instruments in the

statement of financial position, as well as the significant unobservable inputs used. Related valuation processes

are described in Note 4(B).

Type

Valuation technique

Significant unobservable inputs

Equity securities

Market comparison technique: The valuation

model is based on market multiples derived

from quoted prices of companies comparable

to the investee, adjusted for the effect of the

non-marketability of the equity securities, and

the revenue and EBITDA of the investee. The

estimate is adjusted for the net debt of the

investee.

Adjusted market multiple (2021: 4–7).

Corporate debt

securities

Market comparison/discounted cash flow:

The fair value is estimated considering

(i) current or recent quoted prices for identical

securities in markets that are not active and

(ii) a net present value calculated usi

scount rates derived from quoted yields of

securities with similar maturity and credit

rating that are traded in active markets,

adjusted by an illiquidity factor.

Not applicable.

Forward exchange

contracts

Forward pricing: The fair value is determined

using quoted forward exchange rates at the

reporting date and present value calculations

based on high credit quality yield curves in the

respective currencies.

Not applicable.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 40

Notes to the consolidated financial statements (continued)

24. Financial instruments (continued)

C. Financial risk management – Hedging

The Group uses derivatives to manage market risks, e.g. changes in foreign exchange rates. All such transactions

are carried out within the guidelines set by risk management committee. Generally, the Group seeks to apply

hedge accounting to manage volatility in profit or loss.

Currency risk

AASB 1060.120(c)

The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the

currencies in which sales, purchases, receivables and borrowings are denominated and the respective functional

currencies of Group companies. The functional currencies of Group companies are primarily the Australian and

New Zealand dollars. The currencies in which these transactions are primarily denominated are Australian, New

Zealand and US dollars.

AASB 1060.120(a)-(b)

The Group’s risk management policy is to hedge 75 to 85% of its estimated foreign currency exposure in respect

of forecast sales and purchases over the following 12 months at any point in time. The Group uses forward

exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date.

These contracts are generally designated as cash flow hedges.

a,b,c

AASB 1060.120

The Group designates the full change in the fair value of forward foreign exchange contracts to hedge its currency

risk and applies a hedge ratio of 1:1. The Group’s policy is for the critical terms of the forward exchange contracts

to align with the hedged item.

The Group determines the existence of an economic relationship between the hedging instrument and hedged

item based on the currency, amount and timing of their respective cash flows. The Group assesses whether the

derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes

in cash flows of the hedged item using the hypothetical derivative method.

In these hedging relationships, the main sources of ineffectiveness are:

–

the effect of the counterparties’ and the Group’s own credit risk on the fair value of the forward foreign

exchange contracts, which is not reflected in the change in the fair value of the hedged cash flows

attributable to the change in exchange rates; and

–

changes in the timing of the hedged transactions.

Net investment hedges

AASB 1060.120(c)

A foreign currency exposure arises from the Group’s net investment in its New Zealand subsidiary that has a New

Zealand dollar functional currency. The risk arises from the fluctuation in spot exchange rates between the New

Zealand dollar and the Australian dollar, which causes the amount of the net investment to vary.

The hedged risk in the net investment hedge is the risk of a weakening New Zealand dollar against the Australian

dollar that will result in a reduction in the carrying amount of the Group’s net investment in the New Zealand

subsidiary.

AASB 1060.120(a)-(b)

Part of the Group’s net investment in its New Zealand subsidiary is hedged by a New Zealand dollar-denominated

secured bank loan (carrying amount: $1,240 thousand (2021: $1,257 thousand)), which mitigates the foreign

currency risk arising from the subsidiary’s net assets. The loan is designated as a hedging instrument for the

changes in the value of the net investment that is attributable to changes in the AUD/NZD spot rate.

The Group has not designated any fair value hedging relationships.

AASB 1060.122(b)

The Group did not have any forecast transaction for which cash flow hedge accounting had been used in the previous period, but

which is no longer expected to occur. If it did, then it would be required to disclose a description of the forecast transaction as

well as the amount reclassified from the cash flow hedge reserve to profit or loss.

AASB 1060.122(e)

The amount of any cash flow hedge or net investment hedge ineffectiveness recognised in profit or loss for the period is also

separately disclosed where relevant. Other quantitative disclosures relating to hedging are disclosed in the Statement of profit or

loss and OCI.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 41

Notes to the consolidated financial statements (continued)

25. List of subsidiaries

See accounting policy in Note 35(A)(ii).

AASB 1060.192

Set out below is a list of material subsidiaries of the Group.

–

Paper AU Pty Ltd – Australia, 100% ownership interest (2021: 100%)

–

Paper Pulp Pty Ltd – Australia, 100% ownership interest (2021: 100%)

–

Paper NZ Ltd – New Zealand, 100% ownership interest (2021: 100%)

–

Papyrus Ltd – New Zealand, 100% ownership interest (2021: 25%)

26. Acquisition of subsidiary

See accounting policy in Note 35(A)(i)–(iii).

AASB 1060.142(a)-(d)

On 30 September 2021, the Group acquired 75% of the shares and voting interests in Papyrus for a total cash

consideration of $2,935 thousand. As a result, the Group’s equity interest in Papyrus increased from 25 to 100%,

granting it control of Papyrus (see Note 17).

Taking control of Papyrus will enable the Group to modernise its production process through access to Papyrus’s

patented technology. The acquisition is also expected to provide the Group with an increased share of the

standard paper market through access to Papyrus’s customer base. The Group also expects to reduce costs

through economies of scale.

AASB 1060.142(e)

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of

acquisition.

In thousands of dollars

Note

Property, plant and equipment

15(A)

1,955

Intangible assets

16(A)

250

Inventories

825

Trade receivables

848

Cash and cash equivalents

375

Loans and borrowings

(500)

Deferred tax liabilities

10(D)

(79)

Contingent liabilities

(20)

Site restoration provision

(150)

Trade and other payables

(460)

Total identifiable net assets acquired

3,044

Goodwill arising from the acquisition has been recognised as follows.

In thousands of dollars

Note

2022

Consideration transferred

2,935

Fair value of pre-existing interest in Papyrus

650

Fair value of identifiable net assets

(3,044)

Goodwill

16(A)

541

The remeasurement to fair value of the Group’s existing 25% interest in Papyrus resulted in a gain of $250

thousand ($650 thousand less the $420 thousand carrying amount of the investment in associate at the date of

acquisition plus $20 thousand of translation reserve reclassified to profit or loss). This amount has been included

in ‘finance income’ (see Note 8).

AASB 1060.142(g)

The goodwill is attributable mainly to the skills and technical talent of Papyrus’s work force and the synergies

expected to be achieved from integrating the company into the Group’s existing standard papers business.

AASB 1060.104(b)

When a parent entity controls another entity but does not own, directly or indirectly through subsidiaries, more than half of the

voting power, it discloses the basis for concluding that control exists.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 42

Notes to the consolidated financial statements (continued)

27. Leases

See accounting policy in Note 35(R).

A. Leases as lessee

AASB 1060.144(c)

The Group leases warehouse and factory facilities. The leases typically run for a period of 10 years, with an option

to renew the lease after that date. Lease payments are renegotiated every five years to reflect market rentals.

Some leases provide for additional rent payments that are based on changes in local price indices. For certain

leases, the Group is restricted from entering into any sub-lease arrangements.

In 2022, one of the leased properties has been sub-let by the Group. The lease and sub-lease expire in 2023.

Information about leases for which the Group is a lessee is presented below.

i. Right-of-use assets

AASB 16.47(a)(ii)

Right-of-use assets related to leased properties are presented as property, plant and equipment (see Note 15(A)).

In thousands of dollars

Land and

buildings

Production

equipment

Total

AASB 1060.144(a)

Balance at 1 July 2021

2,181

1,972

4,153

AASB 1060.145

Additions to right-of-use assets

150

AASB 1060.145

Depreciation charge for the year

(338)

(283)

(621)

Derecognition of right-of-use assets*

(89)

AASB 1060.144(a)

Balance at 30 June 2022

1,904

1,689

3,593

* Derecognition of the right-of-use asset in 2022 is as a result of entering into a finance sub-lease.

ii. Amounts recognised in profit or loss

In thousands of dollars

2022

2021

AASB 1060.146(b)

Expenses relating to short-term leases and leases of low-value

assets that are not recognised as right-of-use assets

145

141

iii. Extension options

AASB 1060.144(c)

Some property leases contain extension options exercisable by the Group up to one year before the end of the

non-cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to

provide operational flexibility. The extension options held are exercisable only by the Group and not by the

lessors. The Group assesses at lease commencement date whether it is reasonably certain to exercise the

extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a

significant event or significant changes in circumstances within its control.

iv. Future lease payments

AASB 1060.144(b)

The total of future lease payments (including those lease payments that are not included in the measurement of

the lease liability, e.g. for short-term leases and leases of low-value items) are disclosed for each of the following

periods.

In thousands of dollars

2022

2021

Less than one year

1,145

531

One to five years

2,413

1,124

More than five years

2,139

1,531

5,697

3,186

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 43

Notes to the consolidated financial statements (continued)

27. Leases (continued)

B. Leases as lessor

i. Finance lease

AASB 1060.147(f)

In 2022, the Group has sub-leased a building that had previously been presented as part of a right-of-use asset –

property, plant and equipment.

The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments

to be received after the reporting date.

In thousands of dollars

2022

2021

AASB 1060.147(a)(i)

Less than one year

AASB 1060.147(a)(ii)

One to five years

AASB 1060.147(a)(iii)

More than five years

Total undiscounted lease receivable

120

AASB 1060.147(b)

Unearned finance income

Net investment in the lease

111

28. Commitments

AASB 1060.135(b),

138(d)

In 2022, the Group entered into a contract to purchase property, plant and equipment and patents and trademarks

in 2022 for $1,465 thousand (2021: nil) and $455 thousand (2021: nil) respectively.

The Group is committed to incurring other capital expenditure of $141 thousand (2021: $41 thousand). These

commitments are expected to be settled in 2023.

29. Contingencies

AASB 1060.97, 154

A subsidiary is defending an action brought by an environmental agency in Australia. Although liability is not

admitted, if the defence against the action is unsuccessful, then fines and legal costs could amount to $950

thousand, of which $250 thousand would be reimbursable under an insurance policy. Based on legal advice,

management believes that the defence against the action will be successful.

AASB 1060.142(e)

As part of the acquisition of Papyrus, the Group recognised a contingent liability of $20 thousand in respect of a

claim for contractual penalties made by one of Papyrus’s customers (see Note 26).

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 44

Notes to the consolidated financial statements (continued)

30. Related parties

A. Parent and ultimate controlling party

AASB 1060.192

In 2022, a majority of the Company’s shares were acquired by Cameron Paper Co from Brown Products

Corporation. As a result, the new ultimate controlling party of the Group is AJ Pennypacker. The previous ultimate

controlling party was Sigma Australia Investment Holdings.

B. Transactions with key management personnel

i. Key management personnel compensation

AASB 1060.194

Key management personnel compensation comprised short-term employee benefits, post-employment benefits,

other long-term benefits, termination benefits and share-based payments.

In dollars

2022

2021

Total key management personnel compensation

1,127,500

775,250

AASB 199(c)

ii. Key management personnel transactions

Directors of the Company control 12% of the voting shares of the Company.

A number of key management personnel, or their related parties, hold positions in other companies that result in

them having control or significant influence over these companies.

AASB 1060.198(b)(i)

A number of these companies transacted with the Group during the year. The terms and conditions of these

transactions were no more favourable than those available, or which might reasonably be expected to be

available, in similar transactions with non-key management personnel-related companies on an arm’s length basis.

AASB 1060.198(a)-(b)

The aggregate value of transactions and outstanding balances related to key management personnel and entities

over which they have control or significant influence were as follows.

In dollars

Transaction values for the

year ended 30 June

Balance outstanding as at

30 June

Transaction

Note

2022

2021

2022

2021

Legal fees

(a)

12,250

12,750

Repairs and maintenance

(b)

409,950

519,750

136,900

351,250

Inventory purchases – paper

(c)

66,000

AASB 1060.198(b)(i), 202

a. The Group used the legal services of one of its directors in relation to advice over the sale of certain non-

current assets of the Company. Amounts were billed based on market rates for such services and were due

and payable under normal payment terms.

b. In 2021, the Group entered into a two-year contract with On-Track Pty Ltd, a company controlled by another

director, to buy repairs and maintenance services on production equipment. The total contract value is $986

housand. The contract terms are based on market rates for these types of services and amounts ar

payable on a quarterly basis for the duration of the contract.

c. The Group bought various paper supplies from FabSupplies Pty Ltd, a company that is controlled by another

director. Amounts were billed based on market rates for such supplies and were due and payable under

normal payment terms.

