Annual Report

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b) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of

the primary economic environment in which the entity operates (“the functional currency”). The consolidated

financial statements are presented in Australian dollars, which is Washington H. Soul Pattinson and Company

Limited’s functional and presentation currency.

ii. Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at

the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such trans-

actions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in

foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow

hedges and qualifying net investment hedges.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates

at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value

are reported as part of the fair value gain or loss. For example, differences on non-monetary assets and liabilities

such as investments fair valued through profit and loss are recognised in the income statement, as part of the fair

value gain or loss and translation differences on non-monetary assets, such as long term equity investments are

included in the asset revaluation reserve in equity.

iii. Group companies

The results and financial position of all of the Group entities that have a functional currency different from the

presentation currency are translated into the presentation currency as follows:

assets and liabilities are translated at the closing rates at the reporting date;

income and expenses are translated at average exchange rates (unless this is not a reasonable approximation

of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses

are translated at the dates of the transactions); and

all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and

of borrowings and other financial instruments designated as hedges of such investments, are recognised in other

comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment

are repaid, a proportionate share of such exchange differences is reclassified to the income statement, as part of

the gain or loss where applicable.

c) Deferred stripping costs

The Group does not recognise any deferred stripping costs. Based on the nature of the Group’s mining operations

and the stripping ratio for the components of its operations, the recognition criteria of a deferred stripping

asset are not satisfied. Further, it is anticipated that the operations will maintain a consistent stripping ratio at

the component level and as such no overburden in advance should be recognised. In the event that a stripping

campaign is undertaken in the future a deferred stripping asset will be recognised at that time and amortised in

accordance with the requirements of

Australian Interpretation 20

. An asset will be recognised for stripping activity

where the following criteria are met:

It is probable that the future economic benefit (improved access to the ore body) associated with the

stripping activity will flow to the entity;

The entity can identify the component of the ore body for which access has been improved; and

The costs relating to the stripping activity associated with that component can be measured reliably.