Homework answers / question archive / RMIT Classification: Trusted BAFI-1070 Financial Statement Analysis Assignment - Due Date: 16 May 2021 23:59pm (AEST) This assignment comprises 40% of your overall grade in BAFI-1070 You are required to write a report of Big River Industries Limited (BRI)

RMIT Classification: Trusted BAFI-1070 Financial Statement Analysis Assignment - Due Date: 16 May 2021 23:59pm (AEST) This assignment comprises 40% of your overall grade in BAFI-1070 You are required to write a report of Big River Industries Limited (BRI)

Economics

Share With

RMIT Classification: Trusted BAFI-1070 Financial Statement Analysis Assignment - Due Date: 16 May 2021 23:59pm (AEST) This assignment comprises 40% of your overall grade in BAFI-1070 You are required to write a report of Big River Industries Limited (BRI). The report should be about fundamental analysis of this firm, including the firm’s industry analysis, strategy analysis, financial analysis, and your comments of the current financial status in the firm and your expectations of the future financial status in this firm. The final conclusion will have to mention what are your comments on current financial status in this firm and your expectations of this company’s future financial status. This assignment is more of a test for the understanding of the process rather than just the final conclusion. Marks will be given for: 1. Format of presentation: word selection, conciseness, logical structure presentation and referencing. 2. Industry Analysis: descriptions of relevant economic and industry information, and company position in the industry. Describe the competition status in this industry with evidence. 3. Strategy Analysis: describe the company’s strategy compared to the other firms in the same industry. Please analyse the strategy from financial statement perspective and provide data support for your analysis. 4. Financial Analysis: First, providing comments on each of the financial statements ended in fiscal year 2020(including notes) and emphasize what’s the key point or items investor should pay attention to each statement (including related notes) and why. Second, applying ratio and other financial analysis techniques to separately analyse main aspects of financial status in this company (from listed to 2020). Third, conclude how the financial picture related to the stated company strategy analysis in the prior part. Fourth, discuss whether this company successfully implement the company strategy and further explain why from the financial statement’s perspective. Fifth, combining the prior industry analysis, discuss whether the key points that lead to the success or unsuccess implementation of strategy will persistent or change in the future and why. Do you think the company should stick to or change the strategy in the future? 5. Conclusion on financial statements analysis of this company: combining all your prior analysis, provide comments on the current financial status in this firms, and illustrate your expectations of the future financial status in this firm with evidence support. Please explain how you connect past financial data analysis with future financial performance of this firm. Your main source of information should be the firms’ latest annual reports, added by public information such as websites, databases, current news etc. RMIT Classification: Trusted • The whole report should be written in a formal research report format. The maximum number of words for this assignment is 2000 words (outside of tables, references and appendices). The appendix must not exceed 2 pages (with Arial 11 point, single-spaced). • An electronic copy of calculation spreadsheet, Turnitin originality report (automatically generated on Canvas when you submit your report) and the Word or PDF version of the report should be included when submitting the assignment online via Canvas. Do not submit a Zip file. Please separately submit calculation spreadsheet and report on Canvas. Building Australia for over 100 years ANNUAL REPORT 2020 start with 27 Big River Industries Limited ABN 72 609 901 377 With an operating history of approximately 100 years, Big River has established itself as a diverse manufacturer and distributor of timber and building products. Big River Industries Limited Annual Report 2020 1 2 Chairman and Managing Director’s Report 6 Directors’ Report 20 Auditor’s Independence Declaration 21 Statement of Profit or Loss and Other Comprehensive Income 22 Statement of Financial Position 23 Statement of Changes in Equity 24 Statement of Cash Flows 25 Notes to the Financial Statements 65 Directors’ Declaration 66 Independent Auditor’s Report to the Members of Big River Industries Limited 70 Shareholder Information 72 Corporate Directory 73 Branch Network 2 Big River Industries Limited Annual Report 2020 Chairman and Managing Director’s Report Operating Highlights Despite the considerable challenges experienced during FY2020, Big River continued to expand. Despite the considerable challenges experienced during FY2020, Big River continued to expand, with revenue of $249m, up 14%. This included the addition of sites in Townsville and Adelaide continuing the diversity across geographies, construction types and market segments that helped insulate the Group against market volatility. Statutory EBITDA of $17.7m reflects the new AASB16 accounting standard, or $12.3m on a pre AASB16 basis, up 25% on the prior period. This translated to 21% growth at the NPAT level or around 5% growth at comparable earnings per share level. Given the challenging environment for the Construction sector, this was a solid result for the year. Whilst Covid-19 and the Bushfires (experienced in NSW and Victoria in particular) presented headwinds for the business, it was the continued decline in residential construction starts that most significantly impacted the operating performance, given the Group is over 50% exposed to the various residential building segments. Strong performances from New Zealand, Queensland and Western Australian divisions however, helped offset weaknesses in the other States. The business continues to transform from a manufacturing legacy, to a broad building materials supply business, with strong supply chains from company owned manufacturing assets, toll manufacturing agreements and international importation, as well as a strong supply position with leading Australian building products manufacturers. Strong cost control continues to be an important discipline in the business, never more important than during the Covid-19 pandemic, where the Group has received very strong support from a range of stakeholders. Manufacturing costs continued to decline, as scale is reduced and focused on value added products and activities. Distribution also continues to improve gross margin as the product mix is refined, and procurement scale continues to improve. This helped drive positive improvements to the EBITDA margins of 50 basis points during FY2020. Operating cash flow was a highlight of the year, with a 112% cash conversion rate reflecting both working capital improvements as well as the benefit of deferred tax payments initiated by the Australian Government as part of their Covid-19 response. Revenue 