Endeavour Financial Year 31 Dec 2011

Endeavour (International) Limited
Financial year 31 December 2011

An illustration of an Australian companys YffmYd fYf[aYd j]hgjl (also applicable to 30 June 2012 year ends) January 2012 edition
Foreword
The International Accounting Standards Board (IASB) has slowed down the pace at which new accounting standards are being developed. Consequently, many new standards that were expected to be released this year will now likely be issued in 2012, coming into effect in 2015. However, this doesnt mean that there are no new financial reporting changes to consider in the current year. Several amendments to accounting standards are now effective. In addition, this year sees changes in corporate governance reporting relating to diversity and changes in remuneration reporting all of which are illustrated in this publication. During the current year, more countries particularly in the Asia region have declared their intention to adopt or converge in full with International Financial Reporting Standards (IFRS). Many other countries are adopting IFRS for the first time in 2011 and 2012. Meanwhile the US is expected to make a decision in the near term about their adoption of IFRS. Such widespread use of IFRS increases the need for consistency in interpretation and presentation. As investors are becoming more global, there is also an increased need for greater comparability. This edition of Endeavour is a new format of our illustrative financial statements prepared in accordance with Australian Accounting Standards. It is more closely aligned with Good Group our illustrative financial statements prepared in accordance with IFRS thereby allowing greater comparability with overseas companies. We have also included in this edition an illustrative example of the new disclosures introduced by AASB 12 Disclosures of Interests in Other Entities, which becomes applicable in 2013. These disclosures will be useful for those entities that early adopt the new consolidation and joint arrangements standards, in addition to those entities considering the new disclosures required in future periods. Over the next few years, as we are confronted by an abundance of financial reporting change, it is important to keep abreast of the changes, to develop an in-depth knowledge of the requirements of IFRS, and to understand the impact it has on your information systems and business processes. Your Ernst & Young contact can help you prepare for this process and manage the implementation. I wish you all the best with your next set of financial reports and trust this publication will help you in your ongoing journey in financial reporting.
Lynda Tomkins Partner and National Leader IFRS Desk Ernst & Young Australia 30 November 2011
Contents
Foreword ............................................................................................................................................................ i Introduction .......................................................................................................................................................1 Abbreviations and key ........................................................................................................................................6 Contents to financial report .................................................................................................................................7 Corporate information ........................................................................................................................................9 Directors' report ..............................................................................................................................................11 Corporate governance statement ......................................................................................................................37 Consolidated statement of comprehensive income ..............................................................................................47 Consolidated statement of financial position .......................................................................................................49 Consolidated statement of changes in equity ......................................................................................................51 Consolidated statement of cash flows.................................................................................................................54 Notes to the consolidated financial statements ...................................................................................................55 1. 2. 2.1 2.2 2.3 2.4 3. 4. 5. 6. 7. 8. 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 9. 10. 11. 12. 13. 14. 15. Corporate information ............................................................................................................................55 Summary of significant accounting policies ...............................................................................................55 Basis of preparation ...............................................................................................................................56 Compliance with IFRS .............................................................................................................................56 New accounting standards and interpretations ..........................................................................................56 Changes in accounting policies and disclosures .........................................................................................83 Significant accounting judgements, estimates and assumptions ..................................................................84 Business combinations and acquisition of non-controlling interests .............................................................87 Interest in a joint venture ........................................................................................................................92 Investment in an associate ......................................................................................................................92 Segment information ..............................................................................................................................93 Other income/expenses and adjustments .................................................................................................96 Other operating income ..........................................................................................................................96 Other operating expenses .......................................................................................................................96 Finance costs .........................................................................................................................................97 Finance income ......................................................................................................................................97 Depreciation, amortisation, foreign exchange differences and costs of inventories included in the consolidated income statement ...............................................................................................................97 Employee benefits expense .....................................................................................................................98 Research and development costs .............................................................................................................98 Components of other comprehensive income ............................................................................................98 Income tax.............................................................................................................................................99 Discontinued operations .......................................................................................................................103 Earnings per share ...............................................................................................................................106 Property, plant and equipment ..............................................................................................................107 Investment properties ..........................................................................................................................109 Intangible assets ..................................................................................................................................110 Other financial assets and financial liabilities ..........................................................................................111
15.1. Other financial assets ...........................................................................................................................111 15.2. Other financial liabilities........................................................................................................................113 15.3. Hedging activities and derivatives ..........................................................................................................116 15.4. Fair values ...........................................................................................................................................118 16. 17. 18. 19. 20. 21. 22. 23. Impairment testing of goodwill and intangibles with indefinite lives ...........................................................121 Inventories ..........................................................................................................................................123 Trade and other receivables (current) ....................................................................................................124 Cash and short-term deposits ................................................................................................................125 Issued capital and reserves ...................................................................................................................126 Dividends paid and proposed .................................................................................................................128 Provisions ...........................................................................................................................................129 Government grants ..............................................................................................................................131
III
24. 25. 26. 27. 28. 29. 30. 31. 32. 33.
Deferred revenue .................................................................................................................................131 Pensions and other post-employment benefit plans .................................................................................132 Share-based payment plans...................................................................................................................138 Trade and other payables (current) ........................................................................................................140 Related party disclosures ......................................................................................................................141 Commitments and contingencies ...........................................................................................................146 Financial risk management objectives and policies ...................................................................................150 Events after the reporting period ...........................................................................................................156 Auditors' remuneration .........................................................................................................................157 Information relating to Endeavour (International) Limited (the parent entity) ..........................................158
Directors' declaration .....................................................................................................................................159 Independent auditor's report ...........................................................................................................................160 ASX additional information..............................................................................................................................163 Appendix A Closed group class order disclosures ............................................................................................165 Appendix B Agricultural assets example disclosures ........................................................................................167 Appendix C Half-year financial report ............................................................................................................169 Appendix D Illustrative disclosure requirements of AASB 12 ............................................................................193 Appendix E Australian reporting requirements ...............................................................................................205
IV
Introduction
This document contains the consolidated financial report of a fictitious, publicly listed entity, Endeavour (International) Limited, an industrial company with subsidiaries (the Group). Endeavour (International) Limited is incorporated and listed in Australia, with a reporting date of 31 December 2011. The enclosed financial report has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The report is intended to illustrate the disclosure requirements of the Accounting Standards, including providing interpretive commentary where necessary. This financial report is illustrative only and does not attempt to show all possible accounting and disclosure requirements. It is essential to refer to the relevant authoritative source and, where necessary, seek appropriate professional advice. Although the illustrative financial report attempts to show the most common disclosure requirements for industrial companies, it should not be regarded as a comprehensive checklist. For a more comprehensive list of disclosure requirements, please refer to Ernst & Young's Financial reporting standards disclosure checklist. Enquiries regarding specialised industries and areas of accounting (e.g., insurance, US GAAP) should be directed to an Ernst & Young professional. Each section of the financial report of the Group is cross-referenced to commentary. Source references to the authoritative literature are also provided. The commentary follows the disclosure contained in each section of the financial report and is intended to highlight disclosure requirements of the note or to explain the approach taken in providing the illustrative disclosure in this report.
Whats new in this update?

This edition of Endeavour (International) Limited includes financial reporting developments that have occurred since the 31 December 2010 edition. A summary of the most significant changes made to this edition are as follows: Summary of changes Leverage of Good Group This edition of Endeavour (International) Limited has been based on Ernst & Young Globals Good Group (International) Limited IFRS financial statements. As such, the format and structure of the financial statements and notes of this edition differs from the 31 December 2010 Endeavour edition. Voluntary change in accounting policy In the 2011 edition, the Group illustrates a voluntary change in accounting policy regarding AASB 119 Employee Benefits. The Group now records actuarial gains and losses in other comprehensive income in the period in which they occur in accordance with paragraph 93A of AASB 119. Previously, the Group applied the corridor method under paragraph 92 of AASB 119. Remuneration disclosures The Remuneration report has been reformatted and revised to provide good practice illustrative disclosures of remuneration arrangements for key management personnel. Diversity policy The ASX Corporate Governance Principles and Recommendations have been amended so that an entity is required to publish its policy concerning diversity, disclose annually measurable objectives for achieving gender diversity, the progress toward achieving those objectives and the proportion of women in the organisation, in senior management positions and on the board. The corporate governance statements have been updated to reflect the amended ASX Corporate Governance Principles and Recommendations for reporting periods ended on or after 31 December 2011. Corporate governance statement in the directors report Remuneration report in the directors report Note 25 Pensions and other post employment benefit plans Reference
Introduction (continued)
New accounting standards and interpretations Reference Note 2.4 Changes in accounting policies and disclosures
Amendment to AASB 124 Related Party Transactions

The amendment to AASB 124 is twofold. The amendment clarified the definition of a related party, however, without changing the fundamental approach to related party disclosures. It emphasises a symmetrical view on related party relationships and clarifies how a person or key management personnel impacts related party relationships of an entity (see Note 2). Furthermore, the amendment provides for an exemption to related party disclosures for government-related entities. The amendment is effective for financial years beginning on or after 1 January 2011. While the adoption of the amendment did not have any current impact on the financial position or performance or disclosures of the Group, as all required information is currently being appropriately captured and disclosed, it is relevant to the application of the Groups accounting policy in identifying future potential related party relationships.
Amendment to AASB 132 Financial Instruments: Presentation Classification of Rights Issues

The amendment alters the definition of a financial liability in AASB 132. It classifies certain rights issues, options or warrants as equity instruments. This is applicable if the rights are given pro rata to all of the existing owners of the same class of an entitys non-derivative equity instruments, in order to acquire a fixed number of the entitys own equity instruments for a fixed amount in any currency. The Group did not enter into any rights issue, options or warrants which would be affected by this amendment. If the Group had such instruments, these would no longer be classified as derivatives with changes in fair value impacting profit or loss. The amendment is effective for financial years beginning on or after 1 February 2010.
Note 2.4 Changes in accounting policies and disclosures
Amendment to AASB Int 14 Prepayments of a Minimum Funding Requirement

The amendment was made to remove an unintended consequence when an entity is subject to minimum funding requirements (MFR) and makes an early payment of contributions to cover those requirements. The amendment permits a prepayment of future service cost by the entity to be recognised as a pension asset. The Groups defined benefit obligation liability is not affected by this amendment. However, the amendment is incorporated into the Groups accounting policy.
Accounting policy Note 2
Improvements to AASBs
In May 2010, the board issued its third omnibus of amendments to standards, primarily with a view to removing inconsistencies and clarify wording. There are separate transitional provisions for each standard.
The Group illustrates the adoption of these amendments in Note 2
New accounting standards and interpretations Reference Note disclosures covering impairments in the 2011 edition of Endeavour (International) Limited are summarised below:
X X
Impairment disclosures in the 2011 edition

In the current economic environment, disclosures relating to impairment are increasingly sensitive.
Accounting policy disclosures Note 2.3 Disclosures for significant assumptions Note 3 Property, plant and equipment Note 12 Intangible assets Note 14 Other financial assets Note 15 Goodwill and intangible assets with indefinite lives Note 16 Trade receivables Note 18
X X X X
Australian Accounting Standards

When complying with Australian Accounting Standards, preparers also need to comply with all applicable amending standards and interpretations.
Australian Accounting Standards applicable as at 31 December 2011
This financial report illustrates Australian Accounting Standards that were issued at 31 October 2011 and which apply to annual reporting periods beginning on or after 1 January 2011. It is important to note that the illustrative financial report in this document will require continual updating as new and amended Standards and Interpretations are issued by the AASB. Therefore, if you are using this publication to assist in the preparation of your financial report, it must be emphasised that this does not include changes arising from new and amending Standards and Interpretations effective for periods commencing after 31 October 2011. Therefore, users of this publication are cautioned to ensure that they consider any changes in the requirements of AASB Standards and Interpretations issued after 31 October 2011. In addition, the disclosure requirements of the following Australian Accounting Standards are not applicable to the Group and have therefore not been dealt with in the financial report: AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB AASB 1 4 6 10 11 12 111 129 134 141 1004 1023 1038 1039 1049 1050 1051 1052 2008-2 2008-8 2008-9 2008-11 2008-13 2009-1 25 12 13 15 17 18 107 110 129 131 132 1038 1042 1047 1055 First Time Adoption of Australian Equivalents to International Financial Reporting Standards Insurance Contracts Exploration for and Evaluation of Mineral Resources Consolidated Financial Statements *** Joint Arrangements *** Disclosure of Interests in Other Entities *** Construction Contracts Financial Reporting in Hyperinflationary Economies Interim Financial Reporting* Agriculture** Contributions General Insurance Contracts Life Insurance Contracts Concise Financial Reports Whole of Government and General Government Sector Financial Reporting Administered Items Land Under Roads Disaggregated Disclosures Amendments to Australian Accounting Standards Puttable Financial Instruments and Obligations arising on Liquidation Amendments to Australian Accounting Standards Eligible Hedged Items Amendments to AASB 1049 for Consistency with AASB 101 Amendments to Australian Accounting Standards Business Combinations among Not-for-Profit Entities Amendments to Australian Accounting Standards arising from AASB Interpretation 17 Distributions of Non-cash Assets to Owners Amendments to Australian Accounting Standards Borrowing costs of Not-for-Profit Public Sector Entities Financial Reporting by Superannuation Plans Service Concession Arrangements Customer Loyalty Programs Agreements for the Construction of Real Estate Distributions of Non-Cash Assets to Owners Transfers of Assets from Customers Introduction of the Euro Government Assistance No Specific Relation to Operating Activities Service Concession Arrangements: Disclosures Revenue Barter Transactions Involving Advertising Services Intangible Assets Web Site Costs Contributions by Owners Made to Wholly-Owned Public Sector Entities Subscriber Acquisition Costs in the Telecommunications Industry Professional Indemnity Claims Liabilities in Medical Defence Organisations Accounting for Road Earthworks
AAS Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation Interpretation
* An example half-year financial report in accordance with AASB 134 is included in Appendix C. ** Example disclosures for agricultural assets are included as a guide in Appendix B. *** Example disclosures for consolidated financial statements, joint arrangements and disclosure of interests in other entities are included as a guide in Appendix D.
Allowed alternative treatments
In some cases, an Australian Accounting Standard permits more than one accounting treatment for the same transactions or event. Preparers of financial reports should chose the treatment that is most relevant to their business. AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, requires an entity to select and apply its accounting policies consistently for similar transactions, and/or other events and conditions, unless an Australian Accounting Standard specifically requires or permits categorisation of items for which different policies may be appropriate. Where an Australian Accounting Standard requires or permits such categorisation, an appropriate accounting policy is selected and applied consistently to each category. Therefore, once a choice of one of the alternative treatments has been made, it becomes an accounting policy and must be applied consistently. Changes in accounting policy should only be made if required by a standard or interpretation, or if the change results in the financial statements providing more reliable and relevant information. In this publication, when a choice is permitted by an Australian Accounting Standard, the Group has adopted one of the treatments as appropriate to the circumstances of the Group. The commentary provides details of which policy has been selected, and the reasons for this, and summarises the difference in the disclosure requirements.
Financial review by management

Many entities present a financial review by management that is outside the financial statements. The Australian Accounting Standards does not require the presentation of such information, although paragraph 13 of AASB 101 Presentation of Financial Statements, gives a brief outline of what might be included in an annual report. The AASB issued an AASB Practice Statement Management Commentary in December 2010, which provides a broad, non-binding framework for the presentation of a management commentary that relates to the financial statements that have been prepared in accordance with AASB. If a company decides to follow the guidance in the Practice Statement, management is encouraged to explain the extent to which the Practice Statement has been followed. A statement of compliance with the Practice Statement is only permitted if it is followed in its entirety. The content of a financial review by management in relation to the financial statements is determined by the requirements of the Corporations Act 2001. An illustrative financial review by management has been included for the Group, as part of the directors report.
Abbreviations and key

Abbreviations
The following styles of abbreviation are used in the commentary pages of the Endeavour (International) Limited illustrative financial report: AASB 112.2 AASB Int 115.4 CA 300A Reg. 2M.3.03(1) ASIC CO ASIC IR ASIC INFO ASIC RG ASX Rec 2.5 ASX 4.10.5 Interpretations Australian Accounting Standard No. 112, paragraph 2 AASB Interpretation No. 115, paragraph 4 Corporations Act 2001, section 300A Corporations Regulations 2001, Chapter 2M, Regulation 3.03, paragraph 1 Australian Securities & Investments Commission Class Order Australian Securities & Investments Commission Information Release Australian Securities & Investments Commission Information Sheet Australian Securities & Investments Commission Regulatory Guidance Australian Stock Exchange Corporate Governance Council, Principles of Good Corporate Governance and Best Practice Recommendations, Recommendation 2.5 Australian Stock Exchange Listing Rules Chapter 4, Rule 10.5 Interpretations of the AASB
Caveat
The names of people and corporations included in this illustrative financial report are fictitious and have been created for the purpose of illustration only. Any resemblance to any person or business is purely coincidental. This financial report is illustrative only and does not attempt to show all possible accounting and disclosure requirements. In case of doubt as to the requirements, it is essential to refer to the relevant source and, where necessary, seek appropriate professional advice. Although the illustrative financial report attempts to show the most likely disclosure requirements for industrial companies, it should not be regarded as a comprehensive checklist of disclosure requirements.

