## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

Notes to and forming part of the Consolidated Financial Statements For the period from incorporation to 26 June 2004 

## SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 01 

This general purpose financial report has been prepared in accordance with Accounting Standards, other pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001. 

This financial report covers the consolidated entity of Super Cheap Auto Group Limited and its controlled entities, and Super Cheap Auto Group Limited as an individual parent entity. Super Cheap Auto Group Limited is a public company that listed on the Australian Stock Exchange subsequent to the period’s end and is incorporated and domiciled in Australia. 

This financial report is prepared on an accruals basis in accordance with the historical cost convention which, except for certain assets, as noted, are at valuation. 

(a) Principles of consolidation 

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Super Cheap Auto Group Limited (the “Company” or “parent entity”) as at 26 June 2004 and the results of its controlled entities for the period then ended. Super Cheap Auto Group Limited and its controlled entities comprise the “consolidated entity”. The effects of all transactions between entities in the consolidated entity are fully eliminated. A list of controlled entities is contained in Note 37 to the financial statements. 

Where control of an entity is acquired during a financial period its results are included in the consolidated statement of financial performance from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the period during which control existed. 

(b) Income tax 

The Company adopts the liability method of tax- effect accounting whereby the income tax expense is based on the operating profit adjusted for any permanent differences. 

Timing differences, which arise due to the different accounting periods in which items of revenue and expense are included in the determination of accounting profit and taxable income, are brought to account as either a provision for deferred income tax or as a future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable. 

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond any reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit. 

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income tax legislation, and the anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. 

(c) Foreign currency translation 

(i) Transactions 

Foreign currency transactions are initially translated into Australian dollars at the rate of exchange at the date of the transaction. At balance date amounts payable and receivable in foreign currencies are translated to Australian dollars at rates current at that date. Resulting exchange differences are recognised in determining the profit or loss for the year. 

(ii) Specific commitments 

Foreign currency forward exchange contracts are undertaken in order to avoid or minimise the possible adverse financial effects of movements in exchange rates. Gains and losses arising upon entry into a foreign exchange contract intended to hedge the purchase or sale of goods or services, together with the subsequent exchange gains and losses resulting from those transactions are deferred in the statement of financial position from the inception of the forward exchange contract up to the date of the purchase or sale and included in the measurement of the purchase or sale. The net amounts receivable or payable under the forward exchange contract are also recorded in the statement of financial position. Any gains or losses arising on the forward exchange contract after the recognition of the hedged purchase or sale are included in the statement of financial performance. 

When anticipated purchase or sale transactions have been hedged, actual purchases and sales which occur during the designated forward exchange contract period are accounted for as having been hedged until the amounts of those transactions in the designated period are fully allocated against the amounts of the forward exchange contracts. 

