## Note 1 – Summary of significant accounting policies 

AGL Energy Limited (the Parent Entity) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange (ASX). The address of its registered office is Level 22, 101 Miller Street North Sydney NSW 2060 Australia. 

The consolidated financial statements comprise the Parent Entity and its subsidiaries (together referred to as the consolidated entity). For the purposes of preparing the consolidated financial statements, the Parent Entity is a for-profit entity. 

The principal activities of the consolidated entity are described in Note 4. 

(a) Statement of compliance 

These consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards and Interpretations as issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 . 

The consolidated financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). 

The consolidated financial statements were authorised for issue by the Directors on 22 August 2012. 

(b) Basis of preparation 

The consolidated financial statements have been prepared on the basis of historical cost, except for derivative financial instruments and available-for-sale financial assets, which are measured at fair value. Historical cost is generally based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. 

The Parent Entity is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order, amounts in the financial statements are rounded off to the nearest tenth of a million dollars, unless otherwise indicated. 

The significant accounting policies that have been adopted in the preparation and presentation of the consolidated financial statements are set out below. 

(c) Significant accounting judgements, estimates and assumptions 

In the application of the consolidated entity’s accounting policies, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Refer to Note 2 for a discussion of critical judgements in applying the entity’s accounting policies, and key sources of estimation uncertainty. 

(d) Adoption of new and revised accounting standards 

The consolidated entity has adopted the following new and revised Standards and Interpretations that are relevant to its operations and effective for the current reporting period. 

These new and revised Standards and Interpretations have not impacted on the accounting policies, financial position 

or performance of the consolidated entity, or on presentation or disclosure in the consolidated financial statements. 

> AASB 124 Related Party Disclosures  (2009) and AASB 2009- 12 Amendments to Australian Accounting Standards  [AASB 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] 

> AASB 1054 Australian Additional Disclosures  and AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project  [AASB 1, 5, 101, 107, 108, 121, 128, 132 & 134 and Interpretations 2, 112 & 113] 

> AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement [AASB Interpretation 14] 

> AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, 7, 101 & 134 and Interpretation 13] 

> AASB 2010-5 Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042] 

> AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets  [AASB 1 & AASB 7] 

(e) Basis of consolidation 

The consolidated financial statements incorporate the financial statements of the Parent Entity and entities (including special purpose entities) controlled by the Parent Entity (its subsidiaries). Control is achieved where the Parent Entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. 

Income and expense of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition and up to the effective date of disposal, as appropriate. 

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the consolidated entity. 

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. 

Changes in the consolidated entity’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. 

When the consolidated entity loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. 

In addition, any amounts previously recognised in other comprehensive income in respect of that subsidiary are accounted for as if the consolidated entity had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139 Financial Instruments: Recognition and Measurement  or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity. 