ABN 00 000 000 000
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Contents to financial report

Corporate information ........................................................................................................................................9 Directors' report ..............................................................................................................................................11 Corporate governance statement ......................................................................................................................37 Consolidated statement of comprehensive income ..............................................................................................47 Consolidated statement of financial position .......................................................................................................49 Consolidated statement of changes in equity ......................................................................................................51 Consolidated statement of cash flows.................................................................................................................54 Notes to the consolidated financial statements ...................................................................................................55 1. 2. 2.1 2.2 2.3 2.4 3. 4. 5. 6. 7. 8. 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 9. 10. 11. 12. 13. 14. 15. Corporate information ............................................................................................................................55 Summary of significant accounting policies ...............................................................................................55 Basis of preparation ...............................................................................................................................56 Compliance with IFRS .............................................................................................................................56 New accounting standards and interpretations ..........................................................................................56 Changes in accounting policies and disclosures .........................................................................................83 Significant accounting judgements, estimates and assumptions ..................................................................84 Business combinations and acquisition of non-controlling interests .............................................................87 Interest in a joint venture ........................................................................................................................92 Investment in an associate ......................................................................................................................92 Segment information ..............................................................................................................................93 Other income/expenses and adjustments .................................................................................................96 Other operating income ..........................................................................................................................96 Other operating expenses .......................................................................................................................96 Finance costs .........................................................................................................................................97 Finance income ......................................................................................................................................97 Depreciation, amortisation, foreign exchange differences and costs of inventories included in the consolidated income statement ...............................................................................................................97 Employee benefits expense .....................................................................................................................98 Research and development costs .............................................................................................................98 Components of other comprehensive income ............................................................................................98 Income tax.............................................................................................................................................99 Discontinued operations .......................................................................................................................103 Earnings per share ...............................................................................................................................106 Property, plant and equipment ..............................................................................................................107 Investment properties ..........................................................................................................................109 Intangible assets ..................................................................................................................................110 Other financial assets and financial liabilities ..........................................................................................111
15.1. Other financial assets ...........................................................................................................................111 15.2. Other financial liabilities........................................................................................................................113 15.3. Hedging activities and derivatives ..........................................................................................................116 15.4. Fair values ...........................................................................................................................................118 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. Impairment testing of goodwill and intangibles with indefinite lives ...........................................................121 Inventories ..........................................................................................................................................123 Trade and other receivables (current) ....................................................................................................124 Cash and short-term deposits ................................................................................................................125 Issued capital and reserves ...................................................................................................................126 Dividends paid and proposed .................................................................................................................128 Provisions ...........................................................................................................................................129 Government grants ..............................................................................................................................131 Deferred revenue .................................................................................................................................131 Pensions and other post-employment benefit plans .................................................................................132 Share-based payment plans...................................................................................................................138 Trade and other payables (current) ........................................................................................................140
Endeavour (International) Limited 7
28. 29. 30. 31. 32. 33.
Related party disclosures ......................................................................................................................141 Commitments and contingencies ...........................................................................................................146 Financial risk management objectives and policies ...................................................................................150 Events after the reporting period ...........................................................................................................156 Auditors' remuneration .........................................................................................................................157 Information relating to Endeavour (International) Limited (the parent entity) ..........................................158
Directors' declaration .....................................................................................................................................159 Independent auditor's report ...........................................................................................................................160 ASX additional information..............................................................................................................................163
Corporate information
ABN 00 000 000 000 Directors J. Barraclough, Chairman M.P. Boiteau, Chief Executive Officer C.P. Muller F. van den Berg A.N. Lockwood M. Evans M.A. Vlahov C. Smart P.R. Garca Company Secretary G.K. Dellas Registered office Homefire House Ashdown Square Australia Principal place of business Bush Avenue Mulberry Park Australia Phone: 61 3 9876 5432 Share register Everest Registry Services 23rd Floor 43 Terry Street Australia Phone: 61 2 9876 5431 Endeavour (International) Limited shares are listed on the Australian Stock Exchange (ASX) Solicitors Solicitors & Co 7 George Street Australia Bankers Bank Limited George Street Australia Auditors Ernst & Young Australia
ASX 4.10.10 CA 153(2)
ASX 4.10.11 AASB 101.138(a)
AASB 101.138(a)
ASX 4.10.12
ASX 4.10.13
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Directors' report
Your directors submit their report for the year ended 31 December 2011.
CA 298(1)
Directors
The names and details of the Company's directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Names, qualifications, experience and special responsibilities J. Barraclough (Non-executive Chairman) J. Barraclough formed Endeavour (International) Limited in 1975 and was the Managing Director of the Company until his retirement in 2002. Presently, he is the Group Chairman and also serves on the audit, remuneration and nomination committees of the Group. During the past three years Mr Barraclough has also served as a director of the following other listed companies:
X X X
CA 300(1)(c)
CA 300(10)(a)
D.A. Bank Ltd* appointed 30 June 2004 Spartan Ltd appointed 30 October 2005; resigned 29 October 2010 Horizon Oil Ltd* appointed 15 July 2006
CA 300(11)(e)
* Denotes current directorship
M.P. Boiteau, B.Sc (Director and Chief Executive Officer) M.P. Boiteau joined the Company as part of the acquisition of the fire prevention business in 1983, becoming Production Manager in 1994 and a director in 1998. He now combines the role of Production Director with that of Managing Director while also serving on the Group's finance and treasury committees. C.P. Muller, B.Com., F.C.A. (Finance Director) C.P. Muller joined Endeavour (International) Limited as Finance Director in 2002. Prior to joining the Group, she was a senior partner in an accounting firm. Ms Muller also serves on the Group's finance and treasury committees. F. van den Berg, LL.B. F. van den Berg has combined his work as a practising solicitor with his role as a non-executive director of the Company since 2002. He resigned as a non-executive director of the board on 15 January 2012. F. van den Berg was a member of the remuneration and nomination committees and was chairman of the Group's audit committee. During the past three years he has also served as a director of the following listed companies:
X X
Castle Ltd * appointed 15 July 2005 Carrington Ltd appointed 30 June 2002; resigned 29 June 2010
CA300(11)(e)
* Denotes current directorship
A.N. Lockwood, M. Eng. A.N. Lockwood joined the board as a non-executive director in 2006. She is an engineer with significant expertise in the electronics and aviation industries and also serves on the nomination and remuneration committees of the Group. M. Evans M. Evans is an American citizen and served as the President of the Australasian operations of S.J. Limited, the ultimate holding company of Endeavour (International) Limited, from 1982 to 1986. He retired as a non-executive director of the board on 28 July 2011. During the past three years Mr Evans has held the following listed company directorships:
X
DE Manufacturing Ltd appointed 31 December 2001; resigned 30 June 2010
11
Directors' report (continued)

Directors (continued)
M.A. Vlahov, B.Com., C.A. M.A. Vlahov joined the board as a non-executive director in 2006. She is a practising chartered accountant and tax practitioner and is Chairman of the audit committee and a member of the remuneration committee of the Group. C. Smart, M. Sc. C. Smart joined the board as a non-executive director on 1 May 2009. He has extensive knowledge of the chemical industry and has a Masters degree in chemical engineering from the University of Melbourne. P.R. Garcia (alternate director) P.R. Garcia is a practising chartered accountant. He joined the board to act as an alternate director for M.P. Boiteau and C.P. Muller in 2006. Interests in the shares and options of the company and related bodies corporate As at the date of this report, the interests of the directors in the shares and options of Endeavour (International) Limited were: Number of ordinary shares 321,940 702,000 117,500 59,000 37,000 15,000 10,000 Number of preference shares 20,000 6,000 5,000 Number of options over ordinary shares 110,000 98,500 CA 300(11)(a),(c)
J. Barraclough M.P. Boiteau C.P. Muller A.N. Lockwood M.A. Vlahov C. Smart P.R. Garcia
Company Secretary
G.K. Dellas B.Comm. (Hons) F.C.A G.K. Dellas has been the Company Secretary of Endeavour (International) Limited for eight years. She has been a chartered accountant for over 15 years.
CA 300(10)(d)
Dividends
Cents Final dividends recommended: ordinary shares Dividends paid in the year: Interim for the year on ordinary shares on preference shares 5.01 $000 1,087
CA 300(1)(a) CA 300(1)(b)
4.66 0.46
877 13 890
Final for 2010 shown as recommended in the 2010 financial report on ordinary shares on preference shares
5.66 0.46
1,069 13 1,082
12

Principal activities
The principal activities during the year of entities within the consolidated entity were:
X X
CA 299(1)(c)
Supply and servicing of electronic equipment for defence, aviation and electrical safety markets Production, installation and servicing of extinguishers, fire prevention equipment and fire retardant fabrics Production of rubber hosepipes for commercial applications Leasing of offices and manufacturing sites that are surplus to the Group's requirements
X X
Other than the discontinuance of the rubber equipment segment which came about through the sale of Hose Limited, there have been no other significant changes in the nature of these activities during the year.
Operating and financial review

Group overview Endeavour (International) Limited was formed in 1975 by J. Barraclough, who is the current Chairman of the board. During the year the Group decided to dispose of Hose Limited. The disposal of Hose Limited is due to be completed on 28 February 2012 and, as at 31 December 2011, final negotiations for the sale were in progress. Both transactions are discussed in further detail below. The acquisition on 1 May 2011 of Extinguishers Limited, a company that has been established in Australia for many years, has further strengthened the fire prevention division of the Group. This company has a well-established research and development department, and will help ensure that the Group's products remain state-of-the-art. Additionally, the acquisition of Extinguishers Limited has allowed the Group to gain control of a significant fire prevention patent, thus ensuring future strong sales opportunities for the Group. The Group also acquired an additional 7.4% interest in the voting shares of Lightbulbs Limited, a company based in Australia specialising in the production and distribution of lightbulbs. This business was acquired to enlarge the range of products in the electronics segment. As at 31 December 2011, the Groups ownership interest in Lightbulbs Limited was 87.4%. Electronics The electronics business is a producer and supplier of electronic equipment for defence, aviation and electrical safety markets. It offers products and services in the areas of electronics, safety, thermal and electrical architecture. Segment sales from the electronics segment have increased by 4% to $76,728,000 and the segment net operating profit after tax has decreased by 45% to $2,968,000 due to significant cost inefficiencies for certain electrical components. Management believes that continued market growth will allow the electronics segment of the Group to improve its profitability. The Group has recently introduced a new range of safety products for the aviation sector, both military and civil. These are the first in a new line of next generation safety products that use sophisticated computerised techniques to communicate with their environment, thereby reducing the number of malfunctions. Several key clients are currently testing the products and initial customer reaction has been favourable. We are confident that these products will meet any new security measures introduced by the aviation industry. Fire prevention equipment The fire prevention equipment business produces and installs extinguishers, fire prevention equipment and fire retardant fabrics for industrial markets.
CA 299(1)(a) CA 299A(1) ASX 4.10.17
13

Operating and financial review (continued)
Fire prevention equipment (continued) Extinguishers Limited was acquired on 1 May 2011, and therefore the results for the year include seven months of sales from that business. We expect a further increase in revenues in fire prevention for the 31 December 2012 year end, benefiting from a full year of trading by Extinguishers Limited. The acquisition of Extinguishers Limited adds the area of fire retardant fabrics to the portfolio of products offered by the Group, and we believe this puts the Group in a strong position in the market as it is now able to offer a full range of fire prevention products to its customers. Investment property The investment property business leases offices and manufacturing sites surplus to the Group's requirements and does not actively trade in the investment property market. Performance indicators Management and the board monitor the Group's overall performance, from its implementation of the mission statement and strategic plan through to the performance of the Group against operating plans and financial budgets. The board, together with management, have identified key performance indicators (KPIs) that are used to monitor performance. Key management monitor KPIs on a regular basis. Directors receive the KPIs for review prior to each monthly board meeting allowing all directors to actively monitor the Group's performance. Dynamics of the business Markets remained demanding and difficult during the period making it increasingly challenging to reach our high sales growth targets. However, management remains confident that an improving market together with the Group's market stronghold will allow the Group to continue its steady growth strategy over the coming years. Conditions are expected to continually improve, at least over the next 12 to 18 months, and some of our newer operations are showing signs of profitability by starting to move into a more stable environment fostering future growth. The Group has been an assertive player in the fire prevention market over the last 12 months and will continue to be in the foreseeable future especially with the impending publication of the Fire Prevention Act (the Act). It is anticipated that the Act will be issued within the next 12 months. It is a parliamentary initiative that has come about as a direct result of the severe fires that occurred in office buildings in the states of New South Wales and Queensland during 2011. It is expected that the Act will require all companies with more than 250 employees to replace their fire prevention equipment every five years. Management believes that this development will foster and allow the aforementioned company growth to occur. Management believes the results of the Group show that the Group has had a good year, particularly the fire prevention equipment business. Management believes they have taken the appropriate steps to ensure that the Group is in a strong position to cope with the current economic uncertainties and exploit future opportunities. On 1 March 2011, the Group announced the board of directors decision to dispose of Hose Limited. Hose Limited had been operating in a volatile market for the last few years making it difficult for management to achieve any real growth and profitability in this segment. Additionally, the level of investment required to turn around the businesses would have diverted valuable resources from the Group's more profitable core activities. The divestments will allow the Group to concentrate on its core activities, the manufacture of electronic safety products and fire prevention equipment. Final negotiations are under way with the buyer seeking to purchase Hose Limited. It is envisaged that the sale will be completed by 28 February 2012. Due to sensitivities and legalities surrounding the divestment, management is not at liberty to disclose any further information surrounding disposal of this business.
CA 299(1)(a)
14

Operating results for the year The year was one in which, having successfully defended the takeover offer made by Fire Products Limited for Endeavour (International) Limited at the start of the year, strong foundations were laid for the future growth of the Group. The Group's net profit for the year before income tax is $12,118,000 (2010: $10,869,000) representing an increase of 11% (2010: 12%) from the previous year. The acquisition of Extinguishers Limited during the year has also assisted in the growth of the Group. The net profit also includes the following significant items before income tax:
X
CA 299(1)(a)
Gains on the disposal of property, plant and equipment in the current year of $532,000 before tax (2010: $2,007,000) Profit of $213,000 (2010: loss $193,000) arising from Hose Limited (the discontinued operation of the Group)
Net profit from continuing operations before tax excluding significant items is $11,373,000 (2010: $9,055,000) representing a 26% (2010: 49.3%) increase from last year (see the table presented below). Net underlying profit from continuing operations excluding significant items before tax represents net profit for the period, excluding the effect of discontinued operations, impairment of assets and intangibles and net gains on disposal of property, plant and equipment. A reconciliation of underlying profit from continuing operations to net profit for the period as reported in the statement of comprehensive income is as follows: 2011 $000 12,118 (532) 11,586 2010 $000 10,869 301 (2,007) 9,163 Change % 11% (100%) (73%) 26%
Net profit for the period before tax Impairment of assets and intangibles Net (gains) on disposal of property, plant and equipment (Profit)/loss from discontinued operations before tax - Hose Limited and Pipe Limited losses (including impairment loss and gain on disposal in the current year) Underlying profit from continuing operations before tax Summarised operating results are as follows:
(213) 11,373
193 9,356
210% 22%
2011 Revenues $000 Operating segments Fire prevention equipment Electronics Investment property Discontinued operations Inter segment eliminations Consolidated entity revenue and profit for the year 139,842 76,728 1,404 217,974 42,809 260,783 (7,465) 253,318 10,475 2,968 321 13,764 213 13,977 (1,859) 12,118 Results $000
15

