IGO Interactive Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2020 Notes to the consolidated financial statements 30 June 2020 (continued) 2 Revenue (continued) (a) Recognition and measurement (continued) Sale of gold bullion Revenue from the sale of gold bullion is recognised when control of the inventory has transferred to the customer, being when the gold is credited to the metals account of the customers. It is at this point that control over the gold bullion has been passed to the customer and the Group has fulfilled its performance obligation under the contract. (ii) Revenue from Services - Shipping and Insurance Sales of nickel and copper concentrates are on terms that include the Group being responsible for shipping and insurance costs. Shipping and insurance is a separate performance obligation from the sale of the commodity with the revenue allocated to shipping and insurance being recognised over the period of transfer to the customer. (iii) Provisional pricing adjustments The Group’s sales contracts may provide for provisional pricing of sales at the time the product is delivered to the vessel with final pricing determined using the index on or after the vessel’s arrival to the port of discharge. This provisional pricing relates to the quality and quantity of the commodity sold, which is included in sales revenue, and an embedded derivative relating to the pricing of the commodity sold. Provisional pricing adjustments relating to the embedded derivative are separately identified as movements in the financial instrument rather than being included within Sales revenue. The final pricing adjustment mechanism, being an embedded derivative, is separated from the host contract and recognised at fair value through profit or loss. These amounts are disclosed separately as Provisional pricing adjustments in Other revenue, rather than being included within Sales revenue for the Group. (iv) Interest revenue Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (b) Key estimates and judgements Judgement is exercised in estimating variable consideration. This is determined by past experience with respect to the goods returned to the Group where the customer maintains a right of return pursuant to the customer contract or where goods or services have a variable component. Revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved. 3 Other income 2020 $'000 2019 $'000 Net foreign exchange gains - 1,967 Net gain on disposal of property, plant and equipment 1,529 2,636 Net gain on sale of investments 1,965 - Write-back of rehabilitation provision - 1,187 Net gain on sale of subsidiaries - 2,587 3,494 8,377 IGO Limited 13 Notes to the consolidated financial statements 30 June 2020 (continued) 2 Revenue (continued) (a) Recogni ion and measurement (c ntinued) Sale of gold bullion Revenue from the sale of gold bullio is recognised when control of the inventory has transferred to the cu tomer, bei g when the gold is credited to the met ls account of the customers. It is at this point that control over the gold bullion has b en passed to the customer the Group has fulfilled its performance obligation und r the contract. (ii) Revenue from Services - Shipping and Insurance Sales f nickel and copper concentrat s are on terms that includ the Group b ing responsible for shipping and insura ce costs. Shipping and insurance is a sepa ate performanc obligation from the sale of t e commodity with the reve ue allocated to shipping and insurance b ing rec gnised over the period of transfer to the customer. (iii) Provisional ricing a justment Th Group’s sales contracts may provide for provisional pricing of sal s at the tim the product is delivered t the vessel with final pricing determined using t e index on or after the vessel’ rival to th port of disch rge. This provis onal pricing r lates to the quality and quantity of the commo ity sold, which is i cluded in sales revenue, and an embedded derivative relating to the pricing of the commodity sold. Provisional pricing adjustments relating to the embedded derivative are separately identified as movements in the financial instrument rather than being included within Sales revenue. The final pri ing adjustment mechanism, bei an embedd d derivativ , is separated from the host ontract and recognised at fair value through profit or loss. T se amounts ar disclos d s p rately as Provisional pricing adjustments in Other rev nue, rather th n being included within Sales revenue for the Group. (iv) Interest revenue Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (b) Key estimates and judgements Judgement is exercised in estimating variable consideration. This is determined by past experience with respect to the goods returned to the Group where the customer maintains a right of return pursuant to the customer contract or where goods or services have a variable component. Revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved. 3 Other income 2020 $'000 2019 $'000 Net foreign exchange gains - 1,967 Net gain on disposal of property, plant and equipment 1,529 2,636 Net gain on sale of investments 1,965 - Write-back of rehabilitation provision - 1,187 Net gain on sale of subsidiaries - 2,587 3,494 8,377 IGO Limited 13 Notes to the consolidated financial statements 30 June 2020 (continued) 4 Expenses and losses 2020 $'000 2019 $'000 Cost of sale of goods 348,739 327,569 Employee benefits expenses 62,511 52,205 Share-based payments expense 4,489 3,123 Exploration and evaluation expense 72,694 58,346 Impairment of exploration and evaluation expenditure 1,018 - Net foreign exchange losses 2,865 - Amortisation expense 227,146 228,121 Depreciation expense 16,487 8,997 Borrowing and finance costs Borrowing and finance costs - other entities 1,761 4,306 Lease interest expense 1,523 - Rehabilitation and restoration borrowing costs 869 1,416 Amortisation of borrowing costs 919 916 Finance costs expensed 5,072 6,638 Notes to the consolidated financial statements 30 June 2020 (continued) 5 Income tax (a) Income tax expense 2020 $'000 2019 $'000 The major components of income tax expense are: Deferred income tax expense 64,419 29,363 Current income tax expense - - Income tax expense 64,419 29,363 Deferred income tax expense included in income tax expense comprises: Decrease in deferred tax assets 60,503 24,204 Increase in deferred tax liabilities 3,916 5,159 Deferred income tax expense 64,419 29,363 (b) Amounts recognised directly in equity Deferred income tax (benefit)/expense related to items charged or credited to other comprehensive income or directly to equity: Recognition of hedge contracts (41) (452) Income tax benefit reported in equity (41) (452) (c) Numerical reconciliation of income tax expense to prima facie tax payable 2020 $'000 2019 $'000 Profit from continuing operations before income tax expense 219,512 105,448 Tax expense at the Australian tax rate of 30% (2019: 30%) 65,854 31,634 Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Share-based payments 789 317 Other non-deductible items 494 519 Non-assessable gain on disposal of subsidiary - (811) Subtotal 67,137 31,659 Capital losses not brought to account 466 16 Previously unrecognised capital losses brought to account (145) (27) Difference in overseas tax rates 4 7 Overseas tax losses not brought to account 12 20 Adjustments for current tax of prior periods - (2,312) Research and development tax credit (540) - Adjustment for deferred tax asset not previously brought to account (2,515) - Income tax expense 64,419 29,363 IGO Limited 15 84 — IGO ANNUAL REPORT 2020 IGO ANNUAL REPORT 2020— 85