## 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) 

## (ii) oPeRATinG leASeS 

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. 

Net rental payments, excluding contingent payments, are recognised as an expense in the income statement on a straight-line basis over the period of the lease. 

## (iii) oneRouS PRoPeRTy CoSTS 

Property leases are considered to be an onerous contract if the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Where a decision has been made to vacate the premises or there is excess capacity and the lease is considered to be onerous, a provision is recorded. 

## (J) CASH AND CASH EQUIVALENTS 

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short term investments with original maturities of three months or less that are readily convertible to cash and subject to insignificant risk of changes in value. 

Bank overdrafts are shown within interest bearing liabilities in current liabilities on the balance sheet. 

## (K) TRADE AND OTHER RECEIVABLES 

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost which is the original invoice amount less an allowance for any uncollectible amount. Collectability of trade receivables is reviewed on an ongoing basis and a provision for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. 

Interest receivable on related party loans is recognised on an accruals basis. 

## (L) INVENTORIES 

Inventories including work in progress are stated at the lower of cost and net realisable value. The methods used to determine cost for the main items of inventory are: 

• raw materials (comprising mainly newsprint and paper on hand) are assessed at average cost and newsprint and paper in transit by specific identification cost; 

• finished goods and work in progress are assessed as the cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity; and 

• in the case of other inventories, cost is assigned by the weighted average cost method. 

## (M) AVAILABLE FOR SALE INVESTMENTS 

Available for sale financial assets are investments in listed equity securities in which the Group does not have significant influence or control. They are stated at fair value based on current quoted prices and unrealised gains and losses arising from changes in the fair value are recognised in the asset revaluation reserve. The assets are included in non- current assets unless management intends to dispose of the investment within twelve months of the reporting date. 

## (N) INVESTMENTS AND OTHER FINANCIAL ASSETS 

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held to maturity investments and available for sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held to maturity, re-evaluates this designation at each reporting date. 

The consolidated entity classifies and measures its investments as follows: 

## (i) FinAnCiAl ASSeTS AT FAiR VAlue THRouGH PRoFiT And loSS 

This category has two sub-categories: financial assets held for trading and those designated at fair value through profit and loss on initial recognition. The policy of management is to designate a financial asset at fair value through profit and loss if there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. These assets are measured at fair value and realised and unrealised gains and losses arising from changes in fair value are included in the income statement in the period in which they arise. 

## (ii) loAnS And ReCeiVABleS 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are included in receivables and other financial assets in the balance sheet. These assets are measured at amortised cost using the effective interest method. 

## (iii) oTHeR FinAnCiAl ASSeTS 

These assets are non-derivatives that are either designated or not classified in any of the other categories and measured at fair value. Any unrealised gains and losses arising from changes in fair value are included in equity, impairment losses are included in the income statement. 