Shareholder returns The Group is pleased to report that return to shareholders, both through dividends and capital growth, has started to reflect the many initiatives put in place by management. This is reflected in the significant improvement in most financial measures for the current year. 2011 38.1 5.7 8.1 12.4 1.18:1 2010 37.8 7.2 7.4 15.1 1.15:1 2009 30.7 9.4 6.9 17.6 1.28:1 2008 37.5 12.5 7.1 27.8 1.29:1
CA 299(1)(a)
Basic earnings per share (cents) Return on assets (%) Weighted average cost of capital (%) Return on equity (%) Debt/equity ratio (%)
The share price continues to benefit from our improved performance and we are confident that as a result of the many initiatives in place to increase sales and continue to improve profitability, the favourable movement in share price will continue. The Company's total shareholder return (TSR) continues to outperform the TSR of a selected group of peer companies. The Company's TSR and that of the comparator group is shown in the remuneration report. Review of financial condition Liquidity and capital resources The consolidated cash flow statement illustrates that there was an increase in cash and cash equivalents in the year ended 31 December 2011 of $5,131,000 (2010: $4,076,000). The increase in cash inflow in comparison with the prior year is caused by a number of factors. Operating activities generated $14,505,000 (2010: $13,696,000) of net cash flows. This increase in comparison to 31 December 2010 is largely due to better working capital management resulting from the strategies implemented by the board and one off engagement with the Company's consultants. This net increase in the cash flows from operating activities has been offset by a net increase in the amount of cash used for investing activities to $10,046,000 (2010: $7,793,000), which was mainly attributable to purchases of property, plant and equipment. There was also a $672,000 cash inflow (2010: $1,647,000 cash outflow) from financing activities largely due to repayment of borrowings during the year. Asset and capital structure Continuing operations $000 Debts: Trade and other payables Interest-bearing loans and borrowings Cash and short-term deposits Net debt Total equity Total capital employed Gearing 15,354 17,507 (15,818) 17,043 Discontinuing operations $000 7,242 5,809 (1,294) 11,757 2011 Total operations $000 22,596 23,316 (17,112) 28,800 64,487 93,287 31% 2010 Total operations $000 21,584 22,203 (14,916) 28,871 49,178 78,049 36%
The level of gearing in the Group is within the acceptable limits of 30% to 45% set by the directors. The Group's policy allows up to 45% of financing to be provided by net debt at any particular time. Management's policies for determining the mix of fixed and floating rates of interest are examined on a half-yearly basis with the assistance of external financial advisors.
16

Share issues during the year The acquisition of Extinguishers Limited was funded by contingent consideration liability of $740,000 and by the issue of 2,500,000 ordinary shares at a price of $2.88 per share. Profile of debts The profile of the Group's debt finance is as follows: 2011 $000 Current Obligations under finance leases and hire purchase contracts Bank overdrafts Other loans Non-current Obligations under finance leases and hire purchase contracts Debentures Other loans Convertible non-cumulative redeemable preference shares 2010 $000
CA 299(1)(a)
83 966 1,411 2,460
51 2,650 74 2,775
905 3,374 13,799 18,078 2,778 19,140 20,856
943 3,154 15,462 19,559 2,644 17,567 22,203
The Group's debts have decreased over the last year. The Group anticipates that its debts will continue to decrease over the coming year once the Hose Limited transaction is completed. Of the Group's debts, 11% is repayable within one year of 31 December 2011, compared to 13.1% in the previous year. Capital expenditure There has been an increase in cash used to purchase property, plant and equipment in 2011 to $10,352,000 from $7,822,000 for the year ended 31 December 2010. Further capital commitments of $975,000 existed at the reporting date, principally relating to the completion of the operating facilities of Sprinklers Inc., $228,000 relating to the Group's associate Power Works Pty Ltd and $4,900,000 in relation to the Group's interest in the jointly controlled operation. Treasury policy The Group has established a treasury function responsible for managing the Group's currency risks and finance facilities. The treasury division operates within policies set by the board, and the board has also established a treasury committee that is directly responsible for ensuring management's actions are in line with Group policy. Hedging is undertaken whenever possible through the use of interest rate swap contracts and foreign exchange contracts.
17

Risk management The Group takes a proactive approach to risk management. The board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Group's objectives and activities are aligned with the risks and opportunities identified by the board. The Group believes that it is crucial for all board members to be a part of this process, and as such the board has not established a separate risk management committee. Instead sub-committees are convened as appropriate in response to issues and risks identified by the board as a whole, and each respective sub-committee further examines the issue and reports back to the board. The board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks identified by the board. These include the following:
X
CA 299(1)(a)
The completion of a stakeholder needs analysis (SNA), which is a powerful tool in ensuring that the board is cognisant of the diverse needs of various stakeholders and assists in identifying the risks the business may face if those needs are not met. The SNA is a dynamic document and the board holds an annual workshop, in addition to the ongoing discussion of this document in board meetings, to specifically review and update the SNA. Board approval of a strategic plan, which encompasses the Group's vision, mission and strategy statements, designed to meet stakeholders' needs and manage business risk. Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets, including the establishment and monitoring of KPIs of both a financial and non-financial nature. The establishment of committees to report on specific business risks, including for example such matters as environmental issues and occupational health and safety. The establishment of a treasury committee, which assists in discharging the board's responsibility to manage the organisation's financial risks. The committee advises the board on such matters as the Group's liquidity, currency, interest rate and credit policies and exposures and monitors management's actions to ensure they are in line with Group policy.
CA 299(1)(b)
Significant changes in the state of affairs

Total equity increased to $64,487,000 from $49,178,000, an increase of $15,309,000. The movement was largely the result of increased profits. A further $7,203,000 of contributed equity was issued to facilitate the acquisition of Extinguishers Limited. Refer Note 20 for further information on movements in equity. The Group is in the final stage of negotiating the sale of Hose. This is discussed in further detail above. The acquisition of Extinguishers Limited has further strengthened the fire prevention division of the Group. This company has a well-established research and development department, which will help ensure that the Group's products remain state-of-the-art. Additionally, the acquisition of Extinguishers Limited has allowed the Group to gain control of a significant fire prevention patent, thus ensuring future strong sales opportunities for the Group.
Significant events after the balance date

On 14 January 2012, a building with a net book value of $1,695,000 and inventory with a net book value of $800,000 was severely damaged by flooding resulting in estimated impairment losses of $2,450,000. It is expected that insurance proceeds will fall short of the costs of rebuilding and the loss of inventories by $750,000. The financial effects of these events have not been reflected in the 2011 financial statements. On 22 February 2012, the directors of Endeavour (International) Limited declared a final dividend on ordinary shares in respect of the 2010 financial year. The total amount of the dividend is $1,087,345 which represents a fully franked dividend of 5.01 cents per share. The dividend has not been provided for in the 31 December 2011 financial statements.
CA 299(1)(d)
18

Likely developments and expected results
The directors are confident that the 2012 financial year will see an increase in sales of the Group's new electronic safety products. Additionally, the publication of the Fire Prevention Act in the next 12 months will present opportunities for future growth. The Group will also continue to look for ways of making its electronics business more profitable in the following year. The Government released the Clean Energy Act 2011 (the Act or the Scheme) which will have an impact on the Australian economy and also on the Group. The Act, which is substantially enacted as at 31 December 2011, will commence on the 1st of July 2012. None of the entities in the Group are liable entities under the Scheme, as direct emissions (that are covered by the Scheme) at any of its facilities do not exceed 25,000 tonnes of CO2-e, based on its emissions as per the Groups financial year 2011 green house accounts. Management does not expect that it will exceed this threshold in the foreseeable future. Management is currently reviewing its operations, expected financial impacts and opportunities, based on the information released. Impacts on valuation of assets are discussed in Note 16.
CA 299(1)(e)
Environmental regulation and performance

The Group holds licences issued by the relevant environmental protection authorities of the various countries in which the Group operates. These licences specify limits and regulate the management of discharges to the air and storm water run-off associated with the fire prevention and rubber equipment operations. The Group is registered under the National Greenhouse and Energy Reporting Act, under which it is required to report energy consumption and greenhouse gas emissions for its Australian facilities for the 12 months ended 30 June and future periods. The Group has established a separate sustainability group and data collection systems and processes are in place to meet the new requirements. In addition, the Groups Australian operations will be required to comply with the Australian Federal Governments Carbon Pollution Reduction Scheme which has been substantively enacted as at the date of this report and is expected to be phased in from July 2012. There have been no significant known breaches of the consolidated entity's licence conditions or any environmental regulations to which it is subject.
CA 299(1)(f)
Share options
Unissued shares As at the date of this report, there were 723,875 unissued ordinary shares under options (725,000 at the reporting date). Refer to the remuneration report for further details of the options outstanding. Option holders do not have any right, by virtue of the option, to participate in any share issue of the company or any related body corporate. Shares issued as a result of the exercise of options During the financial year, employees and executives have exercised options to acquire 75,000 fully paid ordinary shares in Endeavour (International) Limited at a weighted average exercise price of $4.09 per share.
CA 300(1)(d) CA 300(1)(e),(3),(6)
CA 300(1)(f),(3),(7)
Indemnification and insurance of directors and officers

During the financial year, the company indemnified Mr Boiteau against a liability for costs and expenses incurred in defending proceedings brought against him for a breach by Bright Sparks Ltd of employment regulations. Mr Boiteau was acquitted. The amount of the indemnity was $8,000. The company has agreed to indemnify all the directors and executive officers for any breach of environmental or discrimination laws by the company for which they may be held personally liable. The agreement provides for the company to pay an amount not exceeding $200,000 provided that: (a) The liability does not arise out of conduct involving a lack of good faith (b) The liability is for costs and expenses incurred by the director or officer in defending proceedings in which judgement is given in their favour or in which they are acquitted
CA 300(1)(g) CA 300(8)(a),(9)
CA 300(8)(a),(9)
19

During or since the financial year, the company has paid premiums in respect of a contract insuring all the directors of Endeavour (International) Limited against legal costs incurred in defending proceedings for conduct other than: (a) A wilful breach of duty (b) A contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001 The total amount of insurance contract premiums paid was $12,800.
CA 300(8)(b),(9)(f)
Directors' meetings
The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows: Directors' meetings Number of meetings held: Number of meetings attended: J. Barraclough M.P. Boiteau C.P. Muller F. van den Berg C. Smart A.N. Lockwood M. Evans M.A. Vlahov P.R. Garcia (alternate) 12 Meetings of committees Remuneration Nomination Finance 2 2 2
CA 300(10)(b)
Audit 4
Treasury 2
12 12 12 10 8 11 7 12 -
4 4 4 -
2 2 2 -
2 2 -
2 2 -
2 2 -
All directors were eligible to attend all meetings held, except for C. Smart, who was eligible to attend eight directors' meetings and M. Evans who was eligible to attend seven directors' meetings. Committee membership As at the date of this report, the company had an audit committee, a remuneration committee, a nomination committee, a finance committee and a treasury committee of the board of directors. Members acting on the committees of the board during the year were: Audit F. van den Berg (c) M.A. Vlahov J. Barraclough Remuneration J. Barraclough (c) F. van den Berg M.A. Vlahov Nomination J. Barraclough (c) F. van den Berg E.J. Brookes @ Finance M.P. Boiteau (c) C.P. Muller Treasury M.P. Boiteau (c) C.P. Muller
CA 300(10)(c)
Notes (c) Designates the chairman of the committee @ Mr E.J. Brookes is an independent consultant and non-director
Rounding The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) and where noted ($000) under the option available to the company under ASIC CO 98/0100. The company is an entity to which the class order applies.
ASIC CO 98/0100
20

Auditor independence and non-audit services
The directors received the following declaration from the auditor of Endeavour (International) Limited.
CA 298(1)(c)
Auditor's independence declaration to the directors of Endeavour (International) Limited

In relation to our audit of the financial report of Endeavour (International) Limited for the financial year ended 31 December 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
D.G. Brown Partner Sydney 25 February 2012

Liability limited by a scheme approved under Professional Standards Legislation.
Non-audit services
The following non-audit services were provided by the entity's auditor, Ernst & Young. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive the following amounts for the provision of non-audit services: Tax compliance services Assurance related and due diligence services Special audits as required by jurisdictional regulators $ 37,000 105,300 38,500 180,800
CA 300(11B)
21

Message from the remuneration committee
Dear Shareholders, The remuneration committee continued to review the approach to executive remuneration during 2010-2011 to ensure it aligns executive reward with the delivery of key business goals and objectives. The remuneration committee is comfortable that the current approach achieves this aim and no material changes were made to our approach during the year. Performance and resulting remuneration outcomes for the year For the 2011 year, a portion of the short-term incentive payment is based on attainment of Earnings per Share (EPS) targets; for business unit leaders a portion is also assessed on business unit Profit Before Tax (PBT); the remaining portion is based on non-financial measures (including measures such as market and competitive positioning, customer service, etc). The EPS target set by the board was met, and the target payment for the corporate financial component was therefore achieved. The business unit PBT targets were met by the US operations and Electronics divisions however, as a result of tough market environments, the Fire Prevention Equipment division did not achieve target. The payments made to executives align with the performance of their business unit. Performance against the non-financial measures also varied, with most executives meeting or exceeding their targets. This performance is reflected in the payments made (further performance detail in relation to the short-term incentive is set out on page 26). One-third of the short-term incentive was deferred into share options which vest after two years. A clawback mechanism is in place which permits the board to reduce the deferred amount in specific circumstances. In terms of long-term incentives, during FY11, the performance hurdles for the 2009 grant of share options were partially met, with Endeavour Limited ranking at median of our total shareholder return peer group, and 50% of the relevant options vesting to executives. Remuneration changes Changes to remuneration were constrained this year, with the majority of executives receiving 3% increases to fixed remuneration in line with the budget applied to our broader workforce. The exception to this was Mr. Davis, whose remuneration was increased more significantly 12% due to the expanding responsibilities of his role, his strong contribution to our business during the year and based on an assessment of market remuneration for comparable roles. Executive changes During the year there were several changes to our executive team. Mr. Cunica and Mr. Dhalliwell departed the company. All termination payments were in line with their contractual entitlements and are under the termination payment cap set out in the Corporations Act. Mr. Adamidis and Mr. Jaffe both joined the company during the year. Their remuneration details are set out in this report. Non-executive director remuneration The remuneration of non-executive directors of the Company consists only of director fees and committee fees. The increase in directors annual aggregate fee pool to $1,500,000 was approved at the 2010 Annual General Meeting (AGM). In line with executive and employee fixed remuneration, the FY11 director fees that utilise this pool were increased by 3%. The board values shareholder feedback and I look forward to answering any questions you may have at our AGM. Yours faithfully,
J. Barraclough, Group Chairman
22

Remuneration report (audited)
This remuneration report for the year ended 31 December 2011 outlines the remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C) of the Act. The remuneration report is presented under the following sections: 1. 2. 3. Introduction Remuneration governance Executive remuneration arrangements A. Remuneration principles and strategy B. Approach to setting remuneration C. Detail of incentive plans Executive remuneration outcomes for 2011 (including link to performance) Executive contracts Non-executive director remuneration (including statutory remuneration disclosures) Additional statutory disclosures
CA 300A(1) CA 300A(1A) CA 308 (3C)
4. 5. 6.
7.
1. Introduction The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the Parent and the Group receiving the highest remuneration. For the purposes of this report, the term executive includes the Chief Executive Officer (CEO), executive directors and other senior executives of the Parent and the Group. (i) Non-executive directors (NEDs) J. Barraclough Chairman (non-executive) F. van den Berg Director (non-executive) resigned 15 January 2012 A.N. Lockwood Director (non-executive) M. Evans Director (non-executive) retired 28 July 2011 M.A. Vlahov Director (non-executive) C. Smart Director (non-executive) appointed 1 May 2011 P.R. Garcia Alternate director (ii) Executive directors M.P. Boiteau C.P. Muller (iiI) Other executives R.S. Jaffe G.K. Dellas L.A. Basier C. Dhalliwell L.P.L. Adamidis A.R. Davis S. Cunica
Reg 2M.3.03(1) Items1-3 AASB 1124.9
Chief Executive Officer Finance Director
General Manager US Operations appointed 21 May 2011 Company Secretary and Chief of Treasury Operations Chief Financial Officer Chief Operations Officer resigned 30 November 2011 General Manager Mergers and Acquisitions appointed 1 January 2011 General Manager Electronics Sales General Manager Fire Prevention Equipment Sales Terminated 31 December 2011
Reg 2M.3.03(1) Items4-5
Other than the resignation of F. van den Berg, there were no other changes to KMP after the reporting date and before the date the financial report was authorised for issue.
23