249m $ 14% EBITDA (pre AASB16) 12.3m $ 25% Despite the completion payment for the New Zealand acquisitions in July 2019, as well as the acquisitions made in Townsville and Adelaide during FY2020, net debt only increased to $22m at 30 June 2020, with gearing of 23% still well within the Boards target range. Dividends Whilst the Board cancelled the interim dividend in March 2020 given the very uncertain outlook due to Covid-19, strong cash management in the final quarter allowed the Board to determine a fully franked dividend of 2.4 cents per share, payable on 6 October 2020. Big River Industries Limited Annual Report 2020 Corporate Governance People Malcolm Jackman took over the Chairmanship of the Board in July 2019, after Greg Laurie’s retirement. Greg served on the Board for over 10 years, during periods in which the Company was both listed and unlisted. The Board would also like to particularly pass on our condolences to Greg’s family and friends, after his passing earlier this year. With recent acquisitions, staff numbers now exceed 400 and the support of our staff cannot be overstated during the challenges of market decline and the significant disruptions from Covid-19 and the bushfires. The personal commitment of the many staff who took remuneration reductions, modified hours and working conditions during the pandemic, highlight the strength of the employees and the positive culture across the Group. On behalf of the Board, we take this opportunity to sincerely thank them for their commitment to the business. Brendan York joined the Board in late 2019 and has assumed the role of Chair of the Audit & Risk Committee. His strong financial background at a critical time in the economic cycle will be particularly valuable and adds to the diverse skill base of the Board. 3 Malcolm Jackman Chairman Jim Bindon Managing Director 4 Big River Industries Limited Annual Report 2020 Financial Report 2020 Big River Industries Limited Annual Report 2020 5 6 Directors’ Report 20 Auditor’s Independence Declaration 21 Statement of Profit or Loss and Other Comprehensive Income 22 Statement of Financial Position 23 Statement of Changes in Equity 24 Statement of Cash Flows 25 Notes to the Financial Statements 65 Directors’ Declaration 66 Independent Auditor’s Report to the Members of Big River Industries Limited 6 Big River Industries Limited Annual Report 2020 Directors’ Report Big River Industries Limited Directors' report ForJune the year 30 2020ended 30 June 2020 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Big River Industries Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2020. Directors The following persons were directors of Big River Industries Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: James Bernard Bindon Malcolm Geoffrey Jackman Martin Kaplan Vicky Papachristos Brendan York (appointed 24 October 2019) Gregory Ray Laurie (resigned 31 July 2019) Principal activities During the financial year the principal continuing activities of the Group consisted of the manufacture of veneer, plywood and formply, and the distribution of building supplies. Dividends Dividends paid during the financial year were as follows: Consolidated 2020 2019 $ $ Final dividend of 2.2 cents per fully paid ordinary share paid on 4 October 2019 (2019: 3.5 cents paid on 2 October 2018) Interim dividend of 2.2 cents per fully paid ordinary share paid on 4 April 2019 1,374,316 - 1,856,538 1,166,967 1,374,316 3,023,505 On 25 August 2020, the directors determined a fully franked dividend of 2.4 cents per fully paid ordinary share to be paid on 6 October 2020. Review of operations Revenue for the financial year ended 30 June 2020 was $248.9 million, up 14.3% from $217.8 million the previous financial year, but down 3.2% on a same-store basis. Net profit after tax for the half-year was $4.4 million, up from $3.9 million in the previous financial year. The impact of the introduction of AASB 16 'Leases' is summarised in the table below and provides a comparison of the Group’s operating results on a pre-AASB 16 basis. The adoption of AASB 16 has boosted earnings before interest, tax, depreciation and amortisation ('EBITDA') (prior to acquisition costs) by $5.3 million, increased depreciation by $5.0 million and reduced NPAT by $0.3 million. Statutory Impact of Pre-AASB 16 Statutory FY2020 AASB 16 FY2020 FY2019 $'000 $'000 $'000 $'000 EBITDA (before acquisition costs) Acquisition costs EBITDA Depreciation and amortisation Earnings before interest and tax ('EBIT') Interest Net profit before tax ('NPBT') Tax Net profit after tax ('NPAT') 17,669 (740) 16,929 (8,343) 8,586 (2,292) 6,294 (1,850) 4,444 3 (5,321) (5,321) (5,006) (315) 698 383 (109) 274 12,348 (740) (11,608) (3,337) (8,271) (1,594) 6,677 (1,959) 4,718 9,820 (641) 9,179 (2,667) 6,512 (1,013) 5,499 1,642 3,857 Big River Industries Limited Annual Report 2020 7 Directors’ Report Big River Industries Limited Directors' report For the year 30 June 2020ended 30 June 2020 Excluding the positive impact of the adoption of AASB 16 'Leases', EBITDA of $12.3 million (prior to acquisition costs) was up 25.7% on the previous financial year mostly due to the inclusion of a full twelve months of the New Zealand acquisition. EBITDA contribution (prior to AASB 16) from manufacturing facilities was $1.8 million, steady with the $1.8 million contribution in the previous financial year. EBITDA from distribution activities (prior to AASB 16) was $13.8 million, up 22.8% from $11.3 million in the previous financial year. Net costs from corporate activities were $3.3 million steady with the previous financial year. Novel Coronavirus (COVID-19) The outbreak of Novel Coronavirus (‘COVID-19’) had no material impact on operations located in Australia for the financial year and the Group was not entitled to any government support in Australia, other than the deferral of some tax related payments amounting to $2.0 million as at 30 June 2020. The four week closure of the Group’s New Zealand facilities during the forced lock down in New Zealand reduced EBITDA, despite New Zealand Government wage support and rental relief of $0.35 million. Significant changes in the state of affairs On 5 July 2019, the Group executed a business purchase deed to acquire the business and assets of Big Hammer Building Supplies, a business located in Aitkenvale, Queensland. The purchase price was $1,974,445 which includes the acquisition of inventory and plant and equipment and was settled through the payment of $1,774,445 in cash. An amount of $200,000 is payable as cash or through the issue of ordinary shares in Big River Industries Limited, at the Company's discretion, upon achieving agreed EBITDA targets over a two year period. The values are final as at 30 June 2020. On 11 July 2019, the Company issued 5,806,429 ordinary shares at an issue price of $1.05 per share following approval at the Company’s EGM on 9 July 2019. On 12 July 2019, the Company issued 1,803,264 shares as part consideration to the vendors of the New Zealand businesses of Plytech International Limited and Decortech Limited as referred to in the Company's announcement of 1 May 2019. These shares are subject to voluntary escrow, of which 37.5% were released from escrow on 11 July 2020, being 