Qantas 2012 Annual Report Download - page 84

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FOR THE YEAR ENDED 30 JUNE 2012
Notes to the Financial Statements continued
E DESCRIPTION OF UNDERLYING PBT
AND RECONCILIATION TO 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
Executive 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 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 major transformational/
restructuring initiatives, transactions
involving investments and impairments
of assets outside the ordinary course
of business.
(iii) Underlying EBIT
Underlying EBIT is calculated using
a consistent methodology as outlined
above but excluding the impact
of statutory net finance costs and
ineffective and non-designated
derivatives relating to other reporting
periods affecting net finance costs.
2. Underlying PBT and Operating Segments continued
QANTAS ANNUAL REPORT 2012082