Remuneration report (audited) (continued)
2. Remuneration governance Remuneration committee The remuneration committee comprises three independent NEDs. The remuneration committee has delegated decision making authority for some matters related to the remuneration arrangements for NEDs and executives, and is required to make recommendations to the board on other matters. Specifically, the board approves the remuneration arrangements of the CEO and other executives and all awards made under the long-term incentive (LTI) plan, following recommendations from the remuneration committee. The board also sets the aggregate remuneration of NEDs, which is then subject to shareholder approval, and NED fee levels. The remuneration committee approves, having regard to the recommendations made by the CEO, the level of the Group short-term incentive (STI) pool. The remuneration committee meets regularly through the year. The CEO attends certain remuneration committee meetings by invitation, where management input is required. The CEO is not present during any discussions related to his own remuneration arrangements. Further information on the remuneration committees role, responsibilities and membership can be seen at www.endeavourltd.com.au Use of remuneration consultants To ensure the remuneration committee is fully informed when making remuneration decisions, it seeks external remuneration advice. New legislation was introduced in 2011 that impacts how companies can seek advice which includes a remuneration recommendation in relation to KMP remuneration. Therefore, in FY11 the board underwent a formal appointment process and Ernst & Young was appointed as the remuneration advisor to the company. In order to ensure the remuneration committee is provided with advice, and as required, remuneration recommendations, free from undue influence by members of the KMP to whom the recommendations may relate, the engagement of Ernst & Young by the remuneration committee was based on an agreed set of protocols that would be followed by Ernst & Young, members of the remuneration committee and members of KMP. During the 2011 year, Ernst & Young provided the Company with:
X X X
CA 300A(1) CA 300A(1A)
Insights on remuneration trends, regulatory developments and shareholder views Market data in relation to CEO and executive remuneration Tax advice in relation to the share options plan
No remuneration recommendations were provided during the 2011 year. Remuneration report approval at FY10 AGM
The FY10 remuneration report received positive shareholder support at the FY10 AGM with a vote of 99% in favour.
3. Executive remuneration arrangements 3A: Remuneration principles and strategy Endeavour (International) Limiteds executive remuneration strategy is designed to attract, motivate and retain high performing individuals and align the interests of executives and shareholders.
CA 300A(1)(a)
24

3. Executive remuneration arrangements (continued) 3A: Remuneration principles and strategy (continued) The following diagram illustrates how the Companys remuneration strategy aligns with the strategic direction and links remuneration outcomes to performance. Business objective To be recognised as a national leader in our industry and build long-term value for shareholders.
CA 300A(1)(a) CA 300A(1)(a),(b) CA 300A(1) CA 300A(1A)
Remuneration strategy linkages to business objective Align the interests of executives with shareholders
X
Attract, motivate and retain high performing individuals

X
The remuneration framework incorporates at-risk components, including both short and longer term elements delivered in equity Performance is assessed against a suite of financial and non-financial measures relevant to the success of the company and generating returns for shareholders
The remuneration offering is competitive for companies of a similar size and complexity Deferred and longer-term remuneration encourages retention
Remuneration component Fixed remuneration
Vehicle
X
Purpose
X
Link to performance
X
Represented by total employment cost (TEC). Comprises base salary, superannuation contributions and other benefits. Paid partly in cash and partly as deferred share options.
To provide competitive fixed remuneration set with reference to role, market and experience.
Company and individual performance are considered during the annual remuneration review.
STI (including deferral)
Rewards executives for their contribution to achievement of Group and business unit outcomes, as well as individual key performance indicators (KPIs). The deferred component provides equity exposure, aligns executive reward with shareholder value creation and encourages longer-term decision-making.
Earnings per share (EPS) is the key financial metric. Linked to other internal financial measures, market share, customer service, risk management and leadership. The board may reduce or eliminate unvested deferred STI awards following consideration of any adverse outcomes that should impact assessment of performance. Considerations include any issues likely to affect the company's financial soundness, material restatements due to errors/omissions, major negligence, or acts that may have caused reputational damage.
25

3. Executive remuneration arrangements (continued) 3A: Remuneration principles and strategy (continued) Remuneration component LTI Vehicle
X
CA 300A(1) CA 300A(1A)
CA 300A(1)(a)
Purpose
X
Link to performance
X
Awards are made in the form of share options.
Rewards executives for their contribution to the creation of shareholder value over the longer term.
Vesting of awards is dependent on TSR performance relative to a peer group.
3B. Approach to setting remuneration In FY11, the executive remuneration framework consisted of fixed remuneration and short and longterm incentives as outlined below. The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group and aligned with market practice. The Groups policy is to position total employment cost (TEC) around the median of our direct industry peers and other Australian listed companies of a similar size and complexity. Total reward opportunities are intended to provide the opportunity to earn 75th percentile rewards for outstanding performance against the stretch targets set. Remuneration levels are considered annually through a remuneration review that considers market data, insights into remuneration trends, the performance of the company and individual, and the broader economic environment. The following summarises the CEOs and executives target remuneration mix. Fixed remuneration CEO Target remuneration mix 50% Executives Target remuneration mix 60% 3C. Detail of incentive plans
Short-term incentive (STI)
CA 300A(1)(a),(b)
Target STI opportunity
LTI (face value)
25%
25%
30%
10%
CA 300A(1)(ba)
The Group operates an annual STI program that is available to executives and awards a cash bonus subject to the attainment of clearly defined Group, business unit and individual measures. Executives are also required to defer a portion of the STI into equity. Actual STI payments awarded to each executive depend on the extent to which specific targets set at the beginning of the financial year are met. The targets consist of a number of key performance indicators (KPIs) covering financial and non-financial, corporate and individual measures of performance. A summary of the measures and weightings are set out below.
CA 300A(1)(ba)(i) Reg. 2M.3.03(1) Item 12(b)-(c)
26

3. Executive remuneration arrangements (continued) 3C. Detail of incentive plans (continued) Non-financial measures: Market and competitive positioning Customer service Implementation of key growth initiatives Risk management Leadership/team contribution 40% 50% 40%
CA 300A(1) CA 300A(1A)
Earnings per share (EPS)
Business unit profit before tax (PBT)
CEO Other functional executives Business unit leaders
60% 50% 30%
0% 0% 30%
These performance measures were chosen as they represent the key drivers for the short-term success of the business and provide a framework for delivering long-term value. The CEO and executives have a target STI opportunity of 50% of fixed remuneration, with a maximum opportunity (if the stretch targets are met) of 100% of fixed remuneration. On an annual basis, after consideration of performance against KPIs, the board, in line with their responsibilities, determine the amount, if any, of the short-term incentive to be paid to each executive, seeking recommendations from the CEO as appropriate. All executives are required to defer one-third of the annual STI earned into Endeavour (International) Limited equity. Deferred STI is delivered in the form of options to shares which vest after a two-year period. The deferred STI is forfeited if the individual resigns or is terminated for cause during the vesting period. The board may reduce or eliminate unvested deferred STI awards following consideration of any adverse outcomes that have arisen prior to vesting that, in the board's view, should impact the assessment of performance. Consideration will include any issues that are likely to have affected the company's financial soundness or are due to misrepresentations, material restatements due to errors/omissions (e.g. not a change to accounting standards), major negligence, or acts that may have caused reputational damage.
Long-term incentives (LTI)
CA 300A(1)(ba)(ii)
CA 300A(1)(ba)(iii)
CA 300A(1)(ba)
LTI awards are made annually to executives in order to align remuneration with the creation of shareholder value over the long-term. As such, LTI awards are only made to executives and other key talent who have an impact on the Group's performance against the relevant long-term performance measure. Structure LTI awards to executives are made under the employee share option plan and are delivered in the form of options to shares. The options will vest over a period of three years subject to meeting performance measures, with no opportunity to retest. Performance measure to determine vesting The Company uses relative total shareholder return (TSR) as the performance measure for the share options plan. Relative TSR was selected as the LTI performance measure for the following reasons:
X X
CA 300A(1)(ba)
CA 300A(1)(a),(b) CA 300A(1)(ba)(i) Reg 2M.3.03(1) Item 15(b)(vi)
CA 300A(1)(ba) (ii)
TSR ensures an alignment between comparative shareholder return and reward for executives The relative measure minimises the effects of market cycles
CA 300A(1)(ba)(iv)
The peer group chosen for comparison is the ASX 100 constituents at the start of the performance period. This peer group was chosen as it reflects the Group's competitors for capital and talent.
27

3. Executive remuneration arrangements (continued) 3C. Detail of incentive plans (continued) The Group's performance against the measure is determined according to Endeavour (International) Limited's ranking against the companies in the TSR peer group over the performance period. The vesting schedule is as follows: Relative TSR performance outcome Below the 50th percentile At the 50th percentile (target performance) Between the 50th and 75th percentile At or above the 75th percentile Percentage of award that will vest 0% 50% Straight-line vesting between 50-100% of the award 100%
CA 300A(1)(ba)(iii) CA 300A(1)(ba)(iv) CA 300A(1) CA 300A(1A)
TSR performance is monitored by an independent external adviser at 31 December each year. Table 3 in section 7 provides details of options awarded and vested during the year and Table 4 in section 7 provides details of the value of options awarded, exercised and lapsed during the year. Termination and change of control provisions Where a participant ceases employment prior to their award vesting, they may retain a number of unvested share options pro-rated to reflect participants period of service during the LTI grant performance period. These unvested share options only vest subject to meeting the relevant LTI performance measures. In the event of a change of control of the Group, the performance period end date will generally be brought forward to the date of the change of control and awards will vest subject to performance over this shortened period, subject to ultimate board discretion.
Hedging of equity awards
CA 300A(1)(da)
The Company prohibits executives from entering into arrangements to protect the value of unvested LTI awards. The prohibition includes entering into contracts to hedge their exposure to options awarded as part of their remuneration package. Adherence to this policy is monitored on an annual basis and involves each KMP signing an annual declaration of compliance with the hedging policy. 4. Executive remuneration outcomes for 2011 (including link to performance) Company performance and its link to short-term incentives The financial performance measures driving STI payment outcomes is earnings per share (EPS) of Endeavour Limited and profit before tax (PBT) of each business unit. The following chart shows Endeavour (International) Limiteds EPS over the five-year period from 1 January 2007 to 31 December 2011, while the table below summarises financial performance against the targets set by the board for the 2011 year. 5 year EPS performance
CA 300A(1)(b) CA 300A(1AA),(1AB)
50
EPS (cents/share)
40 30 20 10 0 2007 2008 2009

Year
2010
2011
28

4. Executive remuneration outcomes for 2011 (including link to performance) (continued) Performance against 2011 EPS and PBT targets The table below outlines FY11 Group and business unit EPS performance against targets. Business Unit Group US Operations Electronics Fire Prevention Equipment Performance measure EPS PBT PBT PBT FY 11 performance versus targets At target Between target and stretch Between target and stretch Between threshold and target
CA 300A(1) CA 300A(1A) CA 300A(1)(b) CA 300A(1AA),(1AB)
The following table outlines the proportion of maximum STI that was earned and forfeited in relation to the 2011 financial year. Name M.P. Boiteau C.P. Muller R.S. Jaffe G.K. Dellas L.A. Basier C. Dhalliwell L.P.L. Adamidis A.R. Davis S. Cunica Proportion of maximum STI earned in FY11
60% 60% 70% 60% 60% 60% 60% 75% 25%
Proportion of maximum STI forfeited in FY11

40% 40% 30% 40% 40% 40% 40% 25% 75%
Company performance and its link to long-term incentives The performance measure which drives LTI vesting is the Companys TSR performance relative to the companies within the ASX 100 peer group. The graph below shows the performance of the Group as measured by the Group's total shareholder return (TSR) and the comparison of the Group's TSR to the median of the TSR for the ASX 100 for the past five years (including the current period) to 31 December 2011.
Median TSR for the ASX100 Endeavour International (Limited)
350 300 TSR (rebased to 100) 250 200 150 100 50 0

Dec-06 Dec-07 Dec-08 Date Dec-09 Dec-10 Dec-11
29

4. Executive remuneration outcomes for 2011 (including link to performance) (continued) LTI vesting outcomes The table below outlines both vesting and expected outcomes for outstanding awards in FY11. Projected outcomes for awards still to be tested are based on assuming the current TSR ranking remains unchanged at the relevant testing date. Relative TSR performance Implication for vesting 2009 grant Median ranking 2010 grant 75th percentile ranking 2011 grant 35th percentile ranking
CA 300A(1) CA 300A(1A) CA 300A(1)(b) CA 300A(1AA),(1AB)
50% of award vested in FY11
100% of award will vest if ranking remains unchanged to the testing date in FY12
No vesting if ranking remains unchanged to the testing date in FY13
Table 1: Actual remuneration outcomes for FY11
The table below outlines the remuneration actually received by executives in FY11. The table includes fixed remuneration, the cash component of the STI earned for FY11 performance, vesting of the FY09 deferred STI and [50%] vesting of the 2008 LTI grant. The value attributed to the equity amounts (i.e., deferred STI and LTI) are based on the number of shares that vested multiplied by the share price at the date of vesting. Note that the value actually received by individuals differs from the remuneration outlined in Table 2 (which is based on accounting values).
Name Fixed remuneration 464,530 365,264 446,300 244,986 370,491 124,057 145,730 266,952 241,381 STI cash (FY11 performance) 139,359 109,579 156,205 73,496 111,147 37,217 43,219 100,107 30,173 Deferred STI vested (FY09 STI) 50,000 22,500 33,000 LTI award vested (2008 LTI grant) 11,650 3,495 53,590 Total remuneration received 665,539 500,838 602,505 318,482 568,228 161,274 188,949 367,059 271,554
M.P. Boiteau C.P. Muller R.S. Jaffe G.K. Dellas L.A. Basier C. Dhalliwell L.P.L. Adamidis A.R. Davis S. Cunica
30
Remuneration of key management personnel and the five highest paid executives of the Company and the Group
Post employment Long-term benefits Share-based payments Termination payments Total Performance related
CA 300(A)(1)(c) CA 300A(1)(e)(i) Reg 2M.3.03(1) Items 6-11 CA 300A(1), CA 300A(1A)
Table 2: Executive remuneration for the years ended 31 December 2011 and 31 December 2010
Short-term benefits
Salary & fees $ Other $ Shares* $ $ $ 824 800 29,664 28,800 2,000 1,800 22,000 11,000 37,080 36,000 1,000 800 22,000 19,000 14,626 14,200 6,000 -
Cash bonus $
Non monetary benefits $ SuperRetirement Cash annuation^ benefits Incentives $ $ $ Share options $ Long service leave $ 626,889 670,800 498,843 411,600
% 25.74 32.77 26.38 14.82
Executive directors M.P. Boiteau
2011 2010
412,000 400,000
139,359 200,000
C.P. Muller
2011 2010
329,600 320,000
109,579 50,000
Other key management personnel R.S. Jaffe* 10,480 8,496 8,250 4,520 560 480 4,480 4,000 49,642 26,450 3,065 1,500 213,152 162,000 19,931 19,350 21,672 19,350 31,000 20,250 1,000 500 300 2,000 1,800 11,000 7,100 10,197 9,900 1,000 800 30,591 29,700 1,000 800 10,560 5,300 (18,300) 6,600 4,000 16,500 7,460 117,360 61,040 721 700 19,467 18,900 1,000 800 8,000 14,280 1,520 24,300 31,000 1,500 50,000 -
2011 2010
410,000 -
156,205 -
125,000 125,000 -
685,005 327,479 276,930 497,718 421,800 143,974 150,700 190,449 374,159 276,650 415,054 269,610 3,759,571 2,478,090
30.10 24.89 13.82 24.45 14.53 13.14 19.91 22.96 28.52 13.74 11.25 12.41
G.K. Dellas
2011 2010
216,300 210,000
73,495 24,000
L.A. Basier
2011 2010
339,900 330,000
111,147 56,000
C. Dhalliwel@
2011 2010
113,300 110,000
37,217 30,000
L.P.L. Adamidis**
2011 2010
125,000 -
43,719 -
A.R. Davis
2011 2010
240,800 215,000
100,107 34,000
S. Cunica#
2011 2010
221,450 215,000
30,173 26,000
Total executive KMP Total executive KMP
2011 2010
2,408,350 1,800,000
801,002 420,000
** ^ @ #
Mr. Jaffe received a sign-on award of $50,000 in shares on commencement of employment. L.P.L Adamidis met the definition of a key management person on her appointment as General ManagerMergers and Acquisitions on 1 January 2011. In respect of defined benefit plans, the amount disclosed relates to the total costs under the plan in relation to that person as determined in accordance with AASB 119.13 C. Dhalliwel resigned on 30 November 2011 and forfeited his share options. Any share based payment expense previously recognised under AASB 2 in respect of the options has been reversed. While S. Cunica resigned on 31 December 2011, the board deemed Mr. Cunicas termination to be for a qualifying reason and as a consequence, permitted Mr. Cunica to retain a proportion of the awards made under the LTI plan. The Group has expensed the full entitlement under the 2010 and 2011 offers.
31