12 months from the date of issue; and the remaining 62.5% will be released from escrow on 11 July 2021. On 17 February 2020, the Group executed a business purchase deed to acquire the trading business and assets of Pine Design Truss and Timber located in Adelaide, South Australia. The purchase price is $3,498,331 which includes the acquisition of inventory and plant and equipment. $3,098,331 is payable at completion with the balance of $400,000 payable upon achieving agreed EBITDA targets over a two year period. Novel Coronavirus (COVID-19) The outbreak of Novel Coronavirus (‘COVID-19’) and the subsequent quarantine measures imposed by the Australian and other governments as well as the travel and trade restrictions imposed in early 2020 have caused disruption to businesses and economic activity. As at the date these financial statements are authorised for issue, the directors do not consider the impact to likely compromise the ability of the Group to continue operating for the foreseeable future and are of the belief that there is sufficient cash to ride out the effects of COVID-19 even if the related restrictions remain in force for an extended period of time. Dividend cancellation As announced to the ASX on 25 March 2020, the Company cancelled payment of the interim dividend of 2.4 cents per ordinary share previously announced on 25 February 2020 due to the uncertainty of COVID-19. There were no other significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year The impact of the COVID-19 pandemic is ongoing, and it is not practicable to estimate the potential impact after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. 4 8 Big River Industries Limited Annual Report 2020 Directors’ Report Big River Industries Limited Directors' report ForJune the year 30 2020ended 30 June 2020 Apart from the dividend determined as discussed above, no other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Likely developments and expected results of operations The building products market is closely linked to activity levels in the residential, commercial, civil and infrastructure construction industry (comprising both new builds and additions and alterations) in Australia. The industry is cyclical and is sensitive to a broad range of economic and other factors, including any potential impact from COVID-19. As the COVID-19 situation remains fluid due to continuing changes in government policy and evolving business and customer reactions thereto, as at the date these financial statements are authorised for issue, the directors of the Group consider that the future financial effects of COVID-19 on the Group's operations and operating results cannot be reasonably estimated. The Group has a strong balance sheet and a healthy undrawn banking facility which will continue to support the Group. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Information on directors Name: Title: Qualifications: James Bernard Bindon Managing Director and Chief Executive Officer James ('Jim') holds a Bachelor of Agricultural Economics (Honours) from the University of New England and a Masters of Business Administration from the University of Queensland. Jim is a member of the Australian Institute of Company Directors. Experience and expertise: Jim joined Big River in January 2001 and has been Chief Executive Officer and Managing Director since 2005. He has been a director of Big River Group Pty Limited since July 2005 and a director of the Company since February 2016. Prior to his current role as Chief Executive Officer and Managing Director, Jim was the Chief Financial Officer and Company Secretary from 2001 to 2005. Prior to working at Big River, Jim held the position of Business Manager of Sugar and Horticulture at Incitec, where he was responsible for segment profitability, strategy and marketing. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: None Interests in shares: 533,333 ordinary shares (indirectly) Interests in options: 200,000 options (indirectly) Name: Title: Qualifications: Malcolm Geoffrey Jackman Independent Non-Executive Chairman Malcolm has a Bachelor of Science in Pure Mathematics and a Bachelor of Commerce in Accounting from Auckland University. He is a fellow of the Australian Institute of Directors and a recipient of the Centenary of Federation Medal. Experience and expertise: Malcolm has been an independent Non-Executive Director of the Company since February 2016 and became Chairman on 31 July 2019. Malcolm has also been a director of Big River Group Pty Limited since February 2016. Malcolm is a member of the Anacacia Capital Business Advisory Council. Other current directorships: Non-Executive Director of Force Fire Pty Limited (non-listed) Former directorships (last 3 years): None Special responsibilities: Chair of the Board Interests in shares: 116,112 Interests in options: None 5 Big River Industries Limited Annual Report 2020 9 Directors’ Report Big River Industries Limited Directors' report For the year 30 June 2020ended 30 June 2020 Name: Title: Qualifications: Martin Kaplan Non-Executive Director Martin holds a Bachelor of Commerce degree from the University of Cape Town and is a Chartered Accountant (South Africa & Canada). Experience and expertise: Martin has been a Non-Executive Director of the Company since November 2015 and a director of Big River Group Pty Limited since February 2016. Martin is currently an Investment Director of Anacacia Capital Pty Ltd, the management company of the major shareholder Anacacia Partnership II, L.P. Other current directorships: Non-Executive Director of Direct Couriers Group Pty Ltd (non-listed) Former directorships (last 3 years): None Special responsibilities: None Interests in shares: Martin is an Investment Director of Anacacia Capital Pty Ltd which manages the interests of Anacacia Partnership II, L.P., a substantial shareholder of the Company. Martin does not have a relevant interest in those shares for the purposes of the Corporations Act 2001. Interests in options: None Name: Title: Qualifications: Vicky Papachristos Independent Non-Executive Director Vicky holds an Engineering degree from Monash University, an MBA from the Australian Graduate School of Management and is a member of the Australian Institute of Company Directors. Experience and expertise: Vicky is an experienced Non-Executive Director and has been involved across various operational, strategic and creative roles with organisations including Shell, Westpac, Coventry and Myer. Other current directorships: Non-Executive Director of Aussie Broadband Pty Limited, Non-Executive Director of GMHBA Limited and Non-Executive Director of MO Health Pty Ltd Former directorships (last 3 years): Former Non-Executive Director of Coventry Group Limited and former Chairman of Mount Baw Baw Alpine Resort (non-listed). Special responsibilities: Chair of the Nomination and Remuneration Committee Interests in shares: 30,000 ordinary shares (indirectly) Interests in options: None Name: Title: Experience and expertise: Brendan York Independent Non-Executive Director (appointed 24 October 2019) Brendan is an experienced financial executive and currently holds the role Chief Financial Officer of Enero Group Ltd. Brendan is a Chartered Accountant and has a Bachelor of Business Administration and a Bachelor of Commerce from Macquarie University. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Chair of the Audit and Risk Committee Interests in shares: None Interests in options: None 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Interests in shares and options are as at the date of this report. 6 10 Big River Industries Limited Annual Report 2020 Directors’ Report Big River Industries Limited Directors' report ForJune the year 30 2020ended 30 June 2020 Company Secretary Stephen Thomas Parks (BCom, FIPA) Steve joined Big River in July 2008 as Chief Financial Officer. Prior to working for Big River, Steve was the Chief Financial Officer and General Manager at WDS International, where he was responsible for controlling operating performance and leading finance and administration functions including forecasting, cash management, treasury, payroll, information technology, general administration and warehouse operations. Prior to this role, Steve worked as Financial Controller for a number of Australasian companies including Brazin, Strathfield Group, Sunshades Eyewear and Noel Leeming. Steve holds a Bachelor of Commerce from the University of Canterbury and is a member of the Australian Institute of Company Directors. Steve is a qualified accountant and is a Fellow of the Institute of Public Accountants. Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2020, and the number of meetings attended by each director were: Nomination and Remuneration Committee Attended Held Full Board Attended Held J Bindon * M Kaplan M Jackman V Papachristos B York G Laurie 13 12 13 13 9 1 13 13 13 13 9 1 2 3 3 3 1 - 2 3 3 3 1 - Audit and Risk Committee Attended Held 4 4 4 4 3 - 4 4 4 4 3 - Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. * J Bindon is not a member of the sub-committees but was invited to attend these meetings and his attendance was minuted. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations, and explains how the Group's performance has driven remuneration outcomes. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The key management personnel of the Group are the directors of Big River Industries Limited and the following persons: ? Stephen Parks - Chief Financial Officer and Company Secretary ? John Lorente - General Manager - Sales and Marketing The remuneration report is set out under the following main headings: ? Principles used to determine the nature and amount of remuneration ? Details of remuneration ? Service agreements ? Share-based compensation ? Additional information ? Additional disclosures relating to key management personnel 7 Big River Industries Limited Annual Report 2020 11 Directors’ Report Big River Industries Limited Directors' report For the year 30 June 2020ended 30 June 2020 Principles used to determine the nature and amount of remuneration The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: ? competitiveness and reasonableness; ? acceptability to shareholders; ? performance linkage / alignment of executive compensation; and ? transparency. The Nomination and Remuneration Committee is responsible for: ? determining and reviewing remuneration arrangements for its directors and executives; ? the operation of incentive plans, including equity-based remuneration plans for senior executives; ? reviewing Board and senior executive succession plans; and ? recommending the appointment of any new directors. The quality of the directors and executives is a major factor in the overall performance of the Group. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. The Nomination and Remuneration Committee has structured an executive remuneration framework that is market competitive and complementary to achievement of the reward strategy of the Group. The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it should seek to enhance shareholders' interests by: ? having economic profit as a core component; ? focusing on sustained growth in shareholder value and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and ? attracting and retaining high calibre executives. Additionally, the reward framework should seek to enhance executives' interests by: ? rewarding capability and experience; ? reflecting competitive reward for contribution to growth in shareholder value; and ? providing a clear structure for earning rewards. In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. Non-executive directors' remuneration Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market. The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive directors do not receive share options or other incentives. ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general meeting. Unless otherwise determined by a resolution of shareholders, the maximum aggregate remuneration payable by the Company to all non-executive directors of the Company for their services as directors, including their services on a Board Committee or Sub-Committee and including superannuation is limited to $500,000 per annum (in total). Executive remuneration The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework currently has three components: ? fixed base salary, including superannuation and non-monetary benefits; ? short-term performance incentives; and ? long-term performance incentives. 8 12 Big River Industries Limited Annual Report 2020 Directors’ Report Big River Industries Limited Directors' report ForJune the year 30 2020ended 30 June 2020 The combination of these comprises the executive's total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the Group and comparable market remunerations. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the Group. The short-term incentive ('STI') program is designed to align the targets of the business with the performance hurdles of executives. STI payments granted to executives are at the discretion of the Board and are based on the achievement of financial hurdles, principally relating to earnings before interest, tax, depreciation and amortisation ('EBITDA') performance, and key performance indicators ('KPI's') being achieved. KPI's include profit contribution, cash management, customer satisfaction, safety performance, leadership contribution and product management. The STI's are paid in cash following the end of the financial year and approval from the Nomination and Remuneration Committee. The Nomination and Remuneration Committee retains the discretion to withdraw or amend the STI at any time. The long-term incentive program ('LTI') is designed to create an alignment between shareholder benefit and the remuneration of selected executives through the issue of Performance Rights. The number of Performance Rights vesting will be determined by reference to the compound annual growth rate ('CAGR') in Earnings Per Share ('EPS') over the vesting period and ranges from nil for less than 3% CAGR in EPS to 100% for greater than 10% CAGR in EPS, subject to an overriding discretion held by the Board. The Board considers CAGR in EPS to be an appropriate performance measure as it aligns with the Group’s remuneration policy of creating value and is within the scope of influence of the selected executives. Group performance and link to remuneration Remuneration for the senior executives is directly linked to the performance of the Group. A portion of their STI is dependent on defined EBITDA targets being met. The remaining portion of the STI is at the discretion of the Nomination and Remuneration Committee based on performance against personal objectives. Refer to the section 'Additional information' below for details of the earnings for the last five years. Use of remuneration consultants During the financial year ended 30 June 2020, the Group did not engage remuneration consultants. Voting and comments made at the Company's 2019 Annual General Meeting ('AGM') At the 23 October 2019 AGM, 99.97% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2019. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. 9 Big River Industries Limited Annual Report 2020 13 Directors’ Report Big River Industries Limited Directors' report For the year 30 June 2020ended 30 June 2020 PostAccrued employment long-term benefits benefits Short-term benefits 2020 Non-Executive Directors: G Laurie** M Kaplan* M Jackman V Papachristos B York*** Executive Directors: J Bindon Other Key Management Personnel: S Parks J Lorente * ** *** Cash salary and fees $ Cash bonus $ Nonmonetary $ Superannuation $ Sharebased payments Performance rights $ Leave benefits $ Total $ 8,781 84,738 61,468 38,093 - - 834 8,050 5,839 3,619 - - 9,615 92,788 67,307 41,712 422,981 - - 24,038 16,564 - 463,583 318,108 321,711 1,255,880 - - 24,139 24,393 90,912 19,484 16,659 52,707 - 361,731 362,763 1,399,499 M Kaplan waived his director's fees (including any committee fee to which he is entitled) until 30 June 2020. G Laurie retired on 31 July 2019. Remuneration is for the period from date of appointment, 24 October 2019, to 30 June 2020. 'Accrued long-term benefits' represent movements in employee leave entitlements. Total remuneration paid to non-executive directors for the year ending 30 June 2020 amounted to $211,422 (30 June 2019: $235,000) which is 42.3% of the aggregate. The above directors and key management personnel all took a 20% reduction in remuneration for a period of 11 weeks during the initial uncertainty arising from the outbreak of COVID-19. 10 14 Big River Industries Limited Annual Report 2020 Directors’ Report Big River Industries Limited Directors' report ForJune the year 30 2020ended 30 June 2020 PostAccrued employment long-term benefits benefits Short-term benefits 2019 Cash salary and fees $ Non-Executive Directors: G Laurie M Kaplan* M Jackman V Papachristos * ** Nonmonetary $ Superannuation $ Performance rights $ Leave benefits $ Total $ 91,324 59,361 63,927 - - 8,676 5,639 6,073 - - 100,000 65,000 70,000 390,000 - - 25,000 6,151 - 421,151 179,399 284,927 319,167 1,388,105 - - 6,604 25,073 27,755 104,820 4,401 10,552 - 186,003 314,401 346,922 1,503,477 Executive Directors: J Bindon Other Key Management Personnel: D Henderson** S Parks J Lorente Cash bonus $ Sharebased payments M Kaplan waived his director's fees (including any committee fee to which he is entitled) until 30 June 2020. D Henderson retired on 12 October 2018. His remuneration included the payment of $67,704 in accrued leave entitlements. 'Accrued long-term benefits' represent movements in employee leave entitlements. The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Fixed remuneration 2020 2019 At risk - STI 2020 2019 At risk - LTI 2020 2019 Executive Directors: J Bindon 100% 100% - - - - Other Key Management Personnel: D Henderson S Parks J Lorente 100% 100% 100% 100% 100% - - - - The proportion of the cash bonus paid/payable or forfeited is as follows: Cash bonus paid/payable 2020 2019 Name Cash bonus forfeited 2020 2019 Executive Directors: J Bindon - - 100% 100% Other Key Management Personnel: D Henderson S Parks J Lorente - - 100% 100% 100% 100% 100% Cash bonus forfeited includes missed EBITDA performance targets along with voluntary forfeiture for any KPI objectives met. 11 Big River Industries Limited Annual Report 2020 15 Directors’ Report Big River Industries Limited Directors' report For the year 30 June 2020ended 30 June 2020 Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Title: Agreement commenced: Term of agreement: Details: J Bindon Managing Director and Chief Executive Officer January 2001 No fixed term Total fixed employment cost ('TFEC') of $470,000 per annum including statutory superannuation contributions. Short Term Incentive ('STI') of 35% of TFEC, subject to achievement of financial hurdles, principally relating to EBITDA performance (70% of STI) and the achievement of other business objectives (30% of STI). Either Jim or the Company may terminate the employment contract by giving 6 months' written notice to the other party. Name: Title: Agreement commenced: Term of agreement: Details: S Parks Chief Financial Officer and Company Secretary July 2008 No fixed term Total fixed employment cost ('TFEC') of $360,000 per annum including statutory superannuation contributions. Short Term Incentive ('STI') of 20% of TFEC, subject to achievement of financial hurdles, principally relating to EBITDA performance (70% of STI) and the achievement of other business objectives (30% of STI). Steve may terminate his employment contract by giving 1 months' written notice to the Company and the Company may terminate the employment contract by giving 4 months' written notice to Steve. Name: Title: Agreement commenced: Term of agreement: Details: J Lorente General Manager - Sales and Marketing February 2018 No fixed term Total fixed employment cost ('TFEC') of $360,000 per annum including statutory superannuation contributions. Short Term Incentive ('STI') of 20% of TFEC, subject to achievement of financial hurdles, principally relating to EBITDA performance (70% of STI) and the achievement of other business objectives (30% of STI). Either John or the Company may terminate the employment contract by giving 3 months' written notice to the other party. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Issue of shares There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2020. Options There were no options over ordinary shares issued to directors and other key management personnel as part of compensation that were outstanding as at 30 June 2020. There were no options over ordinary shares granted to or vested in directors and other key management personnel as part of compensation during the year ended 30 June 2020. 