From time to time directors of the Group, or their related entities, may buy goods from the Group. These

purchases are on the same terms and conditions as those entered into by other Group employees or customers.

ASIC Instrument

2016/191

Where an entity applies the rounding relief available in ASIC Instrument 2016/191, certain amounts are required to be rounded to

a lower level. ASIC Instrument 2016/191 specifies those amounts with reference to particular disclosure paragraphs in AAS (e.g.

AASB 2.50, AASB 124.17). The ASIC Instrument has not been updated for the equivalent paragraphs in AASB 1060 where an

entity applies Tier 2 – Simplified Disclosures. This guide applies the requirements in the legislative instrument as if it refers to the

corresponding disclosure requirements in AASB 1060.

AASB 1060.192

The Company’s parent produces consolidated financial statements that are available for public use. If neither the Company’s

parent nor its ultimate controlling party produced consolidated financial statements available for public use, then the Company

would disclose the name of the next most senior parent that does so. If neither the ultimate controlling party nor any intermediate

controlling party produced consolidated financial statements that are available for public use, then this fact would be disclosed.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 45

Notes to the consolidated financial statements (continued)

30. Related parties (continued)

C. Other related party transactions

AASB 1060.198(a)-(b)

Transaction values for the

year ended 30 June

Balance outstanding as at

30 June

In dollars

2022

2021

2022

2021

Sale of goods and services

AASB 1060.199(a)

Parent of the Group – Cameron Paper Co

(2021: Brown Products Corporation)

350,233

319,976

252,753

282,683

AASB 1060.199(b)

Associates

400,219

149,685

331,982

232,593

Others

Associates

– Loan and related interest

5,000

6,000

1,000,000

AASB 1060.198(b)-(d),

202

All outstanding balances with these related parties are priced on an arm’s length basis and are to be settled in

cash within two months of the reporting date. None of the balances is secured. No expense has been recognised

in the current year or prior year for bad or doubtful debts in respect of amounts owed by related parties. In 2022,

there were no transactions or outstanding balances with Brown Products Corporation, the previous parent of the

Group. No guarantees have been given or received.

AASB 1060.201

Purchase obligations in relation to recycled paper products arise from supply and service contracts signed by the

Group. In 2022, the Group entered into an $89,000 supply agreement with Cameron Paper Co. At 30 June 2022,

the Group has used $25,000 of its commitment under the agreement.

ansactions between subsidiaries in the consolidated group, which are eliminated on consolidation, need not be disclosed.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 46

Notes to the consolidated financial statements (continued)

31. Deed of cross guarantee

a,b

ASIC Instrument

2016/785

Pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785, the wholly-owned subsidiaries

listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of

financial reports, and Directors’ reports.

ASIC Instrument

2016/785

Condition 6(v)(i)-(ii)

It is a condition of the Instrument that the Company and each of the subsidiaries enter into a Deed of Cross

Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in

the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a

winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six

months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that

the Company is wound up.

ASIC Instrument

2016/785

Condition 6(v)(i)-(ii)

The subsidiaries subject to the Deed are:

–

Paper AU Pty Ltd

–

Paper Pulp Pty Ltd

ASIC Instrument

2016/785

Condition 6(v)(i), (iii)-(iv)

Paper AU Pty Ltd Limited became a party to the Deed on 1 January 2021, by virtue of a Deed of Assumption.

Tasman Trust was released from its obligations under the Deed by executing Revocation Deeds on 30 March

2022.

Paper Pulp Pty Ltd obtained relief pursuant to the Instrument for the year ended 30 June 2021; however, whilst

still a party to the Deed, is not eligible for relief in the current year as it has become a small proprietary company.

It was a large proprietary company in the previous financial year.

ASIC Instrument

2016/785

Condition 6(v)(i), (v)-(vi)

A consolidated statement of comprehensive income and consolidated statement of financial position, comprising

the Company and controlled entities which are a party to the Deed, after eliminating all transactions between

parties to the Deed of Cross Guarantee, for the year ended 30 June 2021 is set out as follows:

ASIC Instrument

2016/785

Summarised consolidated income statement and balance sheet disclosures for each of the following groups of entities as at the

reporting date must be included in the consolidated financial statements of the Holding Entity:

–

the Closed Group

–

the group comprising the Holding Entity and all of its controlled entities that are parties to the Deed of Cross Guarantee (i.e.

including controlled entities not wholly owned)

–

parties to the Deed of Cross Guarantee which are not controlled entities (either individually or in aggregate).

In some circumstances, the disclosures required for each of the above will not differ as all the parties to the Deed of Cross

Guarantee will be members of the Closed Group. This is the case in Example Simplified Disclosures Proprietary Limited group.

These are only the financial report conditions for obtaining relief under the legislative instrument. The legislative instrument must

be referred to for full details and conditions.

ASIC Instrument

2016/785

Comparative information is only required when the holding entity was a holding entity in a Deed of Cross Guarantee at any time

during the immediately preceding year.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 47

Notes to the consolidated financial statements (continued)

31. Deed of cross guarantee

(continued)

ASIC Instrument

2016/785

Condition 6(v)(v)-(vi)

Statement of profit or loss and other comprehensive income and retained earnings

For the year ended 30 June

In thousands of dollars

2022

2021

Continuing operations

Revenue

Cost of sales

Gross profit

Other income

Selling and distribution expenses

Administrative expenses

Research and development expenses

Other expenses

Operating profit

Finance income

Finance costs

Net finance costs

Share of profit of associates, net of tax

Profit before tax

Income tax expense

Profit from continuing operations

Discontinued operations

Profit (loss) from discontinued operation, net of tax

Profit for the period

Other comprehensive income

Items that are or will be reclassified to profit or loss when

specific conditions are met, net of tax

Foreign operations – foreign currency translation differences

Net investment hedge – net loss

Cash flow hedges – effective portion of changes in fair value

Cash flow hedges – reclassified to profit or loss

Reclassification of foreign currency differences on loss of

significant influence

Share of OCI of associates

Other comprehensive income for the period, net of tax

Total comprehensive income for the period, net of tax

Retained earnings at the beginning of period

Transfers to and from reserves

Dividends recognised during the period

Retained earnings at end of year

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 48

Notes to the consolidated financial statements (continued)

31. Deed of cross guarantee

(continued)

Statement of financial position

In thousands of dollars

2022

2021

Assets

Cash and cash equivalents

Trade and other receivables

Other financial assets

Inventories

Current tax assets

Assets held for sale

Current assets

Other financial assets

Property, plant and equipment

Intangible assets

Investments in associates

Deferred tax assets

Non-current assets

Total assets

Liabilities

Bank overdraft

Trade and other payables

Other financial liabilities

Current tax liabilities

Provisions

Liabilities held for sale

Current liabilities

Other financial liabilities

Deferred tax liabilities

Provisions

Deferred income

Non-current liabilities

Total liabilities

Net assets

Equity

Share capital

Reserves

Retained earnings

Total Equity

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 49

Notes to the consolidated financial statements (continued)

32. Parent entity disclosures

a,b

S295(2), S295(3),

Reg 2M.3.01

As at, and throughout, the financial year ended 30 June 2022 the parent entity of the Group was Example

Simplified Disclosures Proprietary Limited.

Reg 2M.3.01(1)(k)

In thousands of dollars

2022

2021

Results of the parent

Reg 2M.3.01(f)

Profit for the period

Other comprehensive income

Reg 2M.3.01(g)

Total comprehensive income for the period

Financial position of parent entity at year end

Reg 2M.3.01(a)

Current assets

Reg 2M.3.01(b)

Total assets

Reg 2M.3.01(c)

Current liabilities

Reg 2M.3.01(d)

Total liabilities

Reg 2M.3.01(e)

Total equity of the parent entity comprising of:

Share capital

Reserves

Retained earnings

Total Equity

Parent entity contingent liabilities

Reg 2M.3.01(1)(f)

The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable

that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

In thousands of dollars

Note

2022

2021

Contingent liabilities not considered remote

Litigation

(a)

Performance guarantees

(b)

GST liabilities of other entities within the GST group

Tax liabilities of other entities within the tax consolidated group

(a) The parent entity is defending an action brought by an environmental agency in Australia. Although liability is

not admitted, if the defence against the action is unsuccessful, then fines and legal costs could amount to

$950 t

housand, of which $250 thousand would be reimbursable under an insurance policy. Based on legal

advice, the directors do not expect the outcome of the action to have a material effect on the parent entity’s

financial position. In the director’s opinion, disclosure of any further information would be prejudicial to t

nterests of the Group.

(b) The Group has guaranteed, to an unrelated party, the performance of a subsidiary in relation to a contract for

the supply of paper. In the event of default, the terms of the contract contain a minimum compensation

payment to the unrelated party of $600,000. The contract is due to be fulfilled by 30 June 2023.

Reg 2M.3.01(1)(j)

Parent entity capital commitments or acquisition of property, plant and equipment

During the year, the Company entered into contracts to purchase plant and equipment for $[ ] thousand (2021:

$[ ] thousand).

Reg 2M.3.01(1)(h)

Parent entity guarantees in respect of the debt of its subsidiaries

The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts

in respect of certain subsidiaries.

Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed are disclosed in Note 31.

Reporting Update

10RU-024

Parent entities that are APRA regulated or hold an Australian Financial Services License are recommended to continue to present

the parent entity financial statements and notes in the group annual report.

INT 1052

When a tax funding agreement is in place with a head entity, the entity provides relevant disclosures under Interpretation 1052

Tax Consolidation Group.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 50

Notes to the consolidated financial statements (continued)

33. Auditors’ remuneration

a,b,c,d

ASIC Instrument

2016/191

In dollars

2022

2021

Audit and review services

Auditors of the Group – KPMG

–

Audit and review of financial statements – Group

658,900

524,360

–

Audit and review of financial statements – controlled entities

1,049,600

689,890

AASB 1060.98(a)

1,708,500

1,214,250

Other auditors

AASB 1060.98(a)

–

Audit and review of financial statements

12,260

11,310

Assurance services

Auditors of the Group – KPMG

AASB 1060.99

–

Regulatory assurance services

f,g

43,410

30,860

AASB 1060.99

–

Other assurance services

f,g

460,510

491,370

AASB 1060.98(b)

503,920

522,230

Other auditors

AASB 1060.98(b), 99

–

Other assurance services

f,h

2,000

Other services

f,i

Auditors of the Group – KPMG

AASB 1060.98(b), 99

–

Taxation advice and tax compliance services

114,320

96,350

Other auditors

AASB 1060.98(b), 99

–

Valuation services

25,000

23,000

Where an entity applies the rounding relief available in ASIC Instrument 2016/191, certain amounts are required to be rounded to

a lower level. ASIC Instrument 2016/191 specifies those amounts with reference to particular disclosure paragraphs in AAS (e.g.

AASB 2.50, AASB 124.17). The ASIC Instrument has not been updated for the equivalent paragraphs in AASB 1060 where an

entity applies Tier 2 – Simplified Disclosures. This guide applies the requirements in the legislative instrument as if it refers to the

corresponding disclosure requirements in AASB 1060.

This illustrative disclosure excludes auditors’ remuneration for associates. An entity may want to separately disclose auditors’

remuneration for associates, in which case we recommend additional line items be included within each section for transparency.

Although it is not required, this categorisation of fees to auditors is encouraged by ASIC to aid in the consistent and transparent

reporting of audit and non-audit fee information.

Disclosures are required regardless of whether the entity or a related entity make the payments. Where fees are paid on behalf of

the entity by a related party outside the consolidated entity, disclosure as a related party transaction is required.

ASIC encourages fees paid to the Group auditor to be split out separately for those relating to auditing the statutory financial

report of the parent covering the consolidated group; and those relating to auditing the statutory financial reports of any controlled

entities. This disclosure is provided for illustrative purposes only.

Although it is not required, ASIC encourages entities to split fees for assurance services from fees for non-assurance services.

They also encourage assurance services to be further split between “regulatory assurance services” and “other assurance

services”. This disclosure is provided for illustrative purposes only.