5. Summary of executive contractual arrangements Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are provided below. The contracts below includes arrangements entered into prior to the amendments to the Corporations Act 2001 regarding termination payments which came into effect on 24 November 2009. The new legislative provisions apply to KMP contract variations after 24 November 2009 and to agreements with KMPs appointed after 24 November 2009. As such, pre-existing contracts are generally not subject to the new limits on termination payments. Chief Executive Officer The CEO, Mr. Boiteau, is employed under an ongoing contract which can be terminated with notice by either side. Under the terms of the present contract as disclosed to the ASX on 14 September 2008:
X X X
CA 300A(1) CA 300A(IA) CA 300A(1)(e)(vii) Reg 2M.3.03(1) Item 13
The CEO receives fixed remuneration of $425,000 per annum The CEOs target STI opportunity is 25% of annual TEC and his maximum STI opportunity is 50% of TEC The CEO is eligible to participate in Endeavour (International) Limiteds LTI plan on terms determined by the board, subject to receiving any required or appropriate shareholder approval
The CEOs termination provisions are as follows: Notice period 6 months None Payment in lieu of notice 6 months None Treatment of STI on termination Unvested awards forfeited. Unvested awards forfeited. Clawback of deferred STI payments at the boards discretion. Pro-rated for time and performance. Treatment of LTI on termination Unvested awards forfeited. Unvested awards forfeited.
Resignation Termination for cause
Termination in cases of death, disablement, redundancy or notice without cause
12 months
12 months
Pro-rated for time and performance.
Minimum shareholding requirement In order to align executive interests with shareholder interests, all executives including the CEO are required to acquire, at their own expense, as soon as reasonably practicable after commencement with the Company, shares to the value of $500,000 (at the time of their acquisition).
32

Other KMP All other KMP have rolling contracts. Standard KMP termination provisions are as follows: Notice period 3 months None Payment in lieu of notice 3 months None Treatment of STI on termination Unvested awards forfeited. Unvested awards forfeited. Clawback of deferred STI payments at the boards discretion. Pro-rated for time and performance. Treatment of LTI on termination Unvested awards forfeited. Unvested awards forfeited.
CA 300A(1) CA 300A(IA)
Resignation Termination for cause
Termination in cases of death, disablement, redundancy or notice without cause
3 months
6 months
Pro-rated for time and performance.
Payments applicable to outgoing executives In addition to the above terms and conditions, Mr. Jaffe received a sign-on award of $50,000 on commencement of employment. Mr. Jaffe received the full award in ordinary shares in the Company. The following arrangements applied to outgoing executives in office during the 2011 financial year:
X
Due to health reasons, Mr. Cunica resigned from his position on 31 December 2011. As a result, Mr Cunica received a termination payment of $125,000, in accordance with the terms of his employment contract. Adhering to the termination provisions previously stated, Mr. Cunica retained two-thirds of his STI payment for the financial year ending 31 December 2011. The remaining one-third (mandatory STI deferral amount) will be forfeited. Additionally, the board permitted Mr. Cunica to retain a pro-rated (based on time and performance) portion of the awards made under the LTI plan in 2009 and 2010. These awards will vest subject to meeting the relevant performance hurdles set for each award grant. The number of unvested options held by Mr Cunica is 27,000.
CA 300A(1)(a), (b)
6. Non-executive director remuneration arrangements Remuneration policy The board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually against fees paid to NEDs of comparable companies (typically S&P ASX 200 listed companies with market capitalisation 50% to 200% of the Company as well as similar sized industry comparators). The board considers advice from external consultants when undertaking the annual review process. The Companys constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time by a general meeting. The latest determination was at the 2010 AGM held on 30 April 2011 when shareholders approved an aggregate fee pool of $1,500,000 per year. The board will not seek any increase for the NED pool at the 2011 AGM.
33

Structure The remuneration of NEDs consists of directors fees and committee fees. The payment of additional fees for serving on a committee recognises the additional time commitment required by NEDs who serve on subcommittees. The Chairman of the board attends all committee meetings but does not receive any additional fees in addition to his board fee. The table below summarises the NED fees for FY11: Board fees Chairman Directors Committee fees Committee Chair Committee Member $200,000 $120,000
CA 300A(1) CA 300A(IA)
$30,000 $20,000
NEDs do not receive retirement benefits, nor do they participate in any incentive programs. The remuneration of NEDs for the year ended 31 December 2011 and 31 December 2010 is detailed in table 3 section 8 below. Table 3: NED remuneration for the year ended 31 December 2011 and comparative 2010 remuneration Short-term benefits Post employment Total
CA 300(A)(1)(c) Reg 2M.3.03(1) Items 6-11
Financial year
Salary & fees $
Non monetary benefits $
Other $
Superannuation^ $
Non-executive directors J. Barraclough F. van den Berg A.N. Lockwood M. Evans M.A. Vlahov C. Smart P.R. Garcia FY 11 NED FY 10 NED
^
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
360,500 350,000 303,850 295,000 247,200 240,000 139,050 135,000 257,500 250,000 180,570 175,311 11,330 11,000 1,500,000 1,456,311
360,500 350,000 303,850 295,000 247,200 240,000 139,050 135,000 257,500 250,000 180,570 175,311 11,330 11,000 1,500,000 1,456,311
In respect of defined benefit plans, the amount disclosed relates to the total costs under the plan in relation to that person as determined in accordance with AASB 119.13
34

CA 300A(1), CA 300A(1A)
7. Additional statutory disclosures
This section sets out the additional disclosures required under the Corporations Act 2001.
The table below discloses the share options granted to executives as remuneration during FY11. Share options do not carry any voting or dividend rights and will automatically be exercised once the vesting conditions have been met.
Table 4: Options awarded and vested during the year (Consolidated)
Reg 2M.3.03(1) Item 12(e), 15(a),(b)
31 December 2011
Year
Terms and conditions for each grant during the year Fair value per Options awarded options at award during the year date No. Award date ($) Vesting date
No. vested during No. lapsed during year year
Executive directors M.P. Boiteau
C.P. Muller
2011 2010 2009 2008 2011 2010 2009 2008
50,000 50,000 -
1-Jan-2011 1-Jan-2010 1-Jan-2009 1-Jan-2008 1-Jan-2011 1-Jan-2010 1-Jan-2009 1-Jan-2008
$1.32 $1.32 -
31-Dec-2013 31-Dec-2012 31-Dec-2011 31-Dec-2010 31-Dec-2013 31-Dec-2012 31-Dec-2011 31-Dec-2010
5,000 1,500
9,000 -
Other key management personnel R.S. Jaffe G.K. Dellas
L.A. Basier
A.R. Davis
C. Dhalliwell
L.P.L. Adamidis S. Cunica
2011 2011 2010 2011 2010 2009 2008 2011 2010 2011 2010 2011 2010 2009 2008
24,000 24,000 15,000 8,000 -
21-May-2011 1-Jan-2011 1-Jan-2010 1-Jan-2011 1-Jan-2010 1-Jan-2009 1-Jan-2008 1-Jan-2011 1-Jan-2010 1-Jan-2011 1-Jan-2010 1-Jan-2011 1-Jan-2010 1-Jan-2009 1-Jan-2008
$1.32 $1.32 $1.32 $1.32 -
Total
31-Dec-2013 31-Dec-2013 31-Dec-2012 31-Dec-2013 31-Dec-2012 31-Dec-2011 31-Dec-2010 31-Dec-2013 31-Dec-2012 31-Dec-2013 31-Dec-2012 31-Dec-2013 31-Dec-2012 31-Dec-2011 31-Dec-2010 -
23,000 -
4,000 8,000
35

7. Additional statutory disclosures (continued) Table 5: Value of options awarded, exercised and lapsed during the year ^ Value of options Value of options Value of options Remuneration granted during exercised during lapsed during the consisting of share the year 18 the year 22 year 23 options for the year $ $ $ % M.P. Boiteau C.P. Muller R. S. Jaffe L.A. Basier A.R. Davis G.K. Dellas C. Dhalliwel S. Cunica
^ *
CA 300A(1)(e)(ii)-(vi) CA 300A(1), CA 300A(1A)
66,000 66,000 39,600 31,680 19,800 18,300 -
11,650 3,495 53,590
18,300 9,300
2.9 4.4 2.4 2.1 2.6 (10.2)* (2.0)*
For details on the valuation of the options, including models and assumptions used, please refer to Note 25. Represents forfeiture on resignation.
Reg. 2M.3.03(1) Item 14
There were no alterations to the terms and conditions of options awarded as remuneration since their award date. Table 6: Shares issued on exercise of rights (consolidated) 31 December 2011 Executive directors M.P. Boiteau C.P. Muller Other key management personnel G.K. Dellas Total Shares issued No. Paid per share $ Unpaid per share $
Reg 2M3.03(1) Item16
5,000 1,500 23,000 29,500
2.33 2.33 2.33
Signed in accordance with a resolution of the directors.
CA 298(2)
M.P. Boiteau Director 25 February 2012
CA 298(2) CA 298(2)
36
;gjhgjYl] _gn]jfYf[]
Corporate governance statement

The board of directors of Endeavour (International) Limited is responsible for establishing the corporate governance framework of the Group having regard to the ASX Corporate Governance Council (CGC) published guidelines as well as its corporate governance principles and recommendations. The board guides and monitors the business and affairs of Endeavour (International) Limited on behalf of the shareholders by whom they are elected and to whom they are accountable. The table below summarises the Company's compliance with the CGC's recommendations. Comply Yes / No Reference / explanation ASX Listing Rule/CGC recommendations
Recommendation Principle 1 Lay solid foundations for management and oversight 1.1 Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions. Companies should disclose the process for evaluating the performance of senior executives. Companies should provide the information indicated in the guide to reporting on Principle 1.
Yes
Page 39
ASX CGC 1.1
1.2 1.3
Yes Yes
Page 41 Page 41
ASX CGC 1.2
ASX CGC 1.3
Principle 2 Structure the board to add value 2.1 2.2 2.3 2.4 2.5 A majority of the board should be independent directors. The chair should be an independent director. The roles of chair and chief executive officer (CEO) should not be exercised by the same individual. The board should establish a nomination committee. Companies should disclose the process for evaluating the performance of the board, its committees and individual directors. Companies should provide the information indicated in the guide to reporting on Principle 2. Yes Yes Yes Yes Yes Page 40 Page 40 Page 40 Page 41 Page 41
ASX CGC 2.1 ASX CGC 2.2 ASX CGC 2.3
ASX CGC 2.4 ASX CGC 2.5
2.6
Yes
Page 41
ASX CGC 2.6
Principle 3 Promote ethical and responsible decision-making 3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to:
X
Yes
Website
ASX CGC 3.1
The practices necessary to maintain confidence in the company's integrity The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders The responsibility and accountability of individuals for reporting and investigating reports of unethical practices Yes Page 41
ASX CGC 3.2
3.2
Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them. Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executives positions and women on the board.
3.3
Yes
ASX CGC 3.3
3.4
Yes
ASX CGC 3.4
37
Corporate governance statement (continued)

Recommendation Comply Yes / No Reference / explanation ASX Corporate Governance Council recommendations
ASX CGC 3.5
3.5
Companies should provide the information indicated in the guide to reporting on Principle 3.
Yes
Page 40
Principle 4 Safeguard integrity in financial reporting 4.1 4.2 The board should establish an audit committee. The audit committee should be structured so that it:
X X X
Yes Yes
Page 41 Page 41
ASX CGC 4.1 ASX CGC 4.2 ASX LR 12.7
Consists only of non-executive directors Consists of a majority of independent directors Is chaired by an independent chair, who is not chair of the board Has at least three members Yes Yes Page 41 Website
4.3 4.4
The audit committee should have a formal charter. Companies should provide the information indicated in the guide to reporting on Principle 4.
Principle 5 Make timely and balanced disclosure 5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Companies should provide the information indicated in the guide to reporting on Principle 5. Yes Website
ASX CGC 5.1
5.2
Yes
Page 44
ASX CGC 5.2
Principle 6 Respect the rights of shareholders 6.1 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Companies should provide the information indicated in the guide to reporting on Principle 6. Yes Page 44
ASX CGC 6.1
6.2
Yes
Page 44
ASX CGC 6.2
Principle 7 Recognise and manage risk 7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. The board should require management to design and implement the risk management and internal control system to manage the company's material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company's management of its material business risks. The board should disclose whether it has received assurance from the CEO (or equivalent) and the Chief Financial Officer (CFO) (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Companies should provide the information indicated in the guide to reporting on Principle 7. Yes Page 42
ASX CGC 7.1
7.2
Yes
Page 42
ASX CGC 7.2
7.3
Yes
Page 43
ASX CGC 7.3
7.4
Yes
Page 42
ASX CGC 7.4
38

Recommendation Comply Yes / No Reference / explanation ASX Corporate Governance Council recommendations
Principle 8 Remunerate fairly and responsibly 8.1

8.2
The board should establish a remuneration committee. The remuneration committee should be structured so that it:
X X X
Yes Yes
Page 43 Refer to remuneration report
Consists of a majority of independent directors Is chaired by an independent chair Has at least three members Yes
8.3
Companies should clearly distinguish the structure of nonexecutive directors remuneration from that of executive directors and senior executives. Companies should provide the information indicated in the guide to reporting on Principle 8.
Refer to remuneration report Page 43
ASX CGC 8.3
8.4
Yes
ASX CGC 8.3
Endeavour (International) Limited's corporate governance practices were in place throughout the year ended 31 December 2011. Various corporate governance practices are discussed within this statement. For further information on corporate governance policies adopted by Endeavour (International) Limited, refer to our website: www.endeavourltd.com.au/corporategovernance Board functions The board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. To ensure that the board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of directors and for the operation of the board. The responsibility for the operation and administration of the Group is delegated, by the board, to the CEO and the executive management team. The board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the CEO and the executive management team. Whilst at all times the board retains full responsibility for guiding and monitoring the Group, in discharging its stewardship it makes use of sub-committees. Specialist sub-committees are able to focus on a particular responsibility and provide informed feedback to the board. To this end the board has established the following committees:
X X X X X
ASX LR 4.10.3
ASX CGC 1.1
ASX CGC 1.1
Audit Nomination Remuneration Finance Treasury
The roles and responsibilities of these committees are discussed throughout this corporate governance statement. The board is responsible for ensuring that management's objectives and activities are aligned with the expectations and risks identified by the board. The board has a number of mechanisms in place to ensure this is achieved including:
X X
Board approval of a strategic plan designed to meet stakeholders' needs and manage business risk Ongoing development of the strategic plan and approving initiatives and strategies designed to ensure the continued growth and success of the entity Implementation of budgets by management and monitoring progress against budget via the establishment and reporting of both financial and non-financial key performance indicators
39

Other functions reserved to the board include:
X X
Approval of the annual and half-yearly financial reports Approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures Ensuring that any significant risks that arise are identified, assessed, appropriately managed and monitored Reporting to shareholders
ASX CGC 2.6
Structure of the board The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report are included in the directors report. Directors of Endeavour (International) Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement. In the context of director independence, materiality is considered from both the Group and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors that point to the actual ability of the director in question to shape the direction of the Group's loyalty. In accordance with the definition of independence above, and the materiality thresholds set, the following directors of Endeavour (International) Limited are considered to be independent: Name J. Barraclough M. Evans F. van der Berg P.R. Garcia (Alt Director) C. Smart Position Chairman, non-executive director Non-executive director (retired 28 July 2011) Non-executive director (resigned 15 January 2012) Alternate director Non-executive director (appointed 1 May 2010)
ASX CGC 2.1
The board recognises the Corporate Governance Councils recommendation that the Chair should be an independent director. The board further recognises that given Mr Barracloughs prior role as Managing Director of the Group together with his number of years service as a director, it can be argued that he does not meet the definition of independence. The board believes that Mr Barraclough is the most appropriate person to lead the board and that he is able to and does bring quality and independent judgement to all relevant issues falling within the scope of the role of Chairman and that the Group as a whole benefits from his long standing experience of its operations and business relationships and hence is considered independent. There are procedures in place, agreed by the board, to enable directors in furtherance of their duties to seek independent professional advice at the Company's expense. The term in office held by each director in office at the date of this report is as follows: Name J. Barraclough C.P. Muller A.N. Lockwood P.R. Garcia (Alt Director) M.P. Boiteau F. van den Berg C. Smart M.A. Vlahov Term in office 35 years 8 years 4 years 7 years 12 years 8 years 2 years 5 years
ASX CGC 2.6
ASX CGC 2.6
For additional details regarding board appointments, please refer to our website.
40