12 16 Big River Industries Limited Annual Report 2020 Directors’ Report Big River Industries Limited Directors' report ForJune the year 30 2020ended 30 June 2020 Performance rights The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Name Number of rights granted J Bindon S Parks J Lorente 154,024 307,147 65,745 134,435 72,107 134,435 Grant date Measurement period/ Vesting date Expiry date 23 November 2018 28 November 2019 23 November 2018 28 November 2019 23 November 2018 28 November 2019 30 June 2021 30 June 2022 30 June 2021 30 June 2022 30 June 2021 30 June 2022 Fair value per right at grant date 23 November 2023 28 November 2024 23 November 2023 28 November 2024 23 November 2023 28 November 2024 $1.611 $1.076 $1.611 $1.076 $1.611 $1.076 Vesting hurdle: The number of Performance Rights vesting will be determined by reference to the CAGR in EPS over the vesting period of years and ranges from nil for less than 3% CAGR in EPS to 100% for greater than 10% CAGR in EPS, subject to an overriding discretion held by the Board. The Board considers CAGR in EPS to be an appropriate performance measure as it aligns with the Group’s remuneration policy of creating value and is within the scope of influence of the selected executives. Performance rights granted carry no dividend or voting rights. On exercise of rights, the Board will determine at its discretion whether to settle the exercised rights in shares, cash, or a combination thereof. Performance rights that are not forfeited on cessation of employment will be retained for testing for vesting at the end of the relevant measurement period. The number of performance rights over ordinary shares granted to and vested by directors and other key management personnel as part of compensation during the year ended 30 June 2020 are set out below: Number of rights granted during the year 2020 Name J Bindon S Parks J Lorente 307,147 134,435 134,435 Number of rights granted during the year 2019 Number of rights vested during the year 2020 154,024 65,745 72,107 Number of rights vested during the year 2019 - - Additional information The earnings of the Group for the five years to 30 June 2020 are summarised below: Sales revenue EBITDA EBIT Profit/(loss) after income tax 2020 $ 2019 $ 2018 $ 2017 $ 248,827,815 16,929,873 8,586,786 4,444,257 217,689,464 9,178,218 6,511,527 3,856,713 210,756,310 10,676,690 8,180,084 5,176,270 176,891,981 8,144,377 6,175,247 3,927,681 2016 $ 71,536,530 (1,085,537) (1,854,145) (1,949,368) The factors that are considered to affect total shareholders return ('TSR') are summarised below: 2020 Basic earnings per share (cents per share) 2019 7.14 13 7.24 2018 9.79 2017 9.55 2016 - Big River Industries Limited Annual Report 2020 17 Directors’ Report Big River Industries Limited Directors' report For the year 30 June 2020ended 30 June 2020 Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Ordinary shares G Laurie* M Kaplan M Jackman V Papachristos B York J Bindon S Parks J Lorente * Balance at the start of the year Received as part of remuneration 30,000 68,493 30,000 414,285 320,000 36,588 899,366 - Balance at the end of the year Disposals/ other Additions 47,619 119,048 166,667 (30,000) (30,000) 116,112 30,000 533,333 320,000 36,588 1,036,033 Disposals/other represents no longer a director or key management personnel during the year, not necessarily a disposal of holding. Option holding The number of options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Options over ordinary shares J Bindon S Parks Balance at the start of the year Granted 200,000 100,000 300,000 Expired/ forfeited/ other Exercised - - Balance at the end of the year - 200,000 100,000 300,000 Performance rights holding The number of performance rights over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Performance rights over ordinary shares J Bindon S Parks J Lorente Balance at the start of the year Granted 154,024 65,745 72,107 291,876 307,147 134,435 134,435 576,017 This concludes the remuneration report, which has been audited. 14 Expired/ forfeited/ other Vested - Balance at the end of the year - 461,171 200,180 206,542 867,893 18 Big River Industries Limited Annual Report 2020 Directors’ Report Big River Industries Limited Directors' report ForJune the year 30 2020ended 30 June 2020 Shares under option Unissued ordinary shares of Big River Industries Limited under option at the date of this report are as follows: Exercise price Grant date Expiry date 19 February 2016 13 February 2017 19 February 2021 13 February 2022 $2.00 $2.20 Number under option 1,185,000 45,455 1,230,455 No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate. Shares under performance rights Unissued ordinary shares of Big River Industries Limited under performance rights at the date of this report are as follows: Grant date Expiry date 23 November 2018 28 November 2019 23 November 2023 28 November 2024 Number under rights 341,355 677,590 1,018,945 No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of options There were no ordinary shares of Big River Industries Limited issued on the exercise of options during the year ended 30 June 2020 and up to the date of this report. Shares issued on the exercise of performance rights There were no ordinary shares of Big River Industries Limited issued on the exercise of performance rights during the year ended 30 June 2020 and up to the date of this report. Indemnity and insurance of officers The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 32 to the financial statements. 15 Big River Industries Limited Annual Report 2020 19 Directors’ Report Big River Industries Limited irectors report For the year 30 June 2020ended 30 June 2020 The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 32 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and ob ectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in A S 110 Code of thics for rofessional Accountants (including Independence Standards) issued by the Accounting rofessional and thical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or ointly sharing economic risks and rewards. Officers of the Compan ho are former partners of eloitte ouche ohmatsu There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu. uditor s independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. uditor Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Malcolm Jackman Chairman 25 August 2020 Sydney James Bindon Managing Director 20 Big River Industries Limited Annual Report 2020 Auditor’s Independence Declaration For the year ended 30 June 2020 Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au The Board of Directors Big River Industries Pty Limited Trenayr Road Junction Hill NSW 2460 25 August 2020 Dear Board Members Auditor’s Independence Declaration to Big River Industries Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Big River Industries Limited. As lead audit partner for the audit of the financial statements of Big River Industries for the financial year ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU Alfred Nehama Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. 