Santos Limited – Annual report – 31 December 2016
Industry: oil and gas
Section 1: Basis of Preparation (extract)
1.4 FOREIGN CURRENCY
Functional and presentation currency
The Directors have elected to change the Group’s presentation currency from Australian dollars (“A$”) to United States (US) dollars effective from 1 January 2016. The change in presentation currency is a voluntary change which is accounted for retrospectively. All other accounting policies are consistent with those adopted in the annual financial report for the year ended 31 December 2015. The financial report has been restated to US dollars using the procedures outlined below:
- Income Statement and Statement of Cash Flows have been translated into US dollars using average foreign currency rates prevailing for the relevant period.
- Assets and liabilities in the Statement of Financial Position have been translated into US dollars at the closing foreign currency rates on the relevant balance sheet dates.
- The equity section of the Statement of Financial Position, including foreign currency translation reserve, retained earnings, share capital and the other reserves, have been translated into US dollars using historical rates.
- Earnings per share and dividend disclosures have also been restated to US dollars to reflect the change in presentation currency.
The functional currency of the Parent is Australian dollars, whilst the presentation currency of the Group is now in United States dollars. Some subsidiaries have a functional currency other than Australian dollars which is translated to the presentation currency.
Transactions and balances
Transactions in currencies other than an entity’s functional currency are initially recorded in the functional currency by applying the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in currencies other than an entity’s functional currency are retranslated at the foreign exchange rate ruling at the reporting date. Foreign exchange differences arising on translation are recognised in the income statement.
Foreign exchange differences that arise on the translation of monetary items that form part of the net investment in a foreign operation are recognised in the translation reserve in the consolidated financial statements.
Non-monetary assets and liabilities that are measured in terms of historical cost in currencies other than an entity’s functional currency are translated using the exchange rate at the date of the initial transaction. Non-monetary assets and liabilities denominated in currencies other than an entity’s functional currency that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.
The year-end exchange rate used was A$/US$ 1:0.7221 (2015: 1:0.7274, 2014: 1:0.8181).
The results of subsidiaries with a functional currency other than Australian dollars (the functional currency of the Parent) are translated to Australian dollars as at the date of each transaction. The assets and liabilities are translated to Australian dollars at foreign exchange rates ruling at the reporting date. Foreign exchange differences arising on retranslation are recognised directly in the translation reserve. The Group’s consolidated Australian dollar financial statements are then translated to United States dollars (presentation currency) in line with the procedures outlined above.
Exchange differences arising from the translation of the net investment in foreign operations and of related hedges are recognised in the translation reserve. They are released into the income statement upon disposal of the foreign operation.
Also refer to note 5.5(b) Foreign currency risk for further details on the net investment hedge in place.