Performance The performance of the board and key executives is reviewed regularly against both measurable and qualitative indicators. During the reporting period, the nomination committee conducted performance evaluations that involved an assessment of each board member's and key executive's performance against specific and measurable qualitative and quantitative performance criteria. The performance criteria against which directors and executives are assessed are aligned with the financial and non-financial objectives of Endeavour (International) Limited. The nomination committee has determined that this board performance evaluation should be undertaken with the assistance of external consultants every second year. Directors whose performance is consistently unsatisfactory may be asked to retire. Trading policy Under the Company's securities trading policy, an executive or director must not trade in any securities of the Company at any time when they are in possession of unpublished, price-sensitive information in relation to those securities. Before commencing to trade, an executive must first obtain the approval of the Company Secretary to do so and a director must first obtain approval of the Chairman. Only in exceptional circumstances will approval be forthcoming inside of the period which is 4 weeks after:
X X X
ASX CGC 2.5
ASX CGC 3.2
One day following the announcement of the half-yearly and full year results as the case may be One day following the holding of the annual general meeting One day after any other form of earnings forecast update is given to the market
As required by the ASX listing rules, the Company notifies the ASX of any transaction conducted by directors in the securities of the Company. Nomination committee The board has established a nomination committee, which meets at least annually, to ensure that the board continues to operate within the established guidelines, including when necessary, selecting candidates for the position of director. The nomination committee comprises non-executive directors. E.J. Brookes, an independent consultant who is not a director of the Company, regularly attends meetings. The nomination committee comprised the following members throughout the year: J. Barraclough (Committee Chairman) F. van den Berg E.J. Brooks (Independent Consultant) For details of directors' attendance at meetings of the nomination committee, refer to the directors' report. For additional details regarding the nomination committee including its charter please refer to our website. Audit committee The board has established an audit committee, which operates under a charter approved by the board. It is the board's responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of operational key performance indicators. The board has delegated responsibility for establishing and maintaining a framework of internal control and ethical standards to the audit committee. The committee also provides the board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. All members of the audit committee are nonexecutive directors.
ASX CGC 4.1 ASX CGC 2.4, 2.6 ASX CGC 2.4, 2.6
ASX CGC 4.2
41

The members of the audit committee during the year were:
X X X
F. van den Berg (Committee Chairman) M.A. Vlahov J. Barraclough

ASX CGC 4.4
Qualifications of audit committee members F. van den Berg is an experienced solicitor and was the Chairman of the audit committee until his retirement in January 2012. J. Barraclough has significant experience in the management of Endeavour (International) Limited, having served as the Managing Director of Endeavour (International) Limited for 27 years. He is also director of a number of companies, where as part of his role he serves as a member of the audit committee. M.A. Vlahov is the new Chairman of the audit committee and has been a chartered accountant for 18 years and is an experienced tax practitioner. For details on the number of meetings of the audit committee held during the year and the attendees at those meetings, refer to the directors report. For additional details regarding the audit committee, including a copy of its charter, please refer to our website. Risk The board has continued its proactive approach to risk management. The identification and effective management of risk, including calculated risk-taking is viewed as an essential part of the Company's approach to creating long-term shareholder value. In recognition of this, the board determines the company's risk profile and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. In doing so the board has taken the view that it is crucial for all board members to be a part of this process and as such, has not established a separate risk management committee. The board oversees an annual assessment of the effectiveness of risk management and internal compliance and control. The tasks of undertaking and assessing risk management and internal control effectiveness are delegated to management through the CEO, including responsibility for the day to day design and implementation of the company's risk management and internal control system. Management reports to the board on the companys key risks and the extent to which it believes these risks are being adequately managed. The reporting on risk by management is a standing agenda item at monthly board meetings. Management is required by the board to carry out risk specific management activities in five core areas; strategic risk, operational risk, reporting risk, compliance risk and environmental and sustainability risk. It is then required to assess risk management and associated internal compliance and control procedures and report back on the efficiency and effectiveness of these efforts by benchmarking performance in accordance with Australian/New Zealand Standard for Risk Management (AS/NZS 4360 risk management) and the Committee of Sponsoring Organisations of the Treadway Commission (COSO) risk framework. The board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks identified by the board. These include the following:
X
ASX CGC 4.4
ASX CGC 7.1
ASX CGC 7.2
The completion of a stakeholder needs analysis (SNA), which is a powerful tool in ensuring that the board is cognisant of the diverse needs of various stakeholders and assists in identifying the risks the business may face if those needs are not met. The SNA is a dynamic document and the board holds an annual workshop, in addition to the ongoing discussion of this document in board meetings, specifically to review and update the SNA. Board approval of a strategic plan, which encompasses the company's vision, mission and strategy statements, designed to meet stakeholders' needs and manage business risk. Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets, including the establishment and monitoring of KPIs of both a financial and non-financial nature.
42

For the purposes of assisting investors to understand better the nature of the risks faced by Endeavour (International) Limited, the board has prepared a list of operational risks as part of the Principle 7 disclosures. However the board notes that this does not necessarily represent an exhaustive list and that it may be subject to change based on underlying market events.
X X X X X
Fluctuations in commodity prices, exchange rates and demand volumes Political instability/sovereignty risk in some operating sites The occurrence of force majeure events by significant suppliers Increasing costs of operations, including labour costs Changed operating, market or regulatory environments as a result of climate change
As part of its duties, the companys internal audit function conducts a series of risk-based and routine reviews based on a plan agreed with management and the audit committee with the objective of providing assurance on the adequacy of the company's risk framework and the completeness and accuracy of risk reporting by management. In order to ensure the independence of the internal audit function, the head of internal audit meets privately with the audit committee without management present on a regular basis and the audit committee is responsible for making the final decision on the head or internal audits tenure and remuneration. Underpinning these efforts is a comprehensive set of policies and procedures directed towards achieving the following objectives in relation to the requirements of Principle 7:
X X X
Effectiveness and efficiency in the use of the Company's resources Compliance with applicable laws and regulations Preparation of reliable published financial information
ASX CGC 7.3
CEO and CFO certification In accordance with section 295A of the Corporations Act, the CEO and CFO have provided a written statement to the board that:
X
Their view provided on the Company's financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the board The Company's risk management and internal compliance and control system is operating effectively in all material respects
The board agrees with the views of the ASX on this matter and notes that due to its nature, internal control assurance from the CEO and CFO can only be reasonable rather than absolute. This is due to such factors as the need for judgement, the use of testing on a sample basis, the inherent limitations in internal control and because much of the evidence available is persuasive rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in control procedures. In response to this, internal control questions are required to be completed by the key management personnel of all significant business units, including finance managers, in support of these written statements. Remuneration It is the Company's objective to provide maximum stakeholder benefit from the retention of a high quality board and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the remuneration committee links the nature and amount of executive directors' and officers' remuneration to the Company's financial and operational performance. The expected outcomes of the remuneration structure are:
X X X
ASX CGC 8.2
Retention and motivation of key executives Attraction of high quality management to the Company Performance incentives that allow executives to share in the success of Endeavour (International) Limited
ASX CGC 8.3
For a full discussion of the Company's remuneration philosophy and framework and the remuneration received by directors and executives in the current period please refer to the remuneration report, which is contained within the directors report. There is no scheme to provide retirement benefits to non-executive directors.
ASX CGC 8.3
43

The board is responsible for determining and reviewing compensation arrangements for the directors themselves, the CEO and executive team. The board has established a remuneration committee, comprising three non-executive directors. Members of the remuneration committee throughout the year were:
X X X
ASX CGC 8.1
J. Barraclough (Committee Chairman) M.A. Vlahov F. van den Berg

ASX CGC 8.3
For details on the number of meetings of the remuneration committee held during the year and the attendees at those meetings, refer to the directors report. For additional details regarding the remuneration committee, including a copy of its charter, please refer to our website. Finance committee The role of the finance committee is documented in a charter approved by the board. The finance committee is responsible for:
X
Establishing and monitoring the Company's capital management strategy, including dividend payment strategies, for the board's consideration Assessing the Company's funding requirements and making recommendations to the board concerning specific funding proposals Monitoring borrowings from financial institutions and compliance with borrowing covenants
The current members of the finance committee are:

X X
M.P. Boiteau (Committee Chairman) C.P. Muller
For details on the number of meetings of the finance committee held during the year and the attendees at those meetings, refer to the directors' report. Treasury committee The purpose of the treasury committee is to monitor financial risks and exposure from movements in interest rates and exchange rates. This involves reviewing and assessing the types of hedging products available in minimising these risks and making recommendations to the board as to the course of action required. The current members of the treasury committee are:
X X
M.P. Boiteau (Committee Chairman) C.P. Muller
For details on the number of meetings of the treasury committee held during the year and the attendees at those meetings, refer to the directors' report. Shareholder communication policy Pursuant to Principle 6, Endeavours objective is to promote effective communication with its shareholders at all times. Endeavour (International) Limited is committed to:
X
ASX CGC 6.2
ASX CGC 5.1
Ensuring that shareholders and the financial markets are provided with full and timely information about Endeavour (International) Limiteds activities in a balanced and understandable way Complying with continuous disclosure obligations contained in the ASX listing rules and the Corporations Act in Australia Communicating effectively with its shareholders and making it easier for shareholders to communicate with Endeavour (International) Limited
44

To promote effective communication with shareholders and encourage effective participation at general meetings, information is communicated to shareholders:
X X X X X
Through the release of information to the market via the ASX Through the distribution of the annual report and notices of annual general meeting Through shareholder meetings and investor relations presentations Through letters and other forms of communications directly to shareholders By posting relevant information on Endeavour (International) Limiteds website: www.endeavourltd.com.au/corporate governance
The Companys website www.endeavourltd.com.au has a dedicated investor relations section for the purpose of publishing all important company information and relevant announcements made to the market. The external auditors are required to attend the annual general meeting and are available to answer any shareholder questions about the conduct of the audit and preparation of the audit report. Diversity at Endeavour The Group recognises the value contributed to the organisation by employing people with varying skills, cultural backgrounds, ethnicity and experience. Endeavour believes its diverse workforce is the key to its continued growth, improved productivity and performance. We actively value and embrace the diversity of our employees and are committed to creating an inclusive workplace where everyone is treated equally and fairly, and where discrimination, harassment and inequity are not tolerated. While Endeavour is committed to fostering diversity at all levels, gender diversity has been and continues to be a priority for the Group. To this end, the Group supports and complies with the recommendations contained in the ASX Corporate Governance Principles and Recommendations. The Group has established a diversity policy outlining the boards measurable objectives for achieving diversity. This is assessed annually to measure the progress towards achieving those objectives. The diversity policy is available in the corporate governance section on the Groups website. The table below outlines the diversity objectives established by the board, the steps taken during the year to achieve these objectives, and the outcomes. Objectives Increase the number of women in the workforce, including senior management positions and at board level. Steps taken/Outcome Key senior female appointments during the year included:
X
ASX CGC 3.2
Appointment of General Manager: Mergers and Acquisitions on 1 January 2011 Endeavour appointed 111 females in managerial roles As at 31 December 2011, women represented 45% in the Groups workforce (2010: 40%), 52% in key executive positions (2010: 47%) and 44% at board level (2010:44%) Women represented 45% of graduate intakes hired during the year (2010: 43%)
X X
For the upcoming financial year, the Group targets to increase female representation in the Groups workforce to 50%, 55% in key executive positions and 50% at board level.
45

Objectives Create development opportunities for women that prepare them to take on senior positions. Steps taken/Outcome The following development trainings/ incentives was facilitated by Endeavour in FY11: X All directors attended director awareness training
X
10 key senior executives attended leadership workshops, out of which 5 were women Employees in managerial positions attended networking and risk management workshops, which comprised of 45% women Mentoring by key senior executive management is offered to all women in managerial positions. During the year, 25% of women participated in this program During the year, Endeavour funded projects designed to enhance the skills of people with disabilities. Endeavour was actively involved in organising an awards ceremony recognising the contribution by people with disabilities in the community. The Group provided on-going training and guidance to people with disabilities and ensured that the workplace was friendly and free of discrimination. As at 31 December 2011, Endeavour provided employment opportunities to 117 people with disability (2010: 89). During the year, Endeavour employed 75 employees on flexible work arrangements (2010: 64). Our work from home option is also provided to employees, which is assessed on a case by case basis. 10% of employees (2010: 5%) were granted permission to work from home at least one day per week. During the year, a HR consultant was hired to identify bias in performance assessment for senior managerial positions, key executive roles and executive directors. Endeavour has adopted the recommendations of the HR consultant and aligned pay disparity. The pay review will continue in the FY12 for the remaining positions. Endeavour has set a zero tolerance policy against discrimination of employees at all levels. The company also provides avenues for employees to voice their concerns or report any discrimination. No cases of discrimination were reported during the year (2010: nil). Whilst Endeavour places special focus on gender diversity, career development opportunities are equal for all employees. During the year, representation at the career development workshop was based on performance of the employees.
To provide employment opportunities for people with disabilities.
Provide flexible workplace arrangement including part time arrangement and other incentives.
Review gender pay gaps on an annual basis and implement actions to address any variances.
Promote an inclusive culture that treats the workforce with fairness and respect.
Provide career development opportunities for every employee, irrespective of any cultural, gender and other differences.
The achievement of the measurable objectives in the current financial year was taken into consideration in assessing bonuses for employees. The Group will continue to review and update the measurable objectives to promote diversity for the upcoming year.
46
>afYf[aYd klYl]e]flk
Consolidated statement of comprehensive income

For the year ended 31 December 2011
AASB 101.10(b) AASB 101.51(b)(c)
2011 Note Continuing operations Sale of goods Rendering of services Revenue from redemption of EndeavourPoints Rental income Revenue Cost of sales Gross profit Other operating income Selling and distribution costs Administrative expenses Other operating expenses Operating profit Finance costs Finance income Share of profit of an associate Profit before tax from continuing operations Income tax expense Profit for the year from continuing operations Discontinued operations Profit/(loss) after tax for the year from discontinued operations Profit for the year Other comprehensive income Net gain on hedge of net investment Exchange differences on translation of foreign operations Net movement of cash flow hedges Net (loss)/gain on available-for-sale financial assets Actuarial gain/(loss) on defined benefit plans Revaluation of land and buildings Income tax relating to the components of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year, net of tax 8.8 8.8 25 12 9 278 (246) (732) (60) 311 846 (193) 204 8,436 9 8.1 $000 190,599 17,131 1,375 1,404 210,509 (163,691) 46,818 1,585 (14,000) (19,746) (1,153) 13,504 (2,868) 1,186 83 11,905 (3,893) 8,012
2010 Restated* $000 172,864 16,537 1,125 1,377 191,903 (155,268) 36,635 2,548 (13,002) (13,482) (706) 11,993 (1,223) 211 81 11,062 (3,432) 7,630
AASB 108.28 AASB 101.51(d)(e)
AASB 118.35(b)(i) AASB 118.35(b)(ii) AASB 118.35(b)(ii) AASB 118.35(c) AASB 101.82(a) AASB 101.103 AASB 101.85, 103
24 13
AASB 101.103 AASB 101.103 AASB 101.103 AASB 101.103 AASB 101.82(a) AASB 101.82(b), AASB 7.20 AASB 101.82(a) AASB 101.82(c), AASB 128.38 AASB 101.85
8.2 8.3 8.4 6
AASB 101.82(d) AASB 112.77 AASB 101.85
10
220 8,232
(188) 7,442
AASB 101.82(e), AASB 5.33(a) AASB 101.82 (f)
AASB 101.82(g)
(117) 33 3 (401) 110 (372) 7,070

AASB 101.90 AASB 101.85 AASB 101.82(i) AASB 119.93B
* Certain numbers shown here do not correspond to the 2010 financial statements and reflect adjustments made as detailed in Note 2.4.
47
Consolidated statement of comprehensive income (continued)

2011 $000 Profit attributable to: Owners of the parent Non-controlling interests 7,944 288 8,232 2010 Restated* $000 7,203 239 7,442
AAaaSB 108.28
AASB 101.83(a)(ii) AASB 101.83(a)(i), AASB 127.27
Total comprehensive income attributable to: Owners of the parent Non-controlling interests
8,148 288 8,436

