KU2022
3 . Summary of Accounting Policies ( continued )
i ) Term deposits Term deposits comprise investment deposits held with banks with short to medium term maturity periods . The investments are measured at amortised cost using the effective interest method , less any impairment . Interest income is recognised by applying the effective interest rate .
j ) Income tax The Company is exempt from income tax under s50-5 of the Income Tax Assessment Act , as it is an income tax exempt charitable entity . As a consequence , there is no income tax attributable to the operating result .
k ) General funds and reserves General Funds The general funds represent the retained earnings of the Company that are not designated for particular purposes .
Fundraising Reserve The fundraising reserve arises from the accumulated surpluses generated as a result of the efforts of parents and staff to allow services to purchase toys and equipment , to assist the service to expand and develop to meet local needs and to allow parents to share in the life of the service and to make a concrete contribution to their children ’ s lives .
l ) Trade and other payables Trade payables and other payables represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid . These amounts are usually settled within 30 days . The carrying amount of the creditors and payables is deemed to reflect fair value .
m ) Program Reserve The Program reserve arises from surpluses on the programs that have been allocated to the Company for future liabilities that may arise which the Company will be accountable for .
n ) Provisions Provisions are recognised when the Company has a present obligation ( legal or constructive ) as a result of a past event , it is probable that the Company will be required to settle the obligation , and a reliable estimate can be made of the amount of the obligation .
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date , taking into account the risks and uncertainties surrounding the obligation . Where a provision is measured using the cash flows estimated to settle the present obligation , its carrying amount is the present value of those cash flows .
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party , the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably .
o ) Unearned income The liability for unearned income is the unutilised amounts of grants received on the condition that specified services are delivered or conditions are fulfilled . The services are usually provided or the conditions usually fulfilled within 12 months of receipt of the grant . Where the amount received is in respect of services to be provided over a period that exceeds 12 months after the reporting date or the conditions will only be satisfied more than 12 months after the reporting date , the liability is discounted and presented as non-current .
p ) Comparatives Comparatives have been realigned where necessary , to agree with current year presentation . There was no change in the profit or net assets .
4 . Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements requires management to make judgements , estimates and assumptions that affect the application of policies and reported amounts of assets , liabilities , income and expenses . The estimates and associated assumptions are based on historical experience and other various factors that are believed to be reasonable under the circumstances , the results of which form the basis of making the judgements . Actual results may differ from these estimates .
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