## NOTEs TO THE FINANCIAL sTATEMENTs 

FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013 

## 1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED) 

The debentures are convertible into shares on a one-for-one basis at the option of the holder provided that conversion will not result in a breach of any of the following: 

(i) any provision of the Foreign Acquisitions and Takeovers Act 1975; 

(ii) any undertaking given by the Company to the Foreign Investment Review Board or at the request of the Foreign Investment Review Board from time to time; or 

(iii) any other applicable law including, without limitation the Broadcasting Act 1942. 

## (V) EARNINGS PER SHARE 

## BASiC eARninGS PeR SHARe 

Basic earnings per share (EPS) is calculated by dividing the net profit attributable to members, adjusted to exclude costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus elements in ordinary shares issued during the financial year. 

## diluTed eARninGS PeR SHARe 

Diluted earnings per share is calculated by dividing the basic EPS earnings adjusted by the after tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares by the weighted average number of ordinary shares and dilutive potential ordinary shares adjusted for any bonus issue. 

## (W) SEGMENT REPORTING 

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenue and expense relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the Board of Directors. 

Operating segments have been identified based on the information provided to the chief operating decision makers, being the Board of Directors, Chief Executive Officer and Chief Financial Officer and are disclosed in Note 37. 

The group aggregates two or more operating segments when they have similar economic characteristics, and the segments are similar in each of the following respects: 

• Nature of the products and services; 

• Nature of the production processes; 

• Type or class of customer for the products and services; 

• Methods used to distribute the products or provide the services; and if applicable 

• Nature of the regulatory environment. 

Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements. 

Information about other business activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category for “Other segments”. 

## (X) SIGNIFICANT ACCOUNTING ESTIMATES ANDJUDGEMENTS 

The carrying amounts of certain assets and liabilities are determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next financial year are: 

## (i) iMPAiRMenT oF GoodWill And inTAnGiBleS WiTH indeFiniTe uSeFul liVeS 

The Group tests annually or at each reporting date where there is an indication of impairment. This requires an estimation of the recoverable amount of the cash generating units (CGU), using a value in use methodology, as detailed in Note 1(D). 

The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with indefinite useful lives, along with a sensitivity analysis, are detailed in Note 14. 

## (ii) inCoMe TAxeS 

The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Judgement is required in determining the Group’s provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. 

## (iii) SHARe-BASed PAyMenT TRAnSACTionS 

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the date at which they are granted. The fair value is determined by an external independent valuer using a Monte Carlo model, using the assumptions detailed in Note 31. 

