Qantas 2010 Annual Report Download - page 61

59 ANNUAL REPORT 2010
for the year ended 30 June 2010
Notes to the Financial Statements continued
(A) UNDERLYING PBT
Underlying PBT is the primary reporting measure used by the Qantas
Group’s chief operating decision making bodies, being the Executive
Committee and the Board of Directors, for the purpose of assessing
the performance of the Group.
Underlying PBT is a non-statutory measure, which excludes certain
impacts of AASB 139: Financial Instruments: Recognition and
Measurement (AASB 139) and items that management consider to be
non-recurring in nature. Qantas removes these items to provide more
useful information that more accurately re ects the underlying
performance of the Group.
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 classi ed 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 pro t that does not re ect 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 current
reporting period’s statutory pro t for derivative mark-to-market
movements that relate to underlying exposures in other reporting
periods.
Non-recurring items are those items which by their nature are considered
necessary to separately disclose in the Qantas Group’s results.
Underlying PBT is calculated as follows:
— Derivative mark-to-market movements recognised in the current
reporting period’s statutory pro t 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 pro t that are associated with underlying
exposures which will occur in future reporting period are excluded
from Underlying PBT
— Derivative mark-to-market movements recognised in the current
reporting period’s statutory pro t 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
period’s statutory pro t that are associated with underlying exposures
which occurred in the current year are included in Underlying PBT
— Underlying PBT excludes the impact of items identi ed as non-recurring
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.
The primary reporting measure of the Qantas Group’s operating
segments is Underlying EBIT. Underlying EBIT excludes net  nance costs
from Underlying PBT as these costs are managed centrally and are not
allocated to operating segments.
Underlying EBIT is calculated by adjusting Underlying PBT for statutory
net  nance costs and the impact on net  nance costs of ineffective and
non-designated derivatives relating to other reporting periods using a
consistent methodology as outlined above.
The calculation of Underlying EBIT and Underlying PBT is detailed in the
table below.
Qantas Group
Notes
2010
$M
2009
$M
Statutory pro t before income tax expense and net  nance costs (Statutory EBIT) 253 203
Ineffectiveness and non-designated derivatives relating to other reporting periods
Exclude current year derivative mark-to-market movements relating to underlying exposures in future years 51 (61)
Exclude current year derivative mark-to-market movements relating to capital expenditure 77 (110)
Include prior years’ derivative mark-to-market movements relating to underlying exposures in the current year 29 (2)
Include adjustment to depreciation expense relating to excluded capital expenditure mark-to-market movements (1) –
156 (173)
Non-recurring items
Gain on sale of Qantas Holidays and Qantas Business Travel – (86)
Revenue from direct earn conversion – (84)
Accelerated depreciation and impairment losses, net of impairment reversals
—Property, plant and equipment and related provisions for costs to sell 48 152
— Investments – (4)
— Goodwill and other intangible assets –22
Redundancies, restructuring and other provisions 11 106
59 106
Underlying EBIT 2(C) 468 136
Underlying net  nance costs
Statutory net  nance costs 5 (75) (22)
Ineffectiveness and non-designated derivatives relating to other reporting periods affecting net  nance costs (16) (14)
2(C) (91) (36)
Underlying PBT 2(C) 377 100
2. Underlying PBT and Operating Segments