## Deferred tax 

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. 

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the consolidated entity intends to settle its current tax assets and liabilities on a net basis. 

## Current and deferred tax for the period 

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination. 

## Tax consolidation 

The Parent Entity and its wholly-owned Australian resident subsidiaries formed a tax-consolidated group under Australian taxation law with effect from 25 October 2006 and are therefore taxed as a single entity from that date. AGL Energy Limited is the head entity in the tax-consolidated group. 

Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘stand alone taxpayer’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the Parent Entity (as head entity in the tax-consolidated group). 

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Parent Entity and each member of the group in relation to the tax contribution amounts paid or payable between the Parent Entity and the other members of the 

tax-consolidated group in accordance with the arrangement. 

Further information about the tax funding arrangement is detailed in Note 10 to the financial statements. 

On 29 June 2012, AGL Generation Proprietary Limited, a subsidiary of AGL Energy Limited (AGL), acquired the remaining 67.46% of the shares in, and loan notes issued by, Great Energy Alliance Corporation Pty Limited (GEAC) and 100% of the shares in Loy Yang Marketing Holdings Pty Limited (LYMH) which it did not already own. GEAC, LYMH and their subsidiaries are not eligible to be members of the existing AGL tax-consolidated group. On 23 July 2012, the LYMH entities joined a new tax-consolidated group which was formed by AGL Generation Holdco Pty Ltd, a subsidiary of AGL. On 27 July 2012, the GEAC entities joined the new tax-consolidated group. AGL Generation Holdco Pty Ltd is the head entity in the new tax-consolidated group. 

## (ah) Earnings per share 

Basic earnings per share is determined by dividing the profit for the year attributable to owners of AGL Energy Limited, by the weighted average number of ordinary shares outstanding during the period. 

Diluted earnings per share is determined by dividing the profit for the year attributable to owners of AGL Energy Limited, by the weighted average number of ordinary shares outstanding during the period and dilutive potential ordinary shares. 

## (ai) Standards and Interpretations in issue not yet adopted 

A number of Australian Accounting Standards have been issued by the AASB but are not effective for the year ended 30 June 2012, but will be applicable to the consolidated entity in future reporting periods. 

> AASB 9 Financial Instruments,  AASB 2009-11 Amendments to Australian Accounting Standards arising from  AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)  are expected to be effective for annual reporting periods beginning on or after 1 January 2015 (previously 1 January 2013). 

 The IASB has deferred the application date for the international equivalent to AASB 9, IFRS 9 , until 1 January 2015. As a result, the AASB has issued a related exposure draft, ED 215 Mandatory Effective Date of IFRS 9 . This proposed amendment to AASB 9 is in pending status at the reporting date. 

 AASB 9 Financial Instruments  and its associated amending Standards introduce new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. 

 AASB 9 requires all recognised financial assets that are within the scope of AASB 139 Financial Instruments : Recognition and Measurement to be subsequently measured at amortised cost or fair value. 

 The most significant effect of AASB 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. For financial liabilities designated at fair value, the portion of the change in fair value due to changes in own credit risk now generally must be presented in other comprehensive income, rather than through profit or loss. 

 AASB 9 will be mandatory for the consolidated entity’s 30 June 2016 financial statements. The potential impact on the consolidated entity’s financial statements has not yet been determined. 

