NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DTAs and DTLs are measured at the tax rates that are
expected to apply to the year when the asset is realised
or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted
at the reporting date. DTAs and DTLs are offset only if
a legally enforceable right exists to set off current tax
assets against current tax liabilities and the DTAs and
DTLs relate to the same taxable entity and the same
taxation authority.
Tax consolidation legislation
Australian Rail Track Corporation Ltd and its wholly
owned Australian controlled entities have been
consolidated for income tax purposes as of 1 July 2003.
The head entity, Australian Rail Track Corporation Ltd
and the controlled entities in the income tax consolidated
group continue to account for their own current and
deferred tax amounts. The Group has applied the
stand alone taxpayer approach, consistent with the
requirements of UIG 1052, in determining the appropriate
amount of current taxes and deferred taxes to allocate
tomembers of the income tax consolidated group. In
addition to its own current and deferred tax amounts,
Australian Rail Track Corporation Ltd also recognises the
current tax liabilities (or assets) and the DTAs arising from
unused tax losses and unused tax credits assumed from
controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding
agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to
other entities in the Group.
Any difference between the amounts assumed
and amounts receivable or payable under the tax
funding agreement are recognised as a contribution
to (or distribution from) wholly owned tax
consolidated entities.
(o) Leases
(i)
Group as a lessee
Leases of property, plant and equipment where the
Group, as lessee, has substantially all the risks and
rewards of ownership are classified as finance leases.
Finance leases are capitalised at the lease’s inception
at the fair value of the leased property or, if lower, the
present value of theminimum lease payments. The
corresponding rental obligations, net of finance charges,
are included in other short termand long termpayables.
Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for
each period. The property, plant and equipment acquired
under finance leases is depreciated over the asset’s useful
life or over the shorter of the asset’s useful life and the
lease term if there is no reasonable certainty that the
Groupwill obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and
rewards of ownership are not transferred to the Group
as lessee are classified as operating leases (note 15).
Payments made under operating leases (net of any
incentives received from the lessor) are charged to the
consolidated income statement on a straight line basis
over the period of the lease.
(ii) Group as a lessor
Leases in which the Group retains substantially all
the risks and benefits of ownership of the leased
asset are classified as operating leases. Initial direct
costs incurred in negotiating an operating lease are
added to the carrying amount of the leased asset and
recognised as an expense over the lease term on the
same basis as rental income.
(p) Fair Value
(i) Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in the consolidated income
statement over the period of the borrowings using the
effective interest method. Fees paid on the establishment
of loan facilities are recognised as transaction costs of
the loan to the extent that it is probable that some or
all of the facility will be drawn down. To the extent there
is no evidence that it is probable that some or all of the
facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the
period of the facility towhich it relates.
(ii) Infrastructure assets
The fair value for infrastructure assets is calculated
using the income method approach, whereby the
measurement reflects current market expectations of
future cashflows discounted to their present value for
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