AASB 1060.99

An entity is required to describe the nature of all services provided that do not related to the audit or review of the financial

statements. There is no requirement to provide an amount for each non-audit services.

Regulatory assurance services are those that are required under legislation and are performed by the auditor, for example, Form

FS 71 and AFS licensee, workers compensation, APRA reports, US Sarbanes-Oxley Act of 2002 Section 404, franchising code of

conduct and retirements villages.

Other assurance services are fees for other assurance services other than those included under regulatory assurance, such as

those required under contractual agreements. Examples include assurance on revenue information relevant to a royalty

agreement, sustainability assurance reporting and capital raisings.

Other services are services that do not fall within regulatory or other assurance services, e.g. tax advice, tax compliance,

consulting.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 51

Notes to the consolidated financial statements (continued)

34. Subsequent events

A. Restructuring

AASB 1060.187-188

At the end of July 2022, the Group announced its intention to implement a cost-reduction programme and to take

further measures to reduce costs. Additionally, to enable the Group to adapt its size to current market conditions,

it intends to reduce the Group’s workforce by 400 positions worldwide by the end of 2022/23, by means of non-

replacement whenever possible. The Group expects the restructuring associated with the reduction in positions

to cost between $600 thousand and $850 thousand in 2023 and 2024.

B. Others

Subsequent to 30 June 2022, one of the Group’s major trade customers went into liquidation following a natural

disaster in August 2022 that damaged its operating plant. Of the $100 thousand owed by the customer, the

Group expects to recover less than $10 thousand. No additional allowance for impairment has been made in

these consolidated financial statements.

On 10 July 2022, one of the premises of the Group’s material subsidiary, having a carrying amount of $220

thousand, was seriously damaged by fire. Surveyors are in the process of assessing the extent of the loss,

following which the Group will file a claim for reimbursement with the insurance company. The Group is unable to

estimate the incremental costs relating to refurbishment and temporary shift of production to other locations (in

excess of the reimbursement expected).

As explained in Note 20(B), the Group breached a financial loan covenant associated with a bank loan in the first

quarter of 2022. The Group obtained a waiver for the breach of covenant in April 2022 for a period of 18 months.

Subsequent to 30 June 2022, the bank revised the loan covenant ratio and the waiver was lifted.

On 22 January 2022, the Group announced its intention to acquire all of the shares of ABC Company for $6,500

thousand. On 4 July 2022, the Group’s shareholders approved the transaction and the Group is now awaiting

approval from regulatory authorities before proceeding with the acquisition. Management anticipates that this

approval will be received by October 2022.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 52

Notes to the consolidated financial statements (continued)

AASB 1060.95–96

35. Significant accounting policies

New and amended standards adopted by the Group

b,c

AASB 1060.106

The Group has initially adopted the following standard and amendments from 1 July 2021

–

AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit

Tier 2 Entities;

–

AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial

Statements for Certain For-Profit Private Sector Entities.

The above standard and amendments did not have any impact on the amounts recognised in prior periods and are

not expected to significantly affect the current or future periods.

A number of other new standards are also effective from 1 July 2021 but they do not have a material effect on

the Group’s financial statements.

Significant accounting policies

Apart from the above, the Group has consistently applied the following accounting policies to all periods

presented in these consolidated financial statements, except if mentioned otherwise.

AASB 1060.18,

AASB 5.34

Certain comparative amounts in the statement of profit or loss and OCI have been re-presented as a result of an

operation discontinued during the current year (see Note 5).

Set out below is an index of the significant accounting policies, the details of which are available on the pages

that follow.

A. Basis of consolidation 53

B. Foreign currency 54

C. Discontinued operation 54

D. Revenue from contracts with customers 55

E. Employee benefits 56

F. Government grants 56

G. Finance income and finance costs 57

H. Income tax 57

I. Inventories 58

J. Property, plant and equipment 58

K. Intangible assets 59

L. Assets held for sale 60

M. Financial instruments 60

N. Share capital 64

O. Compound financial instruments 64

P. Impairment 64

Q. Provisions 66

R. Leases 66

S. Fair value measurement 67

The example accounting policies illustrated reflect the circumstances of the Group on which these financial statements are based,

by describing only the specific policies that are relevant to an understanding of the Group’s consolidated financial statements. For

example, the accounting policy for preference shares (

Note 35(N)(ii)) is not intended to be a complete description of the

classification of such shares in general. These example accounting policies should not be relied on for a complete understanding

of Australian Accounting Standards and should not be used as a substitute for referring to the standards and interpretations

themselves. To help you identify the underlying requirements in Australian Accounting Standards, references to the recognition

and measurement requirements in Australian Accounting Standards that are relevant for a particular accounting policy have been

included and indicated by square brackets – e.g. [AASB 3.19].

AASB 1060.107

Where an entity selects a transition option under another Standard and there are specific transition disclosure requirements in that

Standard, the entity applies the full transition disclosure requirements in that Standard instead of the requirements in

paragraph 106.

Refer to Standards on Issue for a full list and details of all standards (including amending standards) and respective effective

dates.

An entity may have adopted AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19 Rent Concessions beyond

30 June 2021 for the first time.. This fact and any impact are also disclosed.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 53

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

A. Basis of consolidation

i. Business combinations

[AASB 3.3–4, 32, 34, 53,

B5–B12]

The Group accounts for business combinations using the acquisition method when the acquired set of activities

and assets meets the definition of a business and control is transferred to the Group (see (A)(ii)). In determining

whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and

activities includes, at a minimum, an input and substantive process and whether the acquired set has the ability to

produce outputs.

The Group has an option to apply a ‘concentration test’ that permits a simplified reassessment of whether an

acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of

the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar

identifiable assets.

The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net

assets acquired. Any goodwill that arises is tested annually for impairment (see (P)(ii)). Any gain on a bargain

purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related

to the issue of debt or equity securities (see (N)).

[AASB 3.40, 58]

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent

consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured

and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair

value at each reporting date and subsequent changes in the fair value of the contingent consideration are

recognised in profit or loss.

ii. Subsidiaries

[AASB 10.6, 20]

Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has

rights to, variable returns from its involvement with the entity and has the ability to affect those returns through

its power over the entity. The financial statements of subsidiaries are included in the consolidated financial

statements from the date on which control commences until the date on which control ceases.

iii. Loss of control

[AASB 10.25, B97–B99]

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary and

other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the

former subsidiary is measured at fair value when control is lost.

AASB 1060.125(a)

iv. Investments in associates

[AASB 128.3]

Associates are those entities in which the Group has significant influence, but not control or joint control, over the

financial and operating policies.

[AASB 128.10, 16, 22]

Interests in associates are accounted for using the equity method. They are initially recognised at cost, which

includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the

Group’s share of the profit or loss and OCI of associates, until the date on which significant influence ceases.

v. Transactions eliminated on consolidation

[AASB 10.B86(c),

AASB 128.28–29]

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group

transactions, are eliminated. Unrealised gains arising from transactions with associates are eliminated against the

investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same

way as unrealised gains, but only to the extent that there is no evidence of impairment.

Insights 3.5.430.30

In the absence of specific guidance in the Standards, the Group has elected to eliminate unrealised gains and losses resulting

from transactions with associates against the investment in associates. Alternatively, the elimination may be presented as a

reduction in the underlying asset – e.g. inventory.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 54

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

B. Foreign currency

i. Foreign currency transactions

[AASB 121.21]

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at

the exchange rates at the dates of the transactions.

[AASB 121.23, 28, 30,

32]

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the

exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign

currency are translated into the functional currency at the exchange rate when the fair value was determined.

Non-monetary items that are measured based on historical cost in a foreign currency are translated at the

exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or

loss and presented within finance costs.

[AASB 9.B5.7.3]

However, foreign currency differences arising from the translation of the following items are recognised in OCI:

–

a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the

hedge is effective (see (M)(v)); and

–

qualifying cash flow hedges to the extent that the hedges are effective.

ii. Foreign operations

[AASB 121.39]

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition,

are translated into dollars at the exchange rates at the reporting date. The income and expenses of foreign

operations are translated into dollars at the exchange rates at the dates of the transactions.

[AASB 121.41]

Foreign currency differences are recognised in OCI and accumulated in the translation reserve.

[AASB 121.48–49]

When a foreign operation is disposed of in its entirety or partially such that control or significant influence is lost,

the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as

part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control,

then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only

part of an associate while retaining significant influence, the relevant proportion of the cumulative amount is

reclassified to profit or loss.

C. Discontinued operation

[AASB 5.32]

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be

clearly distinguished from the rest of the Group and which:

–

represents a separate major line of business or geographic area of operations;

–

is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of

operations; or

–

is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria

to be classified as held-for-sale.

AASB 5.34

When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI

is re-presented as if the operation had been discontinued from the start of the comparative year.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 55

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

D. Revenue from contracts with customers

AASB 1060.157(a), 158

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises

revenue when it transfers control over a good or service to a customer.

The following table provides information about the nature and timing of the satisfaction of performance

obligations in contracts with customers, including significant payment terms, and the related revenue recognition

policies. For the accounting policy for onerous contracts, see Note 35(Q).

Type of product/service

Nature and timing of satisfaction of performance

obligations, including significant payment terms

Methods used to recognise revenue for

performance obligations satisfied over time

Standard paper

products

Customers obtain control of standard paper

products when the goods are delivered to and

have been accepted at their premises.

Invoices are generated at that point in time.

Invoices are usually payable within 30 days.

No discounts are provided for standard paper

products.

Some contracts permit the customer to return

an item. Returned goods are exchanged only

for new goods – i.e. no cash refunds are

offered.

Made-to-order paper

products

The Group has determined that for made-to-

order paper products, the customer controls

all of the work in progress as the products are

being manufactured. This is because under

those contracts paper products are made to a

customer’s specification and if a contract is

terminated by the customer, then the Group

is entitled to reimbursement of the costs

incurred to date, including a reasonable

margin.

Revenue and associated costs are

recognised over time – i.e. before the

goods are delivered to the customers’

premises. Progress is determined based

on the cost-to-cost method.

Invoices are issued according to contractual

terms and are usually payable within 30 days.

Uninvoiced amounts are presented as

contract assets.

Managing forest

resources services

and related services

Invoices for forestry services are issued on a

monthly basis and are usually payable within

30 days.

Revenue is recognised over time as the

services are provided. The stage of

completion for determining the amount of

revenue to recognise is assessed based

on surveys of work performed.

If the services under a single arrangement

are rendered in different reporting

periods, then the consideration is

allocated based on their relative stand-

alone selling prices. The stand-alone

selling price is determined based on the

list prices at which the Group sells the

services in separate transactions.

AASB 1060.158, BC68

An entity is required to disclose the methods used to recognise revenue only for performance obligations satisfied over time and

not for performance obligations satisfied at a point in time.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 56

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

E. Employee benefits

i. Short-term employee benefits

[AASB 119.11]

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the

amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a

result of past service provided by the employee and the obligation can be estimated reliably.

ii. Share-based payment arrangements

[AASB 2.30, 32]

The fair value of the amount payable to employees in respect of share appreciation rights (SARs), which are

settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period during

which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting

date and at settlement date based on the fair value of the SARs. Any changes in the liability are recognised in

profit or loss.

iii. Defined contribution plans

[AASB 119.51]

Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid

contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is

available.

iv. Other long-term employee benefits

[AASB 119.155–156]

The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that

employees have earned in return for their service in the current and prior periods. That benefit is discounted to

determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise.

v. Termination benefits

[AASB 119.165]

Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those

benefits and when the Group recognises costs for a restructuring. If benefits are not expected to be settled

wholly within 12 months of the reporting date, then they are discounted.

AASB 1060.160(d)

F. Government grants

[AASB 120.7, 24–26]

The Group initially recognises government grants related to assets as deferred income at fair value if there is

reasonable assurance that they will be received and the Group will comply with the conditions associated with

the grant; they are then recognised in profit or loss as other income on a systematic basis over the useful life of

the asset.

