Qantas 2014 Annual Report Download - page 80

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QANTAS ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2014
3. UNDERLYING (LOSS)/PROFIT BEFORE TAX (UNDERLYING PBT) AND OPERATING SEGMENTS CONTINUED
(D) DESCRIPTION OF UNDERLYING PBT AND RECONCILIATION FROM STATUTORY (LOSS)/PROFIT BEFORE TAX
Underlying PBT is a non-statutory measure, and is the primary reporting measure used by the Qantas Group’s chief operating
decision-making bodies, being the Chief Executive Officer, Group Management Committee and the Board of Directors. The objective
of measuring and reporting Underlying PBT is to provide a meaningful and consistent representation of the underlying performance
of each operating segment and the Group.
Underlying PBT is derived by adjusting Statutory (loss)/profit before tax for impacts of AASB 139
Financial Instruments: Recognition
and Measurement
(AASB 139) which relate to other reporting periods and identifying certain other items which are not included in
Underlying PBT.
(i) Adjusting for impacts of AASB 139 which relate to other reporting periods
All derivative transactions undertaken by the Qantas Group represent economic hedges of underlying risk and exposures.
The Qantas Group does not enter into speculative derivative transactions. Notwithstanding this, AASB 139 requires certain mark-
to-market movements in derivatives which are classified as “ineffective” to be recognised immediately in the Consolidated Income
Statement. The recognition of derivative valuation movements in reporting periods which differ from the designated transaction
causes volatility in statutory profit that does not reflect the hedging nature of these derivatives.
Underlying PBT reports all hedge derivative gains and losses in the same reporting period as the underlying transaction by adjusting
the reporting period’s statutory profit for derivative mark-to-market movements that relate to underlying exposures in other
reporting periods.
This adjustment is calculated as follows:
–Derivative mark-to-market movements recognised in the current reporting period’s statutory profit that are associated with
current year exposures remain included in Underlying PBT
–Derivative mark-to-market movements recognised in the current reporting period’s statutory profit that are associated with
underlying exposures which will occur in future reporting periods are excluded from Underlying PBT
–Derivative mark-to-market movements recognised in the current reporting period’s statutory profit that are associated with
capital expenditure are excluded from Underlying PBT and subsequently included in Underlying PBT as an implied adjustment
todepreciation expense for the related assets commencing when the assets are available for use
–Derivative mark-to-market movements recognised in previous reporting periods’ statutory profit that are associated with
underlying exposures which occurred in the current year are included in Underlying PBT
–Ineffectiveness and non-designated derivatives relating to other reporting periods affecting net finance costs are excluded
fromUnderlying PBT
All derivative mark-to-market movements which have been excluded from Underlying PBT will be recognised through Underlying PBT
in future periods when the underlying transaction occurs.
(ii) Other items not included in Underlying PBT
Items which are identified by Management and reported to the chief operating decision-making bodies as not representing the
underlying performance of the business are not included in Underlying PBT. The determination of these items is made after
consideration of their nature and materiality and is applied consistently from period to period.
Items not included in Underlying PBT primarily result from revenues or expenses relating to business activities in other reporting
periods, major transformational/restructuring initiatives, transactions involving investments and impairments of specific assets
orCGUs outside the ordinary course of business.