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Notes to the

financial statements

for the year ended 30 September 2015


2. Significant accounting policies


v. Convertible notes

Convertible notes that do not contain an equity

component are accounted for as follows:

At initial recognition the derivative component of the

convertible notes is measured at fair value and presented

as part of derivative financial instruments (see Note 2(w)).

Any excess of proceeds over the amount initially

recognised as the derivative component is recognised

as the liability component. Transaction costs that relate

to the issue of the convertible note are allocated to the

liability and derivative components in proportion to the

allocation of proceeds. The portion of the transaction

costs relating to the liability component is recognised

initially as part of the liability. The portion relating to

the derivative component is recognised immediately

in profit or loss.

The derivative component is subsequently re-measured

in accordance with Note 2(w). The liability component

is subsequently carried at amortised cost. The interest

expense recognised in profit or loss on the liability

component is calculated using the effective interest


If the note is converted, the carrying amounts of the

derivative and liability components are transferred to

share capital as consideration for the shares issued.

If the note is redeemed, any difference between

the amount paid and the carrying amounts of both

components is recognised in profit or loss.

w. Derivative financial instruments

Derivative financial instruments are recognised initially

at fair value. At the end of each reporting period the

fair value is re-measured. The gain or loss on re-

measurement to fair value is recognised immediately in

profit or loss.

x. New accounting standards for application in

future periods

Accounting Standards and Interpretations issued by

the AASB that are not yet mandatorily applicable to the

company, together with an assessment of the potential

impact of such pronouncements on the company when

adopted in future periods, are discussed below:

AASB 9: Financial Instruments and associated

Amending Standards (applicable to annual reporting

periods commencing on or after 1 January 2018).

The Standard will be applicable retrospectively (subject to

the provisions on hedge accounting outlined below) and

includes revised requirements for the classification and

measurement of financial instruments, revised recognition

and derecognition requirements for financial instruments,

and simplified requirements for hedge accounting.

The key changes that may affect the company on

initial application include certain simplifications to

the classification of financial assets, simplifications

to the accounting of embedded derivatives, upfront

accounting for expected credit loss, and the irrevocable

election to recognise gains and losses on investments

in equity instruments that are not held for trading in

other comprehensive income. AASB 9 also introduces a

new model for hedge accounting that will allow greater

flexibility in the ability to hedge risk, particularly with

respect to hedges of non-financial items. Should the

entity elect to change its hedge policies in line with the

new hedge accounting requirements of this Standard,

the application of such accounting would be largely


Although the directors anticipate that the adoption of

AASB 9 may have an impact on the company’s financial

instruments, including hedging activity, it is impracticable

at this stage to provide a reasonable estimate of such


AASB 15: Revenue from Contracts with Customers

(applicable to annual reporting periods commencing on

or after 1 January 2018).

When effective, this Standard will replace the current

accounting requirements applicable to revenue with a

single, principles-based model.

Except for a limited number of exceptions, including

leases, the new revenue model in AASB 15 will apply to

all contracts with customers as well as non-monetary

exchanges between entities in the same line of business

to facilitate sales to customers and potential customers.

The core principle of the Standard is that an entity will

recognise revenue to depict the transfer of promised

goods or services to customers in an amount that reflects

the consideration to which the entity expects to be

entitled in exchange for the goods or services.

To achieve this objective, AASB 15 provides the following

five-step process:

Identify the contract(s) with a customer

identify the performance obligations in the contract(s)

Determine the transaction price

allocate the transaction price to the performance

obligations in the contract(s); and

recognise revenue when (or as) the performance

obligations are satisfied.

This Standard will require retrospective restatement,

as well as enhanced disclosures regarding Revenue.