11
6,831 239 7,070
AASB 101.83(b)(ii) AASB 101.83(b)(i), AASB 127.27
Earnings per share X Basic, profit for the year attributable to ordinary equity holders of the parent
X
AASB 133.66
$0.39 $0.38
$0.38 $0.37
Diluted, profit for the year attributable to ordinary equity holders of the parent
Earnings per share for continuing operations

X
Basic, profit from continuing operations attributable to ordinary equity holders of the parent Diluted, profit from continuing operations attributable to ordinary equity holders of the parent
$0.38
$0.39
$0.37
$0.38
* Certain numbers shown here do not correspond to the 2010 financial statements and reflect adjustments made as detailed in Note 2.4.
Commentary
Paragraph 10 of AASB 101 suggests titles for the primary financial statements, such as statement of comprehensive income or statement of financial position. Entities are however permitted to use other titles, e.g., Income statement or balance sheet. AASB 101.82(a) requires disclosure of total revenue as a line item on the face of the income statement. The Group has elected to present the various types of revenues on the face of the income statement. Note that this information could also be given in the notes. AASB 101.99 requires expenses to be analysed by nature or by their function within the income statement, whichever provides information that is reliable and more relevant. The Group has presented the analysis of expenses by function. In disclosing operating profit, an entity needs to ensure that the amount disclosed is representative of activities that would normally be regarded as 'operating' and is relevant to the understanding of the financial statements. There is no specific requirement to identify on the face of the financial statements whether there have been adjustments made to the amounts disclosed in the prior period financial statements. AASB 108 requires details to be given only in the notes. The Group illustrates how an entity may supplement the requirements of AASB 108 so that it is clear to the reader that the amounts have been adjusted. AASB 133.68 requires presentation of basic and diluted earnings per share for discontinued operations either on the face of the income statement or in the notes to the financial statements. The Group has elected to show this information with other disclosures required for discontinued operations in Note 10 and show the earnings per share information for continuing operations on the face of the income statement.
48
Consolidated statement of financial position

As at 31 December 2011
AASB 101.10(a) AASB 101.51(b)(c)
2011 Notes Assets Current assets Inventories Trade and other receivables Prepayments Other current financial assets Cash and short-term deposits Assets classified as held for sale Non-current assets Property, plant and equipment Investment properties Intangible assets Investment in an associate Other non-current financial assets Deferred tax assets $000
2010 Restated* $000
As at 1 January 2010 Restated* $000
AASB 108.28 AASB 101.51(d)(e) AASB 101.60, 101.66
17 18 15 19 10
24,875 27,672 244 551 17,112 70,454 13,554 84,008 34,411 8,893 6,019 764 6,425 383 56,895 140,903
25,489 24,290 165 153 14,916 65,013 65,013 25,811 7,983 2,461 681 3,491 365 40,792 105,805
27,151 25,537 226 137 11,066 64,117 64,117 20,385 7,091 2,114 600 3,269 321 33,780 97,897
AASB 101.54(g) AASB 101.54(h), AASB 7.8(c) AASB 101.55 AASB 101.54(d), AASB 7.8 AASB 101.54(i)
AASB 101.54(j), AASB 5.38
AASB 101.60, 66
12 13 14 6 15 9
AASB 101.54(a) AASB 101.54(b) AASB 101.54(c) AASB 101.54(e), AASB 128.38 AASB 101.54(d), AASB 7.8 AASB 101.54(o),56
Total assets Liabilities and equity Current liabilities Trade and other payables Interest-bearing loans and borrowings Other current financial liabilities Government grants Deferred revenue Income tax payable Provisions Liabilities directly associated with the assets classified as held for sale
AASB 101.60, 101.69
27 15.2 15.2 23 24 22
19,556 2,460 3,040 149 220 3,963 850 30,238 13,125 43,363
21,281 2,775 303 151 200 4,013 98 28,821 28,821
20,600 4,555 303 150 190 4,625 40 30,463 30,463
AASB 101.54(k) AASB 101.54(m), AASB 7.8(f) AASB 101.54(m), AASB 7.8 AASB 101.55, AASB 120.24 AASB 101.55 AASB 101.54(n) AASB 101.54(l)
10
AASB 101.54(p), AASB 5.38
Non-current liabilities Interest-bearing loans and borrowings Other non-current financial liabilities Provisions Government grants Deferred revenue Employee benefit liability Other liabilities Deferred tax liabilities Total liabilities
AASB 101.60, 69
15.2 15.2 22 23 24 25 9
20,856 806 1,950 3,300 196 2,622 263 3,060 33,053 76,416
22,203 77 1,400 165 2,494 232 1,235 27,806 56,627
19,436 60 1,300 174 2,074 212 1,261 24,517 54,980
AASB 101.54(m) AASB 101.54(m), AASB 7.8 AASB 101.54(l), AASB 120.24 AASB 101.55 AASB 101.55,101. 78(d) AASB 101.55 AASB 101.54(o), 101.56
49
Consolidated statement of financial position (continued)

As at 31 December 2011
AASB 101.10(a) AASB 101.51(b)(c)
2011 Notes Equity Issued capital Share premium Treasury shares Other capital reserves Retained earnings Other components of equity Reserves of a disposal group classified as held for sale Equity attributable to owners of the parent Non-controlling interests Total equity Total equity and liabilities 20 20 20 20 $000 21,888 4,780 (508) 1,171 35,351 (651) 46 62,077 2,410 64,487 140,903
2010 Restated* $000 19,388 80 (654) 864 29,272 (512) 48,438 740 49,178 105,805
As at 1 January 2010 Restated* $000 19,388 (774) 566 23,950 (521) 42,709 208 42,917 97,897
AASB 108.28 AASB 101.51(d)(e) AASB 101.54(r) AASB 101.54(r), 101.78(e) AASB 101.54(r), 101.78(e) AASB 101.54(r), 101.78(e) AASB 101.54(r), 101.78(e) AASB 101.54(r), 101.78(e) AASB 101.54(r), 101.78(e) AASB 101.54(p)
10
AASB 101.54(q), AASB 127.27
* Certain amounts shown here do not correspond to the 2010 financial statements and reflect adjustments made as detailed in Note 2.4 and Note 4.
Commentary
AASB 101 requires an entity to present a statement of financial position at the beginning of the earliest comparative period when it applies an accounting policy retrospectively, makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements (AASB 101.10(f)). In these situations, AASB 101.39 states that an entity must present, as a minimum, three statements of financial position, two of each of the other statements and related notes. As the Group voluntarily changed its accounting policy with respect to the recognition of actuarial gains and losses (AASB 119.93A) and applied that change retrospectively in accordance with AASB 108, the Group has also included a statement of financial position as at 1 January 2010. AASB 101.39 also requires related notes, and we believe this should include, at a minimum, those notes that were affected by the restatement. Identifying related notes requires judgement to be applied by management. The Group provides a full set of notes for the opening statement of financial position, rather than just for the amended amounts related to employee benefits. There is no specific requirement to identify on the face of the financial statements whether there have been adjustments made to the amounts disclosed in the prior period financial statements. AASB 108 requires details to be given only in the notes. The Group illustrates throughout the notes to the consolidated financial statements how an entity may supplement the requirements of the standard so that it is clear to the reader that the amounts have been adjusted. In accordance with AASB 101.60, the Group has classified its statement of financial position into current and non-current assets, and current and non-current liabilities. Please note that our Global publication, Good Group (International) Limited, presents the sequence of non-current assets, current assets, non-current liabilities and current liabilities differently from Endeavour (International) Limited. The sequence of the disclosure notes may therefore not correspond with the order of the line items on the statement of financial position. AASB 101 allows entities to present assets and liabilities broadly in order of their liquidity when this presentation is reliable and more relevant.
50
Consolidated statement of changes in equity

AASB 101.10(c) AASB 101.51(b)(c) AASB 101.106(d)
Attributable to the owners of the parent

Foreign Asset Cash flow Available- currency for-sale translation revaluation hedge reserve reserve reserve Retained reserve (Note 20) earnings (Note 20) (Note 20) (Note 20) $000 $000 $000 $000 $000 Discontinued operations (Note 10) $000 Total $000 48,438 7,944 204 8,148 46 7,203 175 307 (32) (1,972) Noncontrolling interest $000 740 288 288 (30) 1,547 29,272 7,944 217 8,161 80 (46) (1,972) (80) (512) (42) (51) 592 (512) (42) (51) 592 (70) 2 (444)
Other Issued Share Treasury capital reserves capital premium shares (Note 20) (Note 20) (Note 20) (Note 20) $000 $000 $000 $000 (654) 864 307 146
Total equity $000 49,178 8,232 204 8,436 7,203 175 307 (32) (2,002) 1,547
AASB 101.51(d)(e)
As at 1 January 2011
19,388
80
Profit for the period
AASB 101.106(d)(i)
Other comprehensive
AASB 101.106(d)(ii)
income
Total comprehensive
AASB 101.106(a)
income
Depreciation transfer for

AASB 101.96
land and buildings
Discontinued operation
AASB 5.38
(Note 11)
Issue of share capital

AASB 101.106(d)(iii)
(Note 20)
2,500
4,703
Exercise of options
AASB 101.106(d)(iii) AASB 101.106(d)(iii) AASB 2.50
(Note 20)
29
Share-based payment
transactions (Note 26)
Transaction costs
AASB 132.39 AASB 101.107
(Note 4)
(32)
Dividends (Note 21)
Acquisition of subsidiary
(Note 4)
Acquisition of non (508) 1,171 (190) 35,351 (582) (86) (495) 512 46 (190) 62,077 (135) 2,410 (325) 64,487
controlling interests
(Note 4)
At 31 December 2011
21,888
4,780
51
Consolidated statement of changes in equity (continued)
52
Commentary
For equity-settled share-based payment transactions, AASB 2.7 requires entities to recognise an increase in equity when goods or services are received. However, AASB 2 does not specify where in equity this should be recognised. The Group has chosen to recognise the credit in other capital reserves. The Group provided treasury shares to employees exercising share options and elected to recognise the excess of cash received over the acquisition cost of those treasury shares in share premium. In some jurisdictions, it is common to transfer other capital reserves to share premium or retained earnings when the share options are exercised or expire. The Group has elected to continue to present other capital reserves separately.
The acquisition of an additional ownership interest in a subsidiary without a change of control is accounted for as an equity transaction in accordance with AASB 127. Any excess or deficit of consideration paid over the carrying amount of non-controlling interest is recognised in equity of the parent in transactions where non-controlling interest is acquired or sold without loss of control. The Group has elected to recognise this effect in retained earnings. With respect to the subsidiary to which this non-controlling interest relates, there were no accumulated components recognised in other comprehensive income. If there had been such components, those would have been reallocated within equity of the parent (e.g., foreign currency translation reserve, available-for-sale reserve).
AASB 5.38 requires items recognised in other comprehensive income related to a discontinued operation to be separately disclosed. The Group presents this effect in the statement of changes in equity above. However, presentation of such items within discontinued operations does not change the nature of the reserve. Reclassification to profit or loss will occur if and when necessary.
The Group changed its accounting policy for the recognition of actuarial gains and losses arising on defined benefit pension plans. Those are recognised outside the income statement in other comprehensive income. As they will never be reclassified into profit or loss, they are immediately recorded in retained earnings. The standard thereby indicates no separate presentation of those components in the statement of changes in equity.
Consolidated statement of changes in equity (continued)

ASB 101.10(c) AASB 101.51(b)(c) AASB 108.28 AASB 101.106(d)
for the year ended 31 December 2010 Restated*
Attributable to owners of the parent

Treasury shares (Note 20) $000 Retained earnings $000 Total $000 43,715 24,956 (94) (327) (774) 566 208 Other capital reserves (Note 20) $000 Noncontrolling interest $000 Cash flow hedge reserve (Note 20) $000 Availablefor-sale reserve (Note 20) $000 Foreign currency translation reserve (Note 20) $000
Issued capital (Note 20) $000
Share premium (Note 20) $000
Total equity $000 43,923
AASB 101.51(d)(e)
As at 1 January 2010
19,388
Changes in accounting policies (1,006) 23,950 7,203 (281) 6,922 (1,600) 29,272 (70) 2 24 2 24 2 (117) (117) (444) (94) (327) (774) 120 298 864 (654) 566 80 80 (1,006) 42,709 7,203 (372) 6,831 200 298 (1,600) 48,438 208 239 239 (49) 342 740 (1,006) 42,917 7,442 (372) 7,070 200 298 (1,649) 342 49,178
AASB 101.106(d)(i) AASB 101.106(d)(ii) AASB 101.106(a) AA B 101.106(d)(iii) AASB 101.106(d)(iii) AASB 2.50 AASB 101.107 AASB 101.106(b)
(Note 2.4)
As at 1 January 2010 (restated)
19,388
Profit for the period
Other comprehensive income
Total comprehensive income
Exercise of options (Note 20)
Share-based payment
transactions (Note 26)
Dividends (Note 21) Non-controlling interest arising on a business combination (Note 4)
At 31 December 2010
19,388
* Certain amounts shown here do not correspond to the 2010 financial statements and reflect adjustments made as detailed in Note 2.4.
53
Consolidated statement of cash flows

2011 $000 227,113 (165,231) (43,954) 336 (3,759) 14,505 2010 $000 235,778 (173,966) (43,948) 211 (4,379) 13,696
AASB 107.21 AASB 101.10(d) AASB 101.51(b)(c) AASB 107.10 AASB 101.51(d)(e) AASB 107.18(a)
Note Operating activities Receipts from customers (inclusive of GST) Payments to suppliers (inclusive of GST) Payments to employees Interest received Income tax paid Net cash flows from operating activities Investing activities Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Purchase of investment properties Purchase of financial instruments Proceeds from available-for-sale investments Purchase of intangible assets Acquisition of a subsidiary, net of cash acquired Receipt of government grants Net cash flows used in investing activities Financing activities Proceeds from exercise of share options Acquisition of non-controlling interest Transaction costs of issue of shares Payment of finance lease liabilities Proceeds from borrowings Repayment of borrowings Interest paid Dividends paid to owners of the parent Dividends paid to non-controlling interests Net cash flows from/(used in) financing activities Net increase in cash and cash equivalents Net foreign exchange difference Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December 19 19
AASB 107.31 AASB 107.35
12 13
14 4 23
1,990 (10,352) (1,216) (3,294) 232 (587) 230 2,951 (10,046)
2,319 (7,822) (1,192) (225) 145 (390) (1,450) 642 (7,973)
AASB 107.16(b) AASB 107.16(a) AASB 107.16(a) AASB 107.16(c)
AASB 107.16(a) AASB 107.39
AASB 107.21
20 4 20
21
175 (325) (32) (51) 5,299 (1,806) (586) (1,972) (30) 672 5,131 43 12,266 17,440
200 (76) 2,645 (1,784) (983) (1,600) (49) (1,647) 4,076 (126) 8,316 12,266
AASB 107.17(a)
AASB 107.17(e) AASB 107.17(c) AASB 107.17(d) AASB 107.31 AASB 107.31 AASB 107.31
AASB 107.28
AASB 107.45
Commentary
AASB 107.33 permits interest paid to be shown as operating or financing activities and interest received to be shown as operating or investing activities, as deemed relevant for the entity. The Group has decided to classify interest received as cash flows from operating activities. AASB 107.18 allows entities to report cash flows from operating activities using either the direct method or the indirect method. The Group presents its cash flows using the direct method. The Group has reconciled profit before tax to net cash flows from operating activities. However, a reconciliation from profit after tax is also acceptable under AASB 107.
54
Fgl]k lg l`] fYf[aYd klYl]e]flk
Notes to the consolidated financial statements