17 Big River Industries Limited Annual Report 2020 21 Statement of Profit or Loss and Other Comprehensive Income Big River Industries Limited Statement of profit or loss and other comprehensive income For For the the year yearended ended30 30June June2020 2020 Note Consolidated 2020 2019 $ $ Revenue 5 248,924,142 217,794,157 Other income 6 396,501 26,249 Expenses Raw materials and consumables used Selling and distribution expense Employee benefits expense Occupancy expense General and administration expense Acquisition costs Depreciation and amortisation expense Impairment of receivables Finance costs 7 7 10 7 Profit before income tax expense (177,340,696) (158,077,609) (6,135,202) (6,044,720) (35,741,227) (28,787,185) (4,789,320) (8,243,970) (7,114,814) (6,217,996) (739,501) (641,571) (8,343,087) (2,666,691) (530,010) (629,137) (2,292,120) (1,013,074) 6,294,666 5,498,453 Income tax expense 8 (1,850,409) (1,641,740) Profit after income tax expense for the year attributable to the owners of Big River Industries Limited 28 4,444,257 3,856,713 Items that may be reclassified subsequently to profit or loss Foreign currency translation (352,016) 1,764 Other comprehensive income for the year, net of tax (352,016) 1,764 4,092,241 3,858,477 Cents Cents Other comprehensive income Total comprehensive income for the year attributable to the owners of Big River Industries Limited Basic earnings per share Diluted earnings per share 41 41 7.14 7.14 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 18 7.24 7.24 22 Big River Industries Limited Annual Report 2020 Statement of Financial Position Big River Industries Limited Statement of financial position As at As at 30 30 June June 2020 2020 Note Consolidated 2020 2019 $ $ Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other Total current assets 9 10 11 12 8,712,184 43,563,921 38,209,452 1,130,402 91,615,959 1,202,098 43,117,725 37,209,150 841,558 82,370,531 Non-current assets Property, plant and equipment Right-of-use assets Intangibles Deferred tax Total non-current assets 13 14 15 8 27,838,947 18,460,358 29,578,070 2,808,505 78,685,880 27,971,850 26,296,429 2,445,584 56,713,863 170,301,839 139,084,394 Total assets Liabilities Current liabilities Trade and other payables Deferred consideration Borrowings Lease liabilities Income tax Provisions Contingent consideration Total current liabilities 16 17 18 19 8 20 21 38,439,060 2,816,267 5,272,759 863,342 4,491,826 1,424,042 53,307,296 36,323,029 16,609,092 506,115 901,175 66,830 4,034,133 250,000 58,690,374 Non-current liabilities Borrowings Lease liabilities Deferred tax Provisions Contingent consideration Total non-current liabilities 22 23 8 24 25 25,850,000 16,251,410 284,059 646,714 2,230,120 45,262,303 13,520,000 1,368,048 105,600 500,606 3,365,756 18,860,010 Total liabilities 98,569,599 77,550,384 Net assets 71,732,240 61,534,010 69,286,174 (350,252) 2,796,318 61,325,301 1,764 206,945 71,732,240 61,534,010 Equity Issued capital Foreign currency translation reserve Retained profits 26 27 28 Total equity The above statement of financial position should be read in conjunction with the accompanying notes 19 Big River Industries Limited Annual Report 2020 23 Statement of Changes in Equity Big River Industries Limited Statement of changes in equity For For the the year yearended ended30 30June June2020 2020 Foreign currency translation reserve $ Issued capital $ Consolidated Balance at 1 July 2018 Retained profits $ Total equity $ 59,522,743 - (626,263) 58,896,480 Profit after income tax expense for the year Other comprehensive income for the year, net of tax - 1,764 3,856,713 - 3,856,713 1,764 Total comprehensive income for the year - 1,764 3,856,713 3,858,477 1,802,558 - - (3,023,505) 1,802,558 (3,023,505) 61,325,301 1,764 206,945 61,534,010 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 26) Dividends paid (note 29) Balance at 30 June 2019 Foreign currency translation reserve $ Issued capital $ Consolidated Balance at 1 July 2019 Retained profits $ Total equity $ 61,325,301 1,764 206,945 61,534,010 - - (480,568) (480,568) 61,325,301 1,764 (273,623) 61,053,442 Profit after income tax expense for the year Other comprehensive income for the year, net of tax - (352,016) 4,444,257 - 4,444,257 (352,016) Total comprehensive income for the year - (352,016) 4,444,257 4,092,241 7,960,873 - - (1,374,316) 7,960,873 (1,374,316) 69,286,174 (350,252) 2,796,318 71,732,240 Adjustment for change in accounting policy (note 2) Balance at 1 July 2019 - restated Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 26) Dividends paid (note 29) Balance at 30 June 2020 The above statement of changes in equity should be read in conjunction with the accompanying notes 20 24 Big River Industries Limited Annual Report 2020 Statement of Cash Flows Big River Industries Limited Statement of cash flows For the For the year year ended ended30 30 June June2020 2020 Note Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Consolidated 2020 2019 $ $ 274,592,437 235,230,075 (256,712,686) (228,341,613) 17,879,751 477,135 (2,150,669) (1,278,702) 6,888,462 104,693 (1,012,040) (2,233,467) 40 14,927,515 3,747,648 37 (4,872,276) (14,697,412) (250,000) (1,122,021) (973,262) 44,489 (6,605,453) (1,524,234) (751,088) 84,546 (21,870,482) (8,796,229) 6,096,750 (41,860) 12,330,000 (4,891,520) (1,374,316) 1,649,096 (209,340) 6,600,000 (1,000,000) (238,968) (3,023,505) 12,119,054 3,777,283 5,176,087 695,983 23,847 (1,271,298) 1,971,251 (3,970) 5,895,917 695,983 Other revenue Interest and other finance costs paid Income taxes paid Net cash from operating activities Cash flows from investing activities Payment for purchase of businesses, net of cash acquired Final payments for prior period's business acquisition Payments for contingent consideration Payments for property, plant and equipment Payments for intangibles Proceeds from disposal of property, plant and equipment 13 15 Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Proceeds from borrowings Repayment of borrowings Net lease repayments Dividends paid 26 29 Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year 9 The above statement of cash flows should be read in conjunction with the accompanying notes 21 Big River Industries Limited Annual Report 2020 25 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements For the year 30 June 2020ended 30 June 2020 Note 1. General information The financial statements cover Big River Industries Limited as a Group consisting of Big River Industries Limited ('Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ('Group'). The financial statements are presented in Australian dollars, which is Big River Industries Limited's functional and presentation currency. Big River Industries Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Trenayr Road Junction Hill NSW 2460 A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 25 August 2020. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. The following Accounting Standards and Interpretations are most relevant to the Group: AASB 2020-4 Amendment to Australian Accounting Standards - Covid-19-Related Rent Concessions The Group has early adopted the amendment to AASB 16 from 1 July 2019. The amendment provides a practical expedient for lessees to account for COVID-19-related rent concessions that: result in lease payments that are substantially the same as, or less than, the consideration for the lease immediately prior to the change; where any reduction in the lease payments affects only payments originally due on or before 30 June 2021; and where there is no substantive change to other terms and conditions of the lease. The practical expedient allows an entity not to assess rent concessions meeting the criteria as a lease modification. As a result, to the extent that lease concessions represent a forgiveness or waiver of lease payments, such concessions are treated as variable lease payments recognised in profit or loss with a corresponding adjustment to the lease liability. To the extent that the lease concession in substance represents a delay in lease repayments such that lease consideration is not changed, the lease liability is not extinguished. Interest continues to accrue for that period. AASB 16 Leases The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the classifications of operating leases and finance leases. Subject to exceptions, a 'right-of-use' asset is capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease is also recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. 