[AASB 120.12, 20, 29]

Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a

systematic basis in the periods in which the expenses are recognised, unless the conditions for receiving the

grant are met after the related expenses have been recognised. In this case, the grant is recognised when it

becomes receivable.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 57

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

G. Finance income and finance costs

The Group’s finance income and finance costs include:

–

interest income;

–

interest expense;

–

dividend income;

–

dividend expense on preference shares issued classified as financial liabilities;

–

the net gain or loss on financial assets at FVTPL;

–

the foreign currency gain or loss on financial assets and financial liabilities;

–

impairment losses (and reversals) on investments in debt securities carried at amortised cost;

–

the gain on the remeasurement to fair value of any pre-existing interest in an acquiree in a business

combination;

–

the fair value loss on contingent consideration classified as a financial liability;

–

hedge ineffectiveness recognised in profit or loss; and

–

the reclassification of net gains and losses previously recognised in OCI on cash flow hedges of foreign

currency risk for borrowings).

Interest income or expense is recognised using the effective interest method. Dividend income is recognised in

profit or loss on the date on which the Group’s right to receive payment is established.

[AASB 9.5.4.1–5.4.2, A]

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through

the expected life of the financial instrument to:

–

the gross carrying amount of the financial asset; or

–

the amortised cost of the financial liability.

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of

the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial

assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by

applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-

impaired, then the calculation of interest income reverts to the gross basis.

H. Income tax

[AASB 112.58]

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that

it relates to a business combination, or items recognised directly in equity or in OCI.

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments,

do not meet the definition of income taxes, and therefore accounted for them under AASB 137 Provisions,

Contingent Liabilities and Contingent Assets.

i. Current tax

[AASB 112.2, 12, 46,

INT 23.11]

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any

adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or

receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related

to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Current tax also includes any tax arising from dividends.

[AASB 112.71]

Current tax assets and liabilities are offset only if certain criteria are met.

Insights 7.10.70.20

There is no guidance in the Standards on what is included in finance income and finance costs and the Group has disclosed as

part of its accounting policy which items constitute finance income and finance costs.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 58

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

H. Income tax (continued)

ii. Deferred tax

[AASB 112.15, 24, 39,

44]

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not

recognised for:

–

temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business

combination and that affects neither accounting nor taxable profit or loss;

–

temporary differences related to investments in subsidiaries and associates to the extent that the Group is

able to control the timing of the reversal of the temporary differences and it is probable that they will not

reverse in the foreseeable future; and

–

taxable temporary differences arising on the initial recognition of goodwill.

[AASB 112.56]

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary

differences to the extent that it is probable that future taxable profits will be available against which they can be

used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the

amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future

taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business

plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are

reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are

reversed when the probability of future taxable profits improves.

[AASB 112.37]

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has

become probable that future taxable profits will be available against which they can be used.

[AASB 112.47,

INT 23.11]

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they

reverse, using tax rates enacted or substantively enacted at the reporting date, and reflects uncertainty related to

income taxes, if any.

[AASB 112.51]

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the

Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

[AASB 112.74]

Deferred tax assets and liabilities are offset only if certain criteria are met.

AASB 1060.123(a)

I. Inventories

[AASB 102.9, 25]

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the

first-in, first-out principle. In the case of manufactured inventories, cost includes an appropriate share of

production overheads based on normal operating capacity.

J. Property, plant and equipment

AASB 1060.134(a)

i. Recognition and measurement

[AASB 1.D5,

AASB 116.30]

Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less

accumulated depreciation and any accumulated impairment losses. The cost of certain items of property, plant

and equipment at 1 January 2005, the Group’s date of transition to the Standards, was determined with reference

to its fair value at that date.

[AASB 116.45]

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted

for as separate items (major components) of property, plant and equipment.

[AASB 116.41, 71]

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 59

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

J. Property, plant and equipment (continued)

ii. Subsequent expenditure

[AASB 116.13]

Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the

expenditure will flow to the Group.

AASB 1060.134(b)-(c)

iii. Depreciation

[AASB 116.53, 58, 60]

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated

residual values using the straight-line method over their estimated useful lives, and is generally recognised in

profit or loss. Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

–

buildings:

40 years

–

plant and equipment:

3–12 years

–

fixtures and fittings:

5–10 years.

[AASB 116.51]

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if

appropriate.

K. Intangible assets

i. Recognition and measurement

[AASB 138.107–108]

Goodwill

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated

impairment losses.

[AASB 138.54–55]

Research and

development

Expenditure on research activities is recognised in profit or loss as incurred.

[AASB 138.57, 71, 74]

Development expenditure is capitalised only if the expenditure can be measured reliably,

the product or process is technically and commercially feasible, future economic benefits

are probable and the Group intends to and has sufficient resources to complete

development and to use or sell the asset. Otherwise, it is recognised in profit or loss as

incurred. Subsequent to initial recognition, development expenditure is measured at cost

less accumulated amortisation and any accumulated impairment losses.

[AASB 138.74]

Other intangible

assets

Other intangible assets, including customer relationships, patents and trademarks, that

are acquired by the Group and have finite useful lives are measured at cost less

accumulated amortisation and any accumulated impairment losses.

ii. Subsequent expenditure

[AASB 138.18]

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the

specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and

brands, is recognised in profit or loss as incurred.

AASB 1060.137(a)-(b)

iii. Amortisation

[AASB 138.97]

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the

straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Goodwill is not

amortised.

The estimated useful lives for current and comparative periods are as follows:

–

patents and trademarks:

3–20 years

–

development costs:

2–5 years

–

customer relationships:

4–5 years.

[IAASB 138.104]

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if

appropriate.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 60

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

L. Assets held for sale

[AASB 5.6]

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly

probable that they will be recovered primarily through sale rather than through continuing use.

[AASB 5.15–15A, 18–23]

Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less

costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining

assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets or deferred

tax assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment

losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on

remeasurement are recognised in profit or loss.

[AASB 5.25,

AASB 128.20]

Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or

depreciated, and any interest in associate is no longer equity accounted.

AASB 1060.112

M. Financial instruments

i. Recognition and initial measurement

[AASB 9.3.1.1]

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial

assets and financial liabilities are initially recognised when the Group becomes a party to the contractual

provisions of the instrument.

[AASB 9.5.1.1, 5.1.3]

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is

initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its

acquisition or issue. A trade receivable without a significant financing component is initially measured at the

transaction price.

ii. Classification and subsequent measurement

Financial assets

[AASB 9.4.1.1]

On initial recognition, a financial asset is classified as measured at amortised cost or FVTPL.

[AASB 9.4.4.1, 5.6.1]

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business

model for managing financial assets, in which case all affected financial assets are reclassified on the first day of

the first reporting period following the change in the business model.

[AASB 9.4.1.2]

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated

as at FVTPL:

–

it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

–

its contractual terms give rise on specified dates to cash flows that are solely payments of principal and

interest on the principal amount outstanding.

[AASB 9.4.1.5]

Financial assets not classified as measured at amortised cost as described above are measured at FVTPL (see

Note 24(A)). On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the

requirements to be measured at amortised cost as at FVTPL if doing so eliminates or significantly reduces an

accounting mismatch that would otherwise arise.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 61

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

M. Financial instruments (continued)

ii. Classification and subsequent measurement (continued)

Financial assets – Business model assessment

[AASB 9.B4.1.2]

The Group makes an assessment of the objective of the business model in which a financial asset is held at a

portfolio level

because this best reflects the way the business is managed and information is provided to

management. The information considered includes:

[AASB 9.B4.1.2B–C,

B4.1.4A, B4.1.5]

–

the stated policies and objectives for the portfolio and the operation of those policies in practice. These

include whether management’s strategy focuses on earning contractual interest income, maintaining a

particular interest rate profile, matching the duration of the financial assets to the duration of any relat

lia

bilities or expected cash outflows or realising cash flows through the sale of the assets;

–

how the performance of the portfolio is evaluated and reported to the Group’s management;

–

the risks that affect the performance of the business model (and the financial assets held within that business

model) and how those risks are managed;

–

how managers of the business are compensated – e.g. whether compensation is based on the fair value of

the assets managed or the contractual cash flows collected; and

–

the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and

expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered

sales for this purpose, consistent with the Group’s continuing recognition of the assets.

[AASB 9.B4.1.6]

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis

are measured at FVTPL.

Financial assets – Assessment whether contractual cash flows are solely payments of principal

and interest

[AASB 9.4.1.3,

B4.1.7A–B, B4.1.9A–E]

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial

recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated

with the principal amount outstanding during a particular period of time and for other basic lending risks and costs

(e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group

considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a

contractual term that could change the timing or amount of contractual cash flows such that it would not meet

this condition. In making this assessment, the Group considers:

–

contingent events that would change the amount or timing of cash flows;

–

terms that may adjust the contractual coupon rate, including variable-rate features;

–

prepayment and extension features; and

–

terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).

[AASB 9.B4.1.11(b),

B4.1.12]

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment

amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding,

which may include reasonable compensation for early termination of the contract. Additionally, for a financial

asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires

prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid)

contractual interest (which may also include reasonable compensation for early termination) is treated as

consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

AASB 9.B4.1.1–B4.1.2,

Insights 7.4.70.30

The objective of the entity’s business model is not based on management’s intentions with respect to an individual instrument,

but rather is determined at a higher level of aggregation. The assessment needs to reflect the way that an entity manages its

business or businesses. A single reporting entity may have more than one business model for managing its financial instruments.

Insights 7.4.110.50

AASB 9 does not provide specific guidance for business model assessment related to portfolios of financial assets for which the

entity’s objectives include transfers of financial assets to third parties in transactions that do not qualify for derecognition. In our

view, whether such a portfolio is considered consistent with a held-to-collect business model depends on the circumstances.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 62

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

M. Financial instruments (continued)

ii. Classification and subsequent measurement (continued)

Financial assets – Subsequent measurement and gains and losses

[AASB 9.5.7.1]

Financial assets at

FVTPL

These assets are subsequently measured at fair value. Net gains and losses, including any

interest or dividend income, are recognised in profit or loss. However, see Note 35(M)(v)

for derivatives designated as hedging instruments.

[AASB 9.5.7.2]

Financial assets at

amortised cost

These assets are subsequently measured at amortised cost using the effective interest

method. The amortised cost is reduced by impairment losses. Interest income, foreign

exchange gains and losses and impairment are recognised in profit or loss. Any gain or

loss on derecognition is recognised in profit or loss.

Financial liabilities – Classification, subsequent measurement and gains and losses

[AASB 9.5.7.1]

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at

FVTPL if it is classified as held-for-trading. Financial liabilities at FVTPL are measured at fair value and net gains

and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are

subsequently measured at amortised cost using the effective interest method. Interest expense and foreign

exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in

profit or loss.

See Note 35(M)(v) for financial liabilities designated as hedging instruments.

iii. Derecognition

Financial assets

[AASB 9.3.2.3–6]

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset

expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of

the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers

nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial

asset.

[AASB 9.3.2.6(b)]

The Group enters into transactions whereby it transfers assets recognised in its statement of financial position,

but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the

transferred assets are not derecognised.

Financial liabilities

[AASB 9.3.3.1–2]

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified

liability are substantially different, in which case a new financial liability based on the modified terms is recognised

at fair value.

[AASB 9.3.3.3]

On derecognition of a financial liability, the difference between the carrying amount extinguished and the

consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

iv. Offsetting

[AASB 132.42]

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial

position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it

intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 63

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

M. Financial instruments (continued)

v. Derivative financial instruments and hedge accounting

Derivative financial instruments and hedge accounting

[AASB 9.4.3.3]

The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Embedded

derivatives are separated from the host contract and accounted for separately if the host contract is not a financial

asset and certain criteria are met.

[AASB 9.5.1.1, 5.2.1(c)]

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair

value, and changes therein are generally recognised in profit or loss.

The Group designates certain derivatives as hedging instruments to hedge the variability in cash flows associated

with highly probable forecast transactions arising from changes in foreign exchange rates and certain derivatives

and non-derivative financial liabilities as hedges of foreign exchange risk on a net investment in a foreign

operation.

[AASB 9.6.4.1]

At inception of designated hedging relationships, the Group documents the risk management objective and

strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged

item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging

instrument are expected to offset each other.

Cash flow hedges

[AASB 9.6.5.11, 6.5.16]

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair

value of the derivative is recognised in OCI and accumulated in the hedging reserve. The effective portion of

changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value

of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of

changes in the fair value of the derivative is recognised immediately in profit or loss.

The Group designates the full change in fair value of the forward exchange contracts (including forward points) as

the hedging instrument in cash flow hedging relationships, and recognises the gains or losses relating to the

effective portion of the change in fair value of the entire forward contract in the cash flow hedge reserve within

equity.

