2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

(I) INVENTORIES 

Inventories are valued at the lower of cost and net realisable value. 

Cost includes expenditure incurred in acquiring and bringing the inventories to their existing condition and location and is determined using the weighted average cost method. 

(J) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING 

The Consolidated Entity uses derivative financial instruments to manage commodity price exposures. Such derivative financial instruments are initially recorded at fair value on the date on which the derivative contract is entered into and are subsequently remeasured to fair value. 

Certain derivative instruments are also held for trading for the purpose of making short term gains. None of the derivatives qualify for hedge accounting and changes in fair value are recognised immediately in profit or loss in other revenue and expenses. 

Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. 

(K) INTEREST IN JOINTLY CONTROLLED ASSETS 

The Consolidated Entity recognises its share of the assets, classified as property, plant and equipment, mine properties and development, intangible assets and exploration and evaluation expenditure. In addition, the Consolidated Entity recognises it share of assets, liabilities, expenses and income from the use and output of the jointly controlled assets. 

(L) AVAILABLE-FOR-SALE INVESTMENTS 

All available-for-sale investments are initially recognised at fair value plus directly attributable transaction costs. 

Available-for-sale investments are those non-derivative financial assets, principally equity securities that are designated as available-for-sale. Investments are designated as available for sale if they do not have fixed maturities and fixed and determinable payments and management intends to hold them for the medium to long term. 

After initial recognition, available-for-sale investments are measured at fair value. Gains or losses are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the statement of comprehensive income. 

The fair value of investments that are actively traded in organised markets is determined by reference to quoted market bid prices at the close of business on the reporting date. 

For investments with no active market, fair value is determined using valuation techniques. Such valuation techniques include using recent arm’s length transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models. Where fair value cannot be reliably measured for certain unquoted investments, these investments are measured at cost. 

(M) INVESTMENTS IN ASSOCIATES 

The Consolidated Entity’s investment in its associates is accounted for using the equity method of accounting in the consolidated financial statements. The associates are entities over which the Consolidated Entity has significant influence and that are neither subsidiaries nor joint ventures. 

The Consolidated Entity generally deems it has significant influence if it has over 20% of the voting rights. 

Under the equity method, investments in the associates are carried in the consolidated statement of financial position at cost plus post-acquisition changes in the Consolidated Entity’s share of net assets of the associates. 