1. Corporate information
The consolidated financial statements of Endeavour (International) Limited for the year ended 31 December 2011 were authorised for issue in accordance with a resolution of the directors on 28 January 2012. Endeavour (International) Limited (the Parent) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. The ultimate parent of Endeavour (International) Limited is S.J Limited which owns 52.82% of the ordinary shares. The nature of the operations and principal activities of the Group are described in the directors report.
AASB 101.10(e) AASB 101.51(b)(c) AASB 110.17
AASB 101.138(a) AASB 101.138(c)
AASB 101.138(b)
2.
Summary of significant accounting policies
Table of contents
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) (r) (s) (t) (u) (v) (w) (x) (y) Basis of consolidation ................................................................................................... 58 Business combinations .................................................................................................. 59 Goodwill ...................................................................................................................... 60 Interest in a joint venture .............................................................................................. 61 Investment in an associate ............................................................................................ 61 Foreign currency translation ......................................................................................... 62 Revenue recognition ..................................................................................................... 63 Government grants ....................................................................................................... 64 Income tax and other taxes ........................................................................................... 64 Non-current assets held for sale and discontinued operations ........................................... 66 Property, plant and equipment ...................................................................................... 66 Leases ......................................................................................................................... 67 Borrowing costs ........................................................................................................... 68 Investment properties ................................................................................................... 68 Intangible assets .......................................................................................................... 68 Financial instruments initial recognition and subsequent measurement ........................... 70 Derivative financial instruments and hedge accounting .................................................... 75 Inventories .................................................................................................................. 77 Impairment of non-financial assets ................................................................................. 77 Cash and short-term deposits ........................................................................................ 78 Convertible preference shares ....................................................................................... 79 Treasury shares ........................................................................................................... 79 Provisions .................................................................................................................... 79 Pensions and other post employment benefits ................................................................ 81 Share-based payment transactions ................................................................................ 82
55
Notes to the consolidated financial statements (continued)

2. 2.1 Summary of significant accounting policies (continued) Basis of preparation
AASB 101.119, AASB 101.112(a)
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for investment properties, land and buildings, derivative financial instruments and available-for-sale investments, which have been measured at fair value. The carrying values of recognised assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated.
AASB 101.51(d),(e), ASIC CO 98/0100
2.2
Compliance with IFRS
AASB 101.16
The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
2.3
(i)
New accounting standards and interpretations

Changes in accounting policy and disclosures.
AASB 108.14
The accounting policies adopted are consistent with those of the previous financial year except as follows: The Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 January 2011:
X X X
AASB 124 Related Party Disclosures (amendment) effective 1 January 2011 AASB 132 Financial Instruments: Presentation (amendment) effective 1 February 2010 AASB Int 14 Prepayments of a Minimum Funding Requirement (amendment) effective 1 January 2011 Improvements to AASBs (May 2010)
AASB 108.28
The adoption of the standards or interpretations is described below: AASB 124 Related Party Transactions (Amendment) The AASB issued an amendment to AASB 124 that clarifies the definitions of a related party. The new definitions emphasise a symmetrical view of related party relationships and clarifies the circumstances in which persons and key management personnel affect related party relationships of an entity. In addition, the amendment introduces an exemption from the general related party disclosure requirements for transactions with government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Group. AASB 132 Financial Instruments: Presentation (Amendment) The AASB issued an amendment that alters the definition of a financial liability in AASB 132 to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entitys non-derivative equity instruments, to acquire a fixed number of the entitys own equity instruments for a fixed amount in any currency. The amendment has had no effect on the financial position or performance of the Group because the Group does not have these type of instruments. AASB Int 14 Prepayments of a Minimum Funding Requirement (Amendment) The amendment removes an unintended consequence when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover such requirements. The amendment permits a prepayment of future service cost by the entity to be recognised as a pension asset. The Group is not subject to minimum funding requirements in Australia, therefore the amendment of the interpretation has no effect on the financial position nor performance of the Group.
56

2. Summary of significant accounting policies (continued)
Improvements to AASBs In May 2010, the AASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies, but no impact on the financial position or performance of the Group.
X
AASB 3 Business Combinations: The measurement options available for non-controlling interest (NCI) were amended. Only components of NCI that constitute a present ownership interest that entitles their holder to a proportionate share of the entitys net assets in the event of liquidation should be measured at either fair value or at the present ownership instruments proportionate share of the acquirees identifiable net assets. All other components are to be measured at their acquisition date fair value (see Note 4). The amendments to AASB 3 are effective for annual periods beginning on or after 1 July 2011. The Group, however, adopted these as of 1 January 2011 and changed its accounting policy accordingly as the amendment was issued to eliminate unintended consequences that may arise from the adoption of AASB 3. AASB 7 Financial Instruments Disclosures: The amendment was intended to simplify the disclosures provided by reducing the volume of disclosures around collateral held and improving disclosures by requiring qualitative information to put the quantitative information in context. The Group reflects the revised disclosure requirements in Note 15. AASB 101 Presentation of Financial Statements: The amendment clarifies that an entity may present an analysis of each component of other comprehensive income maybe either in the statement of changes in equity or in the notes to the financial statements. The Group provides this analysis in Note 8.8.
Other amendments resulting from Improvements to AASBs to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:
X
AASB 3 Business Combinations (Contingent consideration arising from business combination prior to adoption of AASB 3 (as revised in 2008)) AASB 3 Business Combinations (Un-replaced and voluntarily replaced share-based payment awards) AASB 127 Consolidated and Separate Financial Statements AASB 134 Interim Financial Statements
X X X
The following interpretation and amendments to interpretations did not have any impact on the accounting policies, financial position or performance of the Group:
X X
AASB Int 13 Customer Loyalty Programmes (determining the fair value of award credits) AASB Int 19 Extinguishing Financial Liabilities with Equity Instruments
The Group has made a formal written election to early adopt the following new and amended Australian Accounting Standards as of 1 January 2011:
(ii) Accounting Standards and Interpretations issued but not yet effective. Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Group for the annual reporting period ending 31 December 2011, outlined in the table below:
Reference Title Summary Application Impact on Group financial Application date of report date for standard* Group*
AASB 108.28(d-e)
AASB 108.31
* Designates the beginning of the applicable annual reporting period
(Please refer to your local Ernst & Young contact or Ernst & Youngs In balance newsletter for the most up-to-date table relevant to your reporting period).
57

(a) Basis of consolidation Subsequent to 1 January 2010 The consolidated financial statements comprise the financial statements of Endeavour (International) limited and its subsidiaries and special purposes entities (as outlined in Note 28) as at and for the period ended 31 December each year (the Group). Interests in associates are equity accounted and are not part of the consolidated Group (see Note 2(e) below). Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity. Special purpose entities are those entities over which the Group has no ownership interest but in effect the substance of the relationship is such that the Group controls the entity so as to obtain the majority of benefits from its operation. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends have been eliminated in full. Subsidiaries and special purpose entities are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. Investments in subsidiaries held by Endeavour (International) Limited are accounted for at cost in the separate financial statements of the parent entity less any impairment charges. Dividends received from subsidiaries are recorded as a component of other revenues in the separate income statement of the parent entity, and do not impact the recorded cost of the investment. Upon receipt of dividend payments from subsidiaries, the parent will assess whether any indicators of impairment of the carrying value of the investment in the subsidiary exist. Where such indicators exist, to the extent that the carrying value of the investment exceeds its recoverable amount, an impairment loss is recognised. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values (see Note 2(d)). The difference between the above items and the fair value of the consideration (including the fair value of any pre-existing investment in the acquiree) is goodwill or a discount on acquisition. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groups cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree` are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit disposal of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the parent. Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance.
AASB 127.27 AASB 136.8
AASB 127.12 AASB 127.20, 22,23,24
AASB 127.14, AASB Int 112.8
AASB Int 112.8
AASB 127.20
AASB 127.26
AASB 127.42(c) AASB 136.12(h)
AASB 3.4, 5, 10, 18
AASB 127.28
58

AASB 127.30
(a) Basis of consolidation (continued) A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
X X X X X X X
AASB 127.30 AASB 127.34
Derecognises the assets (including goodwill) and liabilities of the subsidiary Derecognises the carrying amount of any non-controlling interest Derecognises the cumulative translation differences recorded in equity Recognises the fair value of the consideration received Recognises the fair value of any investment retained Recognises any surplus or deficit in profit or loss Reclassifies the parents share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate
Prior to 1 January 2010 Certain of the above mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward in certain instances from the previous basis of consolidation:
X
Acquisitions of non-controlling interests, prior to 1 January 2010, were accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired was recognised in goodwill. Losses incurred by the Group were attributed to the non-controlling interest until the balance was reduced to nil. Any further excess losses were attributed to the parent, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 January 2010 were not reallocated between NCI and the parent shareholders. Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost. The carrying value of such investments at 1 January 2010 have not been restated.
AASB 101.112 AASB 101.117(a)(b) AASB 3.4 AASB 3.18 AASB 3.19
(b) Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
AASB 3.15 AASB 3.16
59

AASB 3.42
(b) Business combinations (continued) If the business combination is achieved in stages, the acquisition date fair value of the acquirers previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groups cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. (c) Goodwill Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groups cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
AASB 3.32
AASB 3.39 AASB 3.58
AASB 3.54 AASB 3.B63(a) AASB 136.80
AASB 136.86
60

(d) Interest in a joint venture The Group has an interest in a joint venture, which is a jointly controlled entity, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of the entity. The agreement requires unanimous agreement for financial and operating decisions among the venturers. The Group recognises its interest in the joint venture using the proportionate consolidation method. The Group combines its proportionate share of each of the assets, liabilities, income and expenses of the joint venture with similar items, line by line, in its consolidated financial statements. The financial statements of the joint venture are prepared for the same reporting period as the Group. Adjustments are made where necessary to bring the accounting policies in line with those of the Group. Adjustments are made in the Groups consolidated financial statements to eliminate the Groups share of intragroup balances, transactions and unrealised gains and losses on such transactions between the Group and its joint venture. Losses on transactions are recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss. The joint venture is proportionately consolidated until the date on which the Group ceases to have joint control over the joint venture. Upon loss of joint control, the Group measures and recognises its remaining investment at its fair value. Any difference between the carrying amount of the former joint controlled entity upon loss of joint control and the fair value of the remaining investment and proceeds from disposal are recognised in profit or loss. When the remaining investment constitutes significant influence, it is accounted for as investment in an associate.
AASB 131.9
AASB 131.3 AASB 131.30 AASB 131.34
AASB 131.48
AASB 131.45
Commentary
The Group accounts for its interest in the jointly controlled entity using proportionate consolidation. However, AASB 131.38 also permits jointly controlled entities to be recognised using the equity method. If an entity chooses to recognise jointly controlled entities using the equity method, it is required to present its aggregate share of profit or loss from the jointly controlled entity on the face of its income statement. Also, the investment is presented as a non-current asset on the face of the statement of financial position.
(e) Investment in an associate The Groups investment in its associate is accounted for using the equity method. An associate is an entity in which the Group has significant influence. Under the equity method, the investment in the associate is carried on the statement of financial position at cost plus post acquisition changes in the Groups share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The income statement reflects the Groups share of the results of operations of the associate. When there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The Groups share of profit of an associate is shown on the face of the income statement. This is the profit attributable to equity holders of the associate and, therefore, is profit after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.
AASB 128.37(e) AASB 128.26 AASB 128.6
AASB 128.11 AASB 128.23
AASB 128.39 AASB 128.22
61

AASB 128.31 AASB 128.33
(e) Investment in an associate (continued) After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on its investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the share of profit of an associate in the income statement. Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. (f) Foreign currency translation The Groups consolidated financial statements are presented in euros, which is also the parent companys functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group has elected to recycle the gain or loss that arises from the direct method of consolidation, which is the method the Group uses to complete its consolidation. i) Transactions and balances Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange at the reporting date. All differences arising on settlement or translation of monetary items are taken to the income statement with the exception of monetary items that are designated as part of the hedge of the Groups net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed, at which time, the cumulative amount is reclassified to the income statement. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively). Prior to 1 January 2005, the Group treated goodwill, and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition, as assets and liabilities of the parent. Therefore, those assets and liabilities are already expressed in the functional currency or are nonmonetary items and no further translation differences occur.
AASB 101.51(d) AASB 121.9
AASB 128.18
AASB 121.21 AASB 121.23(a)
AASB 121.28 AASB 121.32 AASB 121.32
AASB 121.23(b) AASB 121.23(c)
AASB 121.30
62

(f) Foreign currency translation (continued) ii) Group companies On consolidation the assets and liabilities of foreign operations are translated into euros at the rate of exchange prevailing at the reporting date and their income statements are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement. Any goodwill arising on the acquisition of a foreign operation subsequent to 1 January 2005 and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. (g) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The specific recognition criteria described below must also be met before revenue is recognised. Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Within its electronics segment, the Group operates a loyalty points programme, EndeavourPoints, which allows customers to accumulate points when they purchase products in the Groups retail stores. The points can then be redeemed for free products, subject to a minimum number of points being obtained. Consideration received is allocated between the electronic products sold and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points is determined by applying a statistical analysis. The fair value of the points issued is deferred and recognised as revenue when the points are redeemed.
AASB 118.35(a) AASB 118.14 AASB 118.20 AASB 118.9 AASB 121.39(a) AASB 121.39(b) AASB 121.39(c) AASB 121.48
AASB 121.47
AASB 118.14(a)
AASB Int13.5 AASB Int13.7
Commentary
AASB 118 and AASB Int13 do not prescribe an allocation method for multiple component sales. The Groups revenue recognition policy for sales, which involve the issuance of EndeavourPoints, is based on the fair value of the points issued. The Group could have based its revenue recognition policy on the relative fair values of the goods sold and the points issued. AASB Int13 does not set out any disclosure requirements. The Group has not included extensive disclosure regarding the loyalty programme as the amounts are not significant. If the deferred revenue and revenue related to the EndeavourPoints programme were significant, additional disclosure items might include:
X X X X
The number of outstanding points The period over which the revenue is expected to be recognised The key assumptions used to determine the period over which revenue is recognised The effect of any changes in redemption rates
Rendering of services Revenue from the installation of fire extinguishers, fire prevention equipment and fire retardant fabrics is recognised by reference to the stage of completion. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. When the contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered.
AASB 118.20
AASB 118.26 AASB 118.20(c)
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(g) Revenue recognition (continued) Interest income For all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement. Dividends Revenue is recognised when the Groups right to receive the payment is established. Rental income Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and included in revenue due to its operating nature. Continent rental income is recognised as income in the periods in which it is earned. Lease incentives granted are recognised as an integral part of the total rental income. (h) Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset. When the Group receives non-monetary grants, the asset and the grant are recorded gross at nominal amounts and released to the income statement over the expected useful life and pattern of consumption of the benefit of the underlying asset by equal annual instalments. When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as additional government grants.
AASB 120.7 AASB 120.12 AASB 120.26 AASB 118.30(a)
AASB 118.30(c)
AASB 117.50 AASB Int 115.4
AASB 120.23
Commentary
AASB 120 permits two different ways of presenting a government grant relating to assets. It can be presented in the statement of financial position as deferred income, which is recognised as income on a systematic and rational basis over the useful life of the asset. Alternatively, it can reduce the carrying amount of the asset. The grant is then recognised as income over the useful life of a depreciable asset by way of a reduced depreciation charge. Whichever method is applied, no further disclosures are required.
(i) Income tax and other taxes Current tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period's taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except:
X
AASB 112.46
AASB 112.61A AASB 101.117
AASB 112.15
When the deferred income tax liability arises from the initial recognition of goodwill or of 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 profit nor taxable profit or loss.
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In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
AASB 112.39
(i) Income tax and other taxes (continued)

X
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
X
AASB 112.24
When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
AASB 112.44
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or in profit or loss. Tax consolidation legislation Endeavour (International) Limited and its wholly-owned Australian controlled entities implemented the tax consolidation legislation as of 1 July 2005. The head entity, Endeavour (International) Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, Endeavour (International) Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details of the tax funding agreement are disclosed in Note 9. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
AASB 112.56 AASB 112.37
AASB 112.47
AASB 112.61A
AASB 112.71
AASB 112.68
AASB Int 1052.16(a)
AASB Int 1052.7, 9(a), 16(a), (b)
AASB Int 1052.12(a)
AASB Int 1052.12(b)
AASB Int 1052.12(c)
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(i) Income tax and other taxes (continued) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except:
X
When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable Receivables and payables, which are stated with the amount of GST included
AASB Int 1031.7
AASB Int 1031.8 AASB Int 1031.9
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (j) Non-current assets held for sale and discontinued operations Non-current assets and disposal groups classied as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classied as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classication. In the statement of comprehensive income, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the statement of comprehensive income. Property, plant and equipment and intangible assets once classied as held for sale are not depreciated or amortised. (k) Property, plant and equipment Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the income statement as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Refer to significant accounting judgements, estimates and assumptions (Note 3) and provisions (Note 22) for further information about the recorded decommissioning provision. Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Valuations are performed frequently to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any revaluation surplus is recorded in other comprehensive income and hence, credited to the asset revaluation reserve in equity, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case, the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.
AASB Int 1031.10-11
AASB 5.15 AASB 5.