Berry Street Web Docs Financial Report 2014 | Page 10

BERRY STREET VICTORIA INC.
ABN 24 719 196 762

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
c)

Leases

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset,
but not the legal ownership, are transferred to the Association are classified as finance leases.
Finance leases are capitalised, recording an asset and a liability equal to the present value of the minimum
lease payments, including any guaranteed residual values. Lease payments are allocated between the
reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that
the entity will obtain ownership of the asset.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are
charged as expenses on a straight-line basis over the lease term.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis
over the life of the lease term.

d)

Financial Instruments

Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Association becomes a party to the
contractual provisions to the instrument. For financial assets, this is equivalent to the date that the
Association commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transactions costs except where the instrument
is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed to profit or loss
immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at either fair value, amortised cost using the effective
interest rate method or cost. Fair value represents the amount for which an asset could be exchanged or a
liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market
are used to determine fair value. In other circumstances, valuation techniques are adopted.
Amortised cost is calculated as:
i i.
. ii.
iii.
iv.

the amount at which the financial asset or financial liability is measured at initial recognition;
less principal repayments;
plus or minus the cumulative amortisation of the difference, if any, between the amount initially
recognised and the maturity amount calculated using the effective interest method; and
less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant period
and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including
fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be
reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial
asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the
carrying value with a consequential recognition of an income or expense in profit or loss.
(i)

Financial assets at fair value through profit or loss
Financial assets are classified at ‘fair value through profit or loss’ when they are held for trading for
the purpose of short-term profit taking. Such assets are subsequently measured at fair value with
changes in carrying value being included in profit or loss.

(ii)

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market and