Fitzroy Learning Network Annual Report - Page 8

Fitzroy Learning Network Inc. Annual Financial Report For the year ended 30 June 2016 Notes to the Financial Statements Note 3 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. (a) Income tax The Organisation is exempt from income tax by virtue of Subdivision 50-B of the Income Tax Assessment Act 1997 . (b) Provisions A provision is recognised if, as a result of a past event, the Association has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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. (c) Financial instruments (i) Non-derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. Cash and cash equivalents comprise cash balances and call deposits. Accounting for interest income is discussed in note 3(h). (ii) Other Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. (d) Impairment (i) Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss. 6