22 26 Big River Industries Limited Annual Report 2020 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements ForJune the year 30 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) Straight-line operating lease expense recognition is replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments are separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. Practical expedients applied In adopting AASB 16, the Group has used the following practical expedients permitted by the standard: ? applied a single discount rate to a portfolio of leases with reasonably similar characteristics; ? accounted for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases; ? excluded initial direct costs for the measurement of the right-of-use asset at the date of initial application; ? used hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and ? not apply AASB 16 to contracts that were not previously identified as containing a lease. Impact of adoption AASB 16 was adopted using the modified retrospective approach and as such comparatives have not been restated. The impact of the adoption on opening retained earnings as at the transition date 1 July 2019 is as follows: 1 July 2019 $ Operating lease commitments as at 1 July 2019 (AASB 117) Short-term leases not recognised as a right-of-use asset (AASB 16) Net impact of discounting* and lease extension options not accounted for under AASB 117 Lease liabilities (AASB 16) Right-of-use assets (AASB 16) 20,723,973 Tax effect on the above adjustments 204,908 Reduction in opening retained profits as at 1 July 2019 * (20,384,046) 47,500 (1,072,903) (21,409,449) (480,568) The lease payments have been discounted based on the weighted average incremental borrowing rate of 3.385%. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 36. 23 Big River Industries Limited Annual Report 2020 27 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements For the year 30 June 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Big River Industries Limited as at 30 June 2020 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and noncontrolling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation The financial statements are presented in Australian dollars, which is Big River Industries Limited's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into the functional currency using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Revenue recognition The Group recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. 24 28 Big River Industries Limited Annual Report 2020 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements ForJune the year 30 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Sale of goods Sale of goods revenue is recognised at the point in time when the performance obligation has been satisfied, which is when the customer obtains control of the goods, which is generally at the time of delivery. Interest 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. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ? When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or ? When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. 25 Big River Industries Limited Annual Report 2020 29 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements For the year 30 June 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Inventories Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a 'weighted average' basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overhead. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Buildings Plant and equipment 25 to 40 years 5 to 25 years Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the improvements, whichever is shorter. The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Leases (to 30 June 2019) The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. 26 30 Big River Industries Limited Annual Report 2020 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements ForJune the year 30 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits. Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability. Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term. Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the term of the lease. Right-of-use assets (from 1 July 2019) A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Customer relationships Customer relationships acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life of up to 5 years. Software Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of up to 7 years. Product development Product development has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost over the useful life of up to 10 years. 27 Big River Industries Limited Annual Report 2020 31 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements For the year 30 June 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) Impairment of non-financial assets Goodwill is not subject to amortisation and is tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Lease liabilities (from 1 July 2019) A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Variable lease payments include rent concessions in the form of rent forgiveness or a waiver as a direct consequence of the COVID-19 pandemic and which relate to payments originally due on or before 30 June 2021. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Finance costs Finance costs are expensed in the period in which they are incurred. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group 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 the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. 28 32 Big River Industries Limited Annual Report 2020 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements ForJune the year 30 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high-quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. 29 Big River Industries Limited Annual Report 2020 33 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements For the year 30 June 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the Company. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Big River Industries Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 30 34 Big River Industries Limited Annual Report 2020 Notes to the Financial Statements Big River Industries Limited Notes to the financial statements ForJune the year 30 2020ended 30 June 2020 Note 2. Significant accounting policies (continued) Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2020. The Group's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below. New Conceptual Framework for Financial Reporting The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards. Where the Group has relied on the existing framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the Group may need to review such policies under the revised framework. At this time, the application of the Conceptual Framework is not expected to have a material impact on the Group's financial statements. Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, ...