When the hedged forecast transaction subsequently results in the recognition of a non-financial item such as

inventory, the amount accumulated in the hedging reserve is included directly in the initial cost of the non-

financial item when it is recognised.

For all other hedged forecast transactions, the amount accumulated in the hedging reserve is reclassified to profit

or loss in the same period or periods during which the hedged expected future cash flows affect profit or loss.

[AASB 9.6.5.6–7, 6.5.12]

If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is

terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash

flow hedges is discontinued, the amount that has been accumulated in the hedging reserve remains in equity

until, for a hedge of a transaction resulting in the recognition of a non-financial item, it is included in the non-

financial item’s cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the

same period or periods as the hedged expected future cash flows affect profit or loss.

If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated

in the hedging reserve are immediately reclassified to profit or loss.

Net investment hedges

[AASB 9.6.5.13–14]

When a derivative instrument or a non-derivative financial liability is designated as the hedging instrument in a

hedge of a net investment in a foreign operation, the effective portion of, for a derivative, changes in the fair value

of the hedging instrument or, for a non-derivative, foreign exchange gains and losses is recognised in OCI and

presented in the translation reserve within equity. Any ineffective portion of the changes in the fair value of the

derivative or foreign exchange gains and losses on the non-derivative is recognised immediately in profit or loss.

The amount recognised in OCI is reclassified to profit or loss as a reclassification adjustment on disposal of the

foreign operation.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 64

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

N. Share capital

i. Ordinary shares

[AASB 132.35–35A]

Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Income tax relating to transaction costs of an equity transaction is accounted for in accordance with AASB 112

(see Note 35(H)).

ii. Preference shares

[AASB 132.AG25–AG26]

The Group’s redeemable preference shares are classified as financial liabilities, because they bear non-

discretionary dividends and are redeemable in cash by the holders. Non-discretionary dividends thereon are

recognised as interest expense in profit or loss as accrued.

Non-redeemable preference shares are classified as equity, because they bear discretionary dividends, do not

contain any obligations to deliver cash or other financial assets and do not require settlement in a variable number

of the Group’s equity instruments. Discretionary dividends thereon are recognised as equity distributions on

approval by the Company’s shareholders.

O. Compound financial instruments

[AASB 132.28–32]

Compound financial instruments issued by the Group comprise convertible notes denominated in dollars that can

be converted to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and

does not vary with changes in fair value.

[AASB 9.5.1.1,

AASB 132.38, AG31]

The liability component of compound financial instruments is initially recognised at the fair value of a similar

liability that does not have an equity conversion option. The equity component is initially recognised at the

difference between the fair value of the compound financial instrument as a whole and the fair value of the

liability component. Any directly attributable transaction costs are allocated to the liability and equity components

in proportion to their initial carrying amounts.

[AASB 9.5.3.1]

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at

amortised cost using the effective interest method. The equity component of a compound financial instrument is

not remeasured.

[AASB 132.AG32]

Interest related to the financial liability is recognised in profit or loss. On conversion at maturity, the financial

liability is reclassified to equity and no gain or loss is recognised.

P. Impairment

i. Financial assets

Financial instruments and contract assets

[AASB 9.5.5.1]

The Group recognises loss allowances for ECLs on financial assets measured at amortised cost and contract

assets.

The Group also recognises loss allowances for ECLs on lease receivables, which are disclosed as part of trade

and other receivables.

[AASB 9.5.5.3, 5.5.5,

5.5.11, 5.5.15–16]

The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are

measured at 12-month ECLs:

–

debt securities that are determined to have low credit risk at the reporting date; and

–

other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the

expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowances for trade receivables (including lease receivables) and contract assets are always measured at an

amount equal to lifetime ECLs.

AASB 9.5.5.15

For lease receivables, contract assets and trade receivables with a significant financing component, an entity can choose as an

accounting policy either to apply the general model for measuring the loss allowance or always to measure the loss allowance at

an amount equal to the lifetime ECLs. The Group has chosen the latter policy.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 65

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

P. Impairment (continued)

i. Financial assets (continued)

Financial instruments and contract assets (continued)

When determining whether the credit risk of a financial asset has increased significantly since initial recognition

and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and

available without undue cost or effort. This includes both quantitative and qualitative information and analysis,

based on the Group’s historical experience and informed credit assessment, that includes forward-looking

information.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days

past due.

[AASB 9.5.5.19, B5.5.38]

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group

is exposed to credit risk.

[AASB 9.5.5.17, A,

B5.5.28–30, B5.5.33]

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all

cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and

the cash flows that the Group expects to receive).

ECLs are discounted at the effective interest rate of the financial asset.

[AASB 9.5.5.1–5.5.2]

Presentation of allowance for ECL in the statement of financial position

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of

the assets.

ii. Non-financial assets

[AASB 136.9–10, 59]

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories,

contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such

indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

[AASB 136.22, 80]

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows

from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising

from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the

synergies of the combination.

[AASB 136.6, 30]

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.

Value in use is based on the estimated future cash flows, 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 or CGU.

[AASB 136.59]

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

[AASB 136.104]

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any

goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro

rata basis.

[AASB 136.117, 122,

124]

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to

the extent that the asset’s carrying amount does not exceed the carrying amount that would have been

determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 66

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

Q. Provisions

[AASB 137.14, 45, 47,

INT 1.8]

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current

market assessments of the time value of money and the risks specific to the liability. The unwinding of the

discount is recognised as finance cost.

[AASB 137.39]

Warranties

A provision for warranties is recognised when the underlying products or services are

sold, based on historical warranty data and a weighting of possible outcomes against their

associated probabilities.

[AASB 137.72]

Restructuring

A provision for restructuring is recognised when the Group has approved a detailed and

formal restructuring plan, and the restructuring either has commenced or has been

announced publicly. Future operating losses are not provided for.

[AASB 137.21]

Site restoration

In accordance with the Group’s published environmental policy and applicable legal

requirements, a provision for site restoration in respect of contaminated land, and the

related expense, is recognised when the land is contaminated.

[AASB 137.66, 68]

Onerous contracts

A provision for onerous contracts is measured at the present value of the lower of the

expected cost of terminating the contract and the expected net cost of continuing with

the contract. Before a provision is established, the Group recognises any impairment loss

on the assets associated with that contract (see (P)(ii)).

R. Leases

[AASB 16.9]

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or

contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in

exchange for consideration.

i. As a lessee

[AASB 16.13-15, 45]

At commencement or on modification of a contract that contains a lease component, the Group allocates the

consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for

the leases of property the Group has elected not to separate non-lease components and account for the lease and

non-lease components as a single lease component.

[AASB 16.22–24]

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use

asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease

payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of

costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is

located, less any lease incentives received.

[AASB 16.29–33]

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date

to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the

end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option.

In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is

determined on the same basis as those of property and equipment. In addition, the right-of-use asset is

periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

[AASB 16.26]

The lease liability is initially measured at the present value of the lease payments that are not paid at the

commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily

determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as

the discount rate.

AASB 1060.91(c)

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing

sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

[AASB 16.27]

Lease payments included in the measurement of the lease liability comprise the following:

–

fixed payments, including in-substance fixed payments;

–

variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the

ommencement date;

–

amounts expected to be payable under a residual value guarantee; and

–

the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in

n optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for

early termination of a lease unless the Group is reasonably certain not to terminate early.

Example Simplified Disclosures Proprietary Ltd

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 67

Notes to the consolidated financial statements (continued)

35. Significant accounting policies (continued)

R. Leases (continued)

i. As a lessee (continued)

[AASB 16.36, 40, 42]

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there

is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s

estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its

assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-

substance fixed lease payment.

[AASB 16.39]

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of

the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been

reduced to zero.

[AASB 16.47–48]

The Group presents right-of-use assets in ‘property, plant and equipment’ and lease liabilities in ‘loans and

borrowings’ in the statement of financial position.

ii. As a lessor

[AASB 16.17]

At inception or on modification of a contract that contains a lease component, the Group allocates the

consideration in the contract to each lease component on the basis of their relative stand-alone prices.

[AASB 16.61–62]

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an

operating lease.

[AASB 16.63]

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of

the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a

finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain

indicators such as whether the lease is for the major part of the economic life of the asset.

[AASB 16.B58]

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease

separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from

the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the

Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

[AASB 16.17]

If an arrangement contains lease and non-lease components, then the Group applies AASB 15 Revenue from

Contracts with Customers to allocate the consideration in the contract.

[AASB 16.77]

The Group applies the derecognition and impairment requirements in AASB 9 Financial Instruments to the net

investment in the lease (see Note 35(P)(i)). The Group further regularly reviews estimated unguaranteed residual

values used in calculating the gross investment in the lease.

S. Fair value measurement

[AASB 13.9, 24, 42]

‘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 in the principal or, in its absence, the most advantageous

market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both

financial and non-financial assets and liabilities.

[AASB 13.77, 79, A]

When one is available, the Group measures the fair value of an instrument using the quoted price in an active

market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with

sufficient frequency and volume to provide pricing information on an ongoing basis.

[AASB 13.61–62]

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of

relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique

incorporates all of the factors that market participants would take into account in pricing a transaction.

[AASB 13.70–71]

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets

and long positions at a bid price and liabilities and short positions at an ask price.

Example Simplified Disclosures Proprietary Ltd

trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved

under Professional Standards Legislation. 68

Directors’ declaration

S295(4)

1. In the opinion of the directors of [Example Simplified Disclosures Proprietary

Limited] (‘the Company’):

(a) the Company is not publicly accountable;

(b) the consolidated financial statements and notes that are set out on pages

[xx] to [xxx] are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group’s financial position as at

30 June 2022 and of its performance, for the financial year ended on

that date; and

(ii) complying with Australian Accounting Standards – Simplified

Disclosure Requirements and the Corporations Regulations 2001; and

its debts as and when they become due and payable.

2. There are reasonable grounds to believe that the Company and the group entities

identified in Note [ ] will be able to meet any obligations or liabilities to which they

are or may become subject to by virtue of the Deed of Cross Guarantee between

the Company and those group entities pursuant to ASIC Corporations (Wholly-

owned Companies) Instrument 2016/785.

S295(5)

Signed in accordance with a resolution of the directors:

Dated at…… ……[city]…………day of……………………………2022.

____

____________________________________________

[Director_name]

Director

Example Simplified Disclosures Proprietary Ltd

trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved

under Professional Standards Legislation. 69

Independent audit report to the members of

Example Simplified Disclosures Proprietary

Limited

[To be provided by Auditor]

Example Simplified Disclosures Proprietary Ltd

trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved

under Professional Standards Legislation. 70

Appendices

Appendix 1 – Consolidated statement of income and retained earnings

Appendix 2 – Transition from SPFS to GPFS-Tier 2 SD

Appendix 3 – Illustrative disclosures for scenarios not covered by facts and circumstances of fictional

entity

Appendix 4

– Example disclosures when part of a tax-consolidated group

Appendix 1 – Consolidated statement of income and retained earnings

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 71

AASB 1060 allows an entity to present a combined statement of income and retained earnings in place of a

statement of comprehensive income and a statement of changes in equity if the only changes to its equity during the

periods for which financial statements are presented arise from profit or loss, payment of dividends, corrections of

prior period errors, and changes in accounting policy. This appendix provides an illustration of such a statement.

AASB 1060.26, 30, 62

Consolidated statement of income and retained earnings

AASB 1060.31(c)

For the year ended 30 June

AASB 1060.20-21, 28-29,

31(d), , 49(a), 51, 56, 92

In thousands of dollars

Note

2022

2021

Continuing operations

AASB 1060.52(a)

Revenue

102,400

96,417

AASB 1060.58(b)

Cost of sales

(57,461)

(56,186)

Gross profit

44,939

40,231

Other income

7(A)

264

AASB 1060.58(b)

Selling and distribution expenses

(18,322)

(15,865)

AASB 1060.58(b)

Administrative expenses

(17,732)

(14,428)

AASB 1060.58(b), 139

Research and development expenses

(1,109)

(697)

AASB 1060.58(b)

Other expenses

7(B)

(870)

(190)

Operating profit

7,170

9,067

Finance income

1,034

369

AASB 1060.52(b)

Finance costs

(1,867)

(1,616)

Net finance costs

(833)

(1,247)

AASB 1060.52(c)

Share of profit of associates, net of tax

(49)

315

Profit before tax

6,288

8,135

AASB 1060.52(d),

AASB 112.77

Income tax expense

(1,837)

(2,223)

Profit from continuing operations

4,451

5,912

Discontinued operation

AASB 1060.52(e)

Profit (loss) from discontinued operation, net of tax

379

(422)

AASB 1060.52(f), 53(a)(ii)

Profit for the period

4,830

5,490

Retained earnings

AASB 1060.63(a)

Retained earnings at the beginning of the reporting period

21,337

16,421

AASB 1060.63(c)

Restatement of retained earnings for correction of prior period error

AASB 1060.63(d)

Restatement of retained earnings for change in accounting policy

AASB 1060.63(b)

Dividends

(1,243)

(571)

AASB 1060.63(e)

Retained earnings at the end of the reporting period

24,937

21,337

The notes on pages xx to xxx are an integral part of these consolidated financial statements.

Appendix 2 – Transition from SPFS to GPFS-Tier 2 SD

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 72

The basis of preparation (Note 2) for the financial statements of Example Simplified Disclosures Proprietary Limited is

prepared on the basis that all recognition and measurement requirements of Australian Accounting Standards

(including consolidation and equity accounting) have been applied during the preparation of the prior year special

purpose financial statements.

This Appendix provides illustrative disclosures for an entity adopting GPFS-Tier 2 SD for the first time having prepared

special purpose financial statements for its most recent financial statements. Specifically, it assumes a fact pattern

where in the prior year Example Simplified Disclosures Proprietary Limited prepared parent only separate financial

statements. In the prior year financial statements, it complied with all recognition and measurement requirements of

Australian Accounting Standards except for consolidation and equity accounting. What is the impact of this? – refer to

discussion below on first time preparation of consolidated financial statements.

Where you have not complied with other recognition and measurement requirements of Australian Accounting

Standards, for example say lease accounting or deferred tax accounting, then you may wish to consult with your

KPMG advisor.

First time preparation of consolidated financial statements

Where in the prior year’s only parent separate financial statements have been prepared, but for the current reporting

period group consolidated financial statements are required Example Simplified Disclosures Proprietary Limited will

be required to apply AASB 1 First-time Adoption of Australian Accounting Standards on transition to GPFS-Tier 2 SD.

In brief, AASB 1 must be applied as for the group reporting entity it is the first group set of Australian Accounting

Standards financial statements.

So, the disclosure prepared on the following pages in Appendix 2 are on the basis that:

• this is the first ever group financial statements

• AASB 1 is applied

• in prior years Example Simplified Disclosures Proprietary Limited and each of its subsidiaries have complied wit

ll recognition and measurement requirements of Australian Accounting Standards except for consolidation a

equity accounting

• Example Simplified Disclosures Proprietary Limited has both an investment in a subsidiary (controlled entity) a

an investment in an associate

• Example Simplified Disclosures Proprietary Limited has not elected to apply any pf the voluntary optional

exemptions

contained with AASB 1.

AASB 1060 requirements

AASB 1060.208 requires an entity to explain how the transition from its previous financial reporting framework to

Australian Accounting Standards – Simplified Disclosures affected its reported financial position, financial performance

and cash flows. The scenario described above does not require this explanation as the consolidated entity has not

previously prepared consolidated financial statements. This is the first time that the consolidated entity has

prepared financial statements. Therefore, no previous financial reporting framework was applied by the consolidated

entity.

For the same reason, the requirements of AASB 1060.210(b)-(c) do not apply. AASB 1060.210(b)-(c) require an

entity’s first financial statements prepared using Australian Accounting Standards – Simplified Disclosures to include:

b) reconciliations of its equity determined in accordance with its previous financial reporting framework to its equity

determined in accordance with Australian Accounting Standards – Simplified Disclosures for both of the following

tes:

i. the date of transition to Australian Accounting Standards – Simplified Disclosures; a

ii. t

he end of the latest period presented in the entity’s most recent annual financial statements determi

ned

in accordance with its previous financial reporting framework; and

Refer to Insights into IFRS 6.1.240.

Appendix 2 – Transition from SPFS to GPFS-Tier 2 SD

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 73

c) a reconciliation of the profit or loss determined in accordance with its previous financial reporting framework for

the latest period in the entity’s most recent annual financial statements to its profit or loss determined i

ccordance with Australian Accounting Standards – Simplified Disclosures for the same period.

The disclosures drafted on the following pages are our view of what would be required to provide sufficient

disclosure in the first group set of Australian Accounting Standards financial statements on the adoption of

consolidation and equity accounting, given your financial statements are audited.

Notes to the consolidated financial statements

AASB 1060.106–108,

206-212

2. Basis of preparation

These consolidated financial statements are general purpose financial statements for distribution to the

members and for the purposes of fulfilling the requirements of the Corporations Act 2001. They have been

prepared in accordance with Australian Accounting Standards – Simplified Disclosures made by the Australian

Accounting Standards Board and the Corporations Act 2001.

These consolidated financial statements are the first general purpose financial statements prepared in

accordance with Australian Accounting Standards – Simplified Disclosures and AASB 1 First time adoption of

Australian Accounting Standards

has been applied. An explanation of how the transition to Australian

Accounting Standards – Simplified Disclosures has affected the reported financial position, financial performance

and cash flows of the Group is provided in Note Y.

These consolidated financial statements were authorised for issue by the Company’s board of directors on

[date].

Details of the Group’s accounting policies are included in Note 35.

AASB 1053.18A,

AASB 1060.106-110,

206-213

An entity moving from preparing special purpose financial statements to general purpose financial statements Tier 2 either applies

all the relevant requirements of AASB 1 First-time Adoption of Australian Accounting Standards or the requirements of AASB 108

Accounting Policies, Changes in Accounting Estimates and Errors. AASB 1060 specifies the disclosures required, whichever, AAS

is applied on transition. Where an entity applies AASB 108 instead of AASB 1, this disclosure is amended accordingly.

Appendix 2 – Transition from SPFS to GPFS-Tier 2 SD

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 74

Notes to the consolidated financial statements

AASB 1060.106–108,

206-212

Y. Changes in significant accounting policies and explanation of

transition to consolidated general purpose financial statements

As stated in Note 2, these are the Group’s first consolidated financial statements prepared in accordance with

Australian Accounting Standards – Simplified Disclosures. Previously the parent, Example Simplified Disclosure

Pty Ltd, prepared separate special purpose financial statements.

The Group has adopted AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit

and Not-for-Profit Tier 2 Entities on 1 July 2021. On adoption of AASB 1060, the Group has applied AASB 1 First

Time Adoption of Australian Accounting Standards with a date of initial application of 1 July 2020 (the Group’s

date of transition).The accounting policies set out in Note 35 have been applied in preparing the financial

statements for the year ended 30 June 2022, the comparative information presented in these financial

statements for the year ended 30 June 2021 and in the preparation of the opening balances for the statement of

financial position as at 1 July 2020.

In applying the requirements of AASB 1, the Group has made the adjustments set out below.

Consolidation of subsidiary

The Group’s investment in its subsidiary is consolidated from 1 July 2020, the date of transition. The Group has

applied the option in AASB 1 to recognise goodwill on consolidation as the difference between the net assets of

the subsidiary at the date of transition and the cost of the investment. Subsequent to transition, the Group

accounts for its investment in subsidiary in accordance with the accounting policy described in Note 35(A).

The following table details the impact of applying this option.

Assets and liabilities of subsidiary recognised in accordance with Australian Accounting Standards

In thousand dollars

1 Jul

y 2020

Cash and cash equivalents 375

Trade and other receivables 4,848

Inventories

2,825

Property, plant and equipment

9,955

Trade and other payables

(2,

460)

Other financial liabilities

(500)

rovisions (150)

Deferred tax liabilities

(79)

otal net assets on 1 July 2020

14,814

Cost of investment in the subsidiary 1,464

Excess of the Group’s interest in the net assets of subsidiary

over the cost of investment in the subsidiary

13,350

Appendix 2 – Transition from SPFS to GPFS-Tier 2 SD

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 75

Notes to the consolidated financial statements

AASB 1060.106–108,

206-212

Y. Changes in significant accounting policies and explanation of

transition to consolidated general purpose financial statements

(continued)

Equity accounting investment in associate

The Group has a 35% share in an associate. The investment in the associate is equity accounted from 1 July

2020, the date of transition. At the date of transition, the Group has included in the carrying amount of the

investment in the equity-accounted associate the difference between the Group’s share of net assets of

associate and the cost of the investment. Subsequent to transition, the Group accounts for its investments in

associate in accordance with the accounting policy described in Note 35(A)(iv)

The following table details the impact of applying this option.

Share of assets and liabilities of associate recognised in accordance with Australian Accounting

Standards

In thousand dollars

1 July 2020

otal net assets on 1 July 2020

1,281

Cost of investment in the associate 958

Excess of the Group’s interest in the net assets of associate over

the cost of investment in the associate

323

Reconciliation of equity

In thousand dollars

1 July 2020

quity as reported in the parent’s separate financial statements 21,078

Excess of the Group’s interest in the net assets of subsidiaries over

the cost of investment in the subsidiary at the date of transition

13,350

Excess of the Group’s interest in the net assets of associates over

the cost of investment in the associate at the date of transition

323

Con

solidated equity as at the date of transition to Australian

Accounting Standards – Simplified Disclosures

34,751

a. The Group has previously accounted for its investment in its associate at cost. Where a Group previously accounted for its

investment in associates at fair value through other comprehensive income (OCI), any amounts previously recognised in OCI will

need to be adjusted accordingly on application of equity accounting on transition.

b. This reconciliation is not required as the consolidated entity has not previously prepared consolidated financial statements. This is

the first time that the consolidated entity has prepared financial statements. Therefore, no previous financial reporting framework

was applied by the consolidated entity. The explanation between equity reported in the separate special purpose financial

statements of the parent and the consolidated general purpose financial statements is provided to assist users in understanding the

impact of transitioning to Australian Accounting Standards – Simplified Disclosures and is for illustrative purposes only.

Appendix 3 – Illustrative disclosures for scenarios not covered

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 76

This Appendix provides additional considerations and illustrative disclosures for transactions, conditions and events

relating to the following items, which Example Simplified Disclosures Proprietary Limited have not accounted for in

the main example of this guidance:

• biological assets;

• investment property;

• equity-settled share-based payments; and

• non-controlling interests.

The sub-sections identify the relevant location in the financial statements, where an entity presents and discloses

additional line items and information relating to the corresponding topic area. Also, references to AASB 1060 are

provided for further details in relation to the accounting requirements affecting the relevant item.

Biological assets

Consolidated statement of financial position

— Biological assets classified into current/non-current (ref. AASB 1060.35(h))

Consolidated statement of cash flows

— Cash flow from investing activities – Purchase of non-current biological assets (ref. AASB 1060.68(a))

Note – Income and expenses

— Other income/expenses – Change in fair value of biological assets (ref. materiality, e.g. AASB 1060.21)

Note – Income taxes

— Movement in deferred tax balances – Biological assets (ref. AASB 1060.178(e))

Note – Biological assets

Example disclosures with respect to biological assets measured at fair value:

A. Reconciliation of carrying amount

In thousands of dollars

Standing

timber

Livestock

Total

AASB 1060.204(c)

Balance at 1 July 2021

3,756

300

4,056

AASB 1060.204(c)(i)

Change in fair value less costs to sell

407

180

587

AASB 1060.204(c)(ii)

Purchases

294

305

AASB 1060.204(c)(iii)

Harvested timber transferred to inventories

(135)

AASB 1060.204(c)(v)

Effect of movements in exchange rates

AASB 1060.204(c)(vi)

Sales of livestock

(127)

AASB 1060.204(c)

Balance at 30 June 2022

4,352

378

4,730

Non-current

4,352

346

4,698

Current

4,352

378

4,730

Appendix 3 – Illustrative disclosures for scenarios not covered

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 77

B. Measurement of fair values

AASB 1060.204(a)–(b)

The following table shows the valuation techniques used in measuring fair values, as well as the significant

assumptions applied.

Type

Valuation technique

Significant assumptions

Standing timber

older than

25 years (the age

at which it

becomes

marketable)

Discounted cash flows: The valuation model

considers the present value of the net cash

flows expected to be generated by the

plantation. The cash flow projections include

specific estimates for [X] years. The expected

net cash flows are discounted using a risk-

adjusted discount rate.

–

Estimated future timber market prices per

tonne (2022: $12.8–17.9, weighted

verage $16.25; 2021: $11.6–16.3,

weighted average $15.15).

–

Estimated yields per hectare (2022: 6–10,

weighted average 8; 2021: 5–10,

weighted average 7.5).

–

Estimated harvest and transportati

osts (2022: 6.4–8.3%, weighted avera

7.5%; 2021: 6.3–7.8%, weighted average

7%).

–

Risk-adjusted discount rate (2022: 7.9–

9.0%, weighted average 8.6%; 2021

7.1–8.3%, weighted average 7.8%).

Younger standing

timber

Cost approach and discounted cash flows:

The Group considers both approaches, and

reconciles and weighs the estimates under

each approach based on its assessment of

the judgement that market participants would

apply. The cost approach considers the costs

of creating a comparable plantation, taking

into account the costs of infrastructure,

cultivation and preparation, buying and

planting young trees with an estimate of the

profit that would apply to this activity.

Discounted cash flows consider the present

value of the net cash flows expected to be

generated by the plantation at maturity, the

expected additional biological transformation

and the risks associated with the asset; the

expected net cash flows are discounted using

risk-adjusted discount rates.

–

Estimated costs of infrastructure per

hectare (2022: $0.8–1.1, weighted

average $0.95; 2021: $0.8–1.2, weight

verage $0.97).

–

Estimated costs of cultivation and

reparation per hectare (2022: $0.2–0.4,

weighted average $0.3; 2021: $0.3–0.4,

weighted average $0.35).

–

Estimated costs of buying and planti

young trees (2019: $1.0–1.3, weighted

verage $1.25; 2018: $1.1–1.3, weight

verage $1.2).

–

Estimated future timber market prices per

tonne (2022: $13.8–19.8, weight

average $17.05; 2021: $13.7–19.5,

weighted average $16.6).

–

Estimated yields per hectare (2022: 6–11,

weighted average 8.6; 2021: 7–11,

weighted average 8.9).

–

Risk-adjusted discount rate (2022: 8.9–

9.9%, weighted average 9.4%; 2021

9.3–9.9%, weighted average 9.6%).

Livestock

comprises cattle

and sheep,

characterised as

commercial or

breeders

Market comparison technique: The fair values

are based on the market price of livestock of

similar age, weight and market values.

Not applicable.

here an entity measures its biological assets using the cost model, it discloses:

— a description of each class of its biological assets;

— an explanation of why fair value cannot be measured reliably;

— the depreciation method used;

— the useful lives or the depreciation rates used; and

— the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of

the period. (ref. AASB 1060.205)

Note – Significant accounting policies

Biological assets

[AASB 141.12-13]

Biological assets are measured at fair value less costs to sell, with any change therein recognised in profit or loss.

Inventories

[AASB 102.20]

The cost of standing timber transferred from biological assets is its fair value less costs to sell at the date of

harvest.

Appendix 3 – Illustrative disclosures for scenarios not covered

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 78

Investment property

Consolidated statement of financial position

— Investment property (ref. AASB 1060.35(f))

Note: If an entity’s right-of-use assets meet the definition of investment property, it presents the right-of-use assets in the statement of financial

position as investment property (AASB 16.48).

Consolidated statement of cash flows

— Cash flow from investing activities – Acquisition of investment property (ref. AASB 1060.68(a))

Note – Revenue

— Other revenue – Investment property rentals (ref. materiality, e.g. AASB 1060.21)

Note – Income and expenses

— Other income/expenses – Change in fair value of investment property (ref. materiality, e.g. AASB 1060.21)

Note – Income taxes

— Movement in deferred tax balances – Investment property (ref. AASB 1060.178(e))

Note – Property, plant and equipment

If an entity carries a class of its property, plant and equipment at cost less accumulated depreciation and impairment, it makes the following

additional disclosure, where relevant:

— Reconciliation of carrying amount – Transfers to/from investment property carried at FVTPL (ref. AASB 1060.134(e)(v))

Note – Investment property

Example disclosures with respect to investment property accounted for at FVTPL:

A. Reconciliation of carrying amount

In thousands of dollars

AASB 1060.132(e)

Balance at 1 July 2021

250

AASB 1060.132(e)(i)

Acquisitions

300

AASB 1060.132(e)(ii)

Change in fair value

AASB 1060.132(e)(iv)

Reclassification from property, plant and equipment

800

AASB 1060.132(e)

Balance at 30 June 2022

1,520

B. Measurement of fair values

AASB 1060.132(b)

The fair value of investment property was determined by external, independent property valuers, having

appropriate recognised professional qualifications and recent experience in the location and category of the

property being valued. The independent valuers provide the fair value of the Group’s investment property portfolio

every six months.

AASB 1060.132(a)

The following table shows the valuation technique used in measuring the fair value of investment property, as

well as the significant assumptions applied.

Valuation technique

Significant assumptions

Discounted cash flows: The valuation model

considers the present value of net cash flows to be

generated from the property, taking into account the

expected rental growth rate, void periods, occupancy

rate, lease incentive costs such as rent-free periods

and other costs not paid by tenants. The expected net

cash flows are discounted using risk-adjusted

discount rates. Among other factors, the discount rate

estimation considers the quality of a building and its

location (prime vs secondary), tenant credit quality

and lease terms.

–

Expected market rental growth (2022: 2–3%,

weighted average 2.6%; 2021: 2–3%, weighted

verage 2.5%).

–

Void periods (2022 and 2021: average 6 months after

the end of each lease).

–

Occupancy rate (2022: 90–95%, weighted average

92.5%; 2021: 91–95%, weighted average 92.8%).

–

Rent-free periods (2022 and 2021: 1-year period

new leases).

–

Risk-adjusted discount rates (2022: 5–6.3%, weighted

verage 5.8%; 2021: 5.7–6.8%, weighted avera

6.1%).

Note – Capital and reserves

Where an entity measures its property, plant and equipment at cost and investment property at fair value, it discloses the nature and purpose of a

revaluation reserve.

AASB 1060.45(b)

B. Nature and purpose of reserves

Revaluation reserve

The revaluation reserve relates to the revaluation of property, plant and equipment immediately before its

reclassification as investment property.

Appendix 3 – Illustrative disclosures for scenarios not covered

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 79

Note – Leases

Where an entity leases out its investment property and the lese is classified as an operating lease, it discloses the following:

Leases as lessor

Operating lease

AASB 1060.148(c)

The Group leases out its investment property. The Group has classified these leases as operating leases, because

they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets.

The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to

be received after the reporting date.

In thousands of dollars

2022

2021

AASB 1060.148(a)(i)

Less than one year

450

AASB 1060.148(a)(ii)

One to five years

1,170

AASB 1060.148(a)(iii)

More than five years

145

Total

2,065

Note – Significant accounting policies

Income tax

Deferred tax

[AASB 112.51C]

The carrying amount of investment property measured at fair value is presumed to be recovered through sale,

and the Group has not rebutted this presumption.

Property, plant and equipment

Reclassification to investment property

[AASB 140.61]

When the use of a property changes from owner-occupied to investment property, the property is remeasured to

fair value and reclassified accordingly. Any gain arising on this remeasurement is recognised in profit or loss to the

extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in

OCI and presented in the revaluation reserve. Any loss is recognised in profit or loss. However, to the extent that

an amount is included in the revaluation surplus for that property, the loss is recognised in other comprehensive

income and reduces the revaluation surplus within equity.

Investment property

[AASB 140.20, 33, 35]

Investment property is initially measured at cost and subsequently at fair value with any change therein

recognised in profit or loss.

[AASB 140.62(b)(ii), 69]

Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from

disposal and the carrying amount of the item) is recognised in profit or loss. When investment property that was

previously classified as property, plant and equipment is sold, any related amount included in the revaluation

reserve is transferred to retained earnings.

[AASB 16.81]

Rental income from investment property is recognised as other revenue on a straight-line basis over the term of

the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of

the lease.

Appendix 3 – Illustrative disclosures for scenarios not covered

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 80

Equity-settled share-based payments

Consolidated statement of changes in equity

— Transactions with owners of the company – Equity-settled share-based payment (ref. AASB 1060.61(c)(iii))

Note – Share-based payment arrangements

Description of share-based payment arrangements

AASB 1060.164(a)

At 30 June 2021, the Group had the following share-based payment arrangements.

Share option programmes (equity-settled)

On 1 July 2017 and 1 July 2019, the Group established share option programmes that entitle key management

personnel to purchase shares in the Company. On 1 July 2021, a further grant on similar terms was offered to key

management personnel and senior employees. Under these programmes, holders of vested options are entitled

to purchase shares at the market price of the shares at grant date. Currently, these programmes are limited to

key management personnel and other senior employees.

The key terms and conditions related to the grants under these programmes are as follows; all options are to be

settled by the physical delivery of shares.

Grant date/employees entitled

Number of

instruments

in thousands

Vesting conditions

Contractual life

of options

Options granted to key management

personnel

On 1 July 2018

400

3 years’ service from grant date and

5% increase in operating income

in each of the 3 years

7 years

On 1 July 2020

200

Same as above

10 years

On 1 July 2021

225

Same as above

10 years

Options granted to senior employees

On 1 July 2021

100

3 years’ service from grant date

10 years

Total share options

925

Measurement of fair values

Equity-settled share-based payment arrangements

AASB 1060.165

The fair value of the employee share options has been measured using the Black-Scholes formula. Service and

non-market performance conditions attached to the arrangements were not taken into account in measuring fair

value.

Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price,

particularly over the historical period commensurate with the expected term. The expected term of the

instruments has been based on historical experience and general option holder behaviour.

Reconciliation of outstanding share options

AASB 1060.164(b)

The number and weighted-average exercise prices of share options under the share option programmes and

replacement awards were as follows.

In thousands of options

Number of

options

2022

Weighted-

average

exercise price

2022

Number of

options

2021

Weighted-

average

exercise price

2021

AASB 1060.164(b)(i)

Outstanding at 1 July

550

$10.18

400

$10.00

AASB 1060.164(b)(ii)

Granted during the year

475

$10.16

200

$10.50

AASB 1060.164(b)(iii)

Forfeited during the year

(50)

$10.00

(50)

$10.00

AASB 1060.164(b)(iv)

Exercised during the year

(5)

$10.00

AASB 1060.164(b)(v)

Expired during the year

AASB 1060.164(b)(vi)

Outstanding at 30 June

970

$10.18

550

$10.18

AASB 1060.164(b)(vii)

Exercisable at 30 June

295

$10.00

350

$10.00

Appendix 3 – Illustrative disclosures for scenarios not covered

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 81

Note – Income taxes

— Movement in deferred tax balances – Equity-settled share-based payments (ref. AASB 1060.178(e))

Note – Capital and reserves

Where an entity set up a separate share-based payment reserve, it discloses the nature and purpose of this reserve (ref. AASB 1060.45(b).

Note – Significant accounting policies

Employee benefits

Share-based payment arrangements

[AASB 2.14–15, 19–21A]

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally

recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The

amount recognised as an expense is adjusted to reflect the number of awards for which the related service and

non-market performance conditions are expected to be met, such that the amount ultimately recognised is based

on the number of awards that meet the related service and non-market performance conditions at the vesting

date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based

payment is measured to reflect such conditions and there is no true-up for differences between expected and

actual outcomes.

Appendix 3 – Illustrative disclosures for scenarios not covered

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 82

Non-controlling interests

Consolidated statement of financial position

— Equity – Non-controlling interests (presented separately from the equity attributable to the owners of the parent) (ref. AASB 1060.35(p))

Consolidated statement of profit or loss and other comprehensive income

— Profit or loss for the period attributable to non-controlling interests (ref. AASB 1060.53(a)(i))

— Total comprehensive income for the period attributable to non-controlling interests (ref. AASB 1060.53(b)(i))

Consolidated statement of changes in equity

— Total comprehensive income attributable to non-controlling interests (ref. AASB 1060.61(a)))

— Reconciliation between the carrying amount of non-controlling interests at the beginning and the end of the period (ref. AASB 1060.61(c))

— Changes in ownership interests in subsidiaries that do not result in a loss of control (ref. AASB 1060.61(c)(iii))

Note – Acquisition of subsidiary

Goodwill arising from the acquisition has been recognised as follows.

In thousands of dollars

2022

Consideration transferred

2,631

AASB 1060.142(h)

NCI, based on their proportionate interest in the recognised amounts of the

assets and liabilities of [ ]

304

Fair value of identifiable net assets

(3,044)

Goodwill

541

Note – Significant accounting policies

Basis of consolidation

Non-controlling interests

[AASB 3.19]

NCI are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of

acquisition.

[AASB 10.23, B96]

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity

transactions.

Loss of control

[AASB 10.25, B97–B99]

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and

any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any

interest retained in the former subsidiary is measured at fair value when control is lost.

Foreign currency

Foreign operations

[AASB 121.41,

AASB 10.B94]

Foreign currency differences are recognised in OCI and accumulated in the translation reserve, except to the

extent that the translation difference is allocated to NCI.

AASB 3.19

An entity has a choice on a combination-by-combination basis to measure any NCI in the acquiree at either the proportionate share

of the acquiree’s identifiable net assets or fair value. The Group has elected the former approach.

Appendix 4 – Example disclosures when part of a tax-consolidated group

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 83

Tax consolidation – AI

1052 disclosures

This appendix provides extracts of example disclosures that would apply under AI 1052 Tax Consolidation Accounting when a tax funding

arrangement is in place with a head entity. The disclosures are based on the following assumptions:

— the Company implemented tax consolidation as at 1 July 2003

— under the tax funding arrangement the intercompany charge recognised equals the current tax liability of the subsidiary, resulting in neither a

contribution by the head entity to the subsidiary nor a distribution by the subsidiary to the head entity; and

— deferred taxes are calculated by reference to the carrying amounts of the assets within the separate financial statements of each entity (i.e.

subsidiary carrying amounts less tax consolidation tax base).

ach entity will need to perform its own assessment of the impact AI 1052 has on its financial statements and provide disclosures accordingly.

The following pages are set out as follows:

— Example accounting policy for the ‘separate taxpayer within the group’ approach adopted by a subsidiary under AI 1052 Tax Consolidation

ccounting

— Example accounting policy for the ‘standalone taxpayer’ approach adopted by a subsidiary under AI 1052 Tax Consolidation Accounting

— Example accounting policy for the ‘group allocation’ approach adopted by a subsidiary under AI 1052 Tax Consolidation Accounting

— Example disclosures for current tax assets and liabilities for a subsidiary in a tax-consolidated group

— Example related party disclosures under AASB 124 Related Party Disclosures for a subsidiary in a tax-consolidated group.

Appendix 4 – Example disclosures when part of a tax-consolidated group

Example accounting policy for the ‘separate taxpayer within the group’ approach adopted by a subsidiary under

AI 1052 Tax Consolidation Accounting

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 84

Income tax

ax consolidation

The Company is a wholly owned subsidiary in a tax-consolidated group with Example Public Company Limited as the

head entity. The implementation date of the tax consolidation system for the tax-consolidated group was 1 July 2003.

urrent tax expense (income), deferred tax liabilities and deferred tax assets arising from temporary differences of the

members of the tax-consolidated group are recognised in the separate financial statements of the members of the

tax-consolidated group using the ‘separate taxpayer within group’ approach. Deferred tax assets and deferred tax

liabilities are measured by reference to the carrying amounts of the assets and liabilities in the Company’s balance

sheet and their tax values applying under tax consolidation

ny current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the Company are

assumed by the head entity of the tax-consolidated group and are recognised as amounts payable (receivable) to

other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below).

Any difference between these amounts is recognised by the Company as an equity contribution from or distribution

to the head entity.

The

Company recognises deferred tax assets arising from unused tax losses to the extent that it is probable that

future taxable profits of the tax-consolidated group will be available against which the assets can be utilised. The

Company assesses the recovery of its unused tax losses and tax credits only in the period in which they arise, and

before assumption by the head entity, in accordance with AASB 112 applied in the context of the tax-consolidated

group. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of

revised assessments of the probability of recoverability are recognised by the head entity only.

ature of tax funding arrangement and tax sharing agreements

The

Company, in conjunction with other members of the tax-consolidated group, has entered into a tax funding

arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax

amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability

(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the

Company recognising an inter-entity payable (receivable) equal in amount to the tax liability (asset) assumed. The

inter-entity payable (receivable) is at call.

ontributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of

the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.

The

Company, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing

agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities

between the entities should the head entity default on its tax payment obligations. No amounts have been recognised

in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement

is considered remote.

[Insert significant terms and conditions of tax sharing agreement that may affect the amount, timing and uncertainty

of future cash flows].

AI 1052.37 allows a choice of the company or the tax consolidation group accounting carrying amounts to be used.

Appendix 4 – Example disclosures when part of a tax-consolidated group

Example accounting policy for the ‘stand alone taxpayer’ approach adopted by a subsidiary under AI 1052 Tax

Consolidation Accounting

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 85

Income tax

ax consolidation

The

Company is a wholly owned subsidiary in a tax-consolidated group with Example Public Company Limited as the

head entity. The implementation date of the tax consolidation system for the tax-consolidated group was 1 July 2003.

urrent tax expense (income), deferred tax liabilities and deferred tax assets arising from temporary differences of the

Company are recognised using the ‘stand alone taxpayer’ approach whereby the Company measures its current and

deferred taxes as if it continued to be a separately taxable entity in its own right. Deferred tax assets and deferred tax

liabilities are measured by reference to the carrying amounts of the assets and liabilities in the Company’s balance

sheet and their tax values applying under tax consolidation.

ny current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the Company are

assumed by the head entity of the tax-consolidated group and are recognised as amounts payable (receivable) to

other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below).

Any difference between these amounts is recognised by the Company as an equity contribution from or distribution

to the head entity.

The

Company recognises deferred tax assets arising from unused tax losses to the extent that it is probable that

future taxable profits of the Company will be available against which the assets can be utilised. The Company

assesses the recovery of its unused tax losses and tax credits only in the period in which they arise, and before

assumption by the head entity, in accordance with AASB 112 applied in the context of the tax-consolidated group.

Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised

assessments of the probability of recoverability are recognised by the head entity only.

ature of tax funding arrangement and tax sharing agreements

The Company, in conjunction with other members of the tax-consolidated group, has entered into a tax funding

arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax

amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability

(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the

Company recognising an inter-entity payable (receivable) equal in amount to the tax liability (asset) assumed. The

inter-entity payable (receivable) is at call.

ontributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of

the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.

The Company, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing

agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities

between the entities should the head entity default on its tax payment obligations. No amounts have been recognised

in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement

is considered remote.

nsert significant terms and conditions of tax sharing agreement that may affect the amount, timing and uncertainty

of future cash flows].

Appendix 4 – Example disclosures when part of a tax-consolidated group

Additional example notes to the financial statements for the ‘group allocation’ approach adopted by a

subsidiary under AI 1052 Tax Consolidation Accounting

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 86

Income tax

ax consolidation

The Company is a wholly owned subsidiary in a tax-consolidated group with Example Public Company Limited as the

head entity. The implementation date of the tax consolidation system for the tax-consolidated group was 1 July 2003.

urrent tax expense (income), deferred tax liabilities and deferred tax assets arising from temporary differences of the

members of the tax-consolidated group are allocated to the Company and recognised using a ‘group allocation’

approach. Deferred tax assets and deferred tax liabilities are measured by reference to the carrying amounts of the

assets and liabilities in the Company’s balance sheet and their tax values applying under tax consolidation.

ny current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the Company are

assumed by the head entity of the tax-consolidated group and are recognised as amounts payable (receivable) to

other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below).

Any difference between these amounts is recognised by the Company as an equity contribution from or distribution

to the head entity.

The

Company recognises deferred tax assets arising from unused tax losses to the extent that it is probable that

future taxable profits of the tax-consolidated group will be available against which the assets can be utilised. The

Company assesses the recovery of its unused tax losses and tax credits only in the period in which they arise, and

before assumption by the head entity, in accordance with AASB 112 applied in the context of the tax-consolidated

group. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of

revised assessments of the probability of recoverability are recognised by the head entity only.

ature of tax funding arrangement and tax sharing agreements

The Company, in conjunction with other members of the tax-consolidated group, has entered into a tax funding

arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax

amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability

(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the

Company recognising an inter-entity payable (receivable) equal in amount to the tax liability (asset) assumed. The

inter-entity payable (receivable) is at call.

ontributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of

the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.

The Company, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing

agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities

between the entities should the head entity default on its tax payment obligations. No amounts have been recognised

in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement

is considered remote.

nsert significant terms and conditions of tax sharing agreement that may affect the amount, timing and uncertainty

of future cash flows].

Appendix 4 – Example disclosures when part of a tax-consolidated group

Additional example notes to the financial statements for the ‘group allocation’ approach adopted by a

subsidiary under AI 1052 Tax Consolidation Accounting

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation. 87

Tax assets and liablities

urrent tax assets and liabilities

n accordance with AI 1052, the Company recognises in each reporting period current tax amounts. Subsequently, in

accordance with the tax consolidation legislation, the head entity has assumed the current tax liability (asset) initially

recognised by the Company. Hence, the Company’s current tax liability (asset) has been derecognised immediately

after its initial recognition.

nder the tax funding arrangement the Company and the head entity recognise an inter-entity payable (receivable)

equal in amount to the current tax liability (asset) assumed. The Company continues to recognise tax expense

(income) even though it has derecognised its current tax liability or asset.

The

Company’s inter-entity payable of $[ ] (2021: $[ ]) relating to the current tax liability assumed by the head entity

is included in trade and other payables.

planatory notes on tax consolidation

1. [AASB 112.12] A current tax liability or asset is recognised for income tax payable or recoverable in respect of all periods to date. Under

AI 1052, this balance is assumed by the head entity of the tax-consolidated group.

2. [AI 1052.11(a), (b), (c)] Specific tax consolidation adjustments shall be accounted for by a subsidiary in a tax-consolidated group as

follows:

a) current tax liabilities (or assets) recognised for the period by the subsidiary shall be accounted for as immediately assumed by t

head entity

b) deferred tax assets arising from unused tax losses and unused relevant tax credits recognised for the period by the subsidiary shall

be accounted for as immediately assumed by the head entity

c) assets and liabilities (if any) arising for the subsidiary under a tax funding arrangement shall be recognised as amounts receivabl

rom or payable to other entities in the group; and

d) any differences between the net tax amount derecognised under paragraphs (a) and (b) and the net amount recognised under

paragraph (c) shall be recognised as a contribution by (or distribution to) equity participants between the subsidiary and the head

entity

I 1052.42] The derecognition of a subsidiary’s current tax liability (or asset) is treated under AI 1052 as a contribution by (or distribution to) the

head entity, in conjunction with any tax funding arrangement amounts, on the basis that the transaction is with the parent in its capacity as the

parent. The definition of “income” (or “expenses”) in the Framework for the Preparation and Presentation of Financial Statements cannot be

satisfied, as the decrease in the subsidiary’s current tax liability (or asset) results from a contribution by or distribution to equity participants. AI

1052 does not prescribe which equity accounts are to be adjusted by subsidiaries for tax-consolidation contributions or distributions.

[AI 1052.44] The subsidiary recognises the assumption of its current tax liability or asset as a contribution by or distribution to the head entity, in

conjunction with any tax funding arrangement amounts. Thus, the subsidiary continues to recognise tax expense (income) even though it

derecognises its current tax liability or asset. The subsidiary may choose to classify a tax-consolidation equity contribution from the head entity as

contributed equity other than paid-in capital. A transaction that would result in an equity reduction for the subsidiary may be subject to legal

restrictions concerning capital distributions.

Related parties (tax consolidation)

[Refer Note 41 of Example Public Company Limited – Illustrative disclosures 2021-22

for further disclosures required.

Below are example disclosures in respect of tax consolidation only].

arent entity

The Company is a wholly owned subsidiary in a tax-consolidated group with its parent entity, Example Public

Company Limited, as the head entity. The Company, in conjunction with other members of the tax-consolidated

group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-

consolidated group in respect of tax amounts. The Company, in conjunction with other members of the tax-

consolidated group, has also entered into a tax sharing agreement.

The Company’s inter-entity payable of $[ ] (2021: $[ ]) relating to the current tax liability assumed by the parent entity

as the head entity, is included in trade and other payables.

For further details regarding tax consolidation and the nature of the tax funding arrangement and tax sharing

agreement, refer to accounting policy Note 35(xx) and Note x.

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of certain additional disclosures that may be relevant are included in the Appendix and Example Public Company Limited –

Illustrative disclosures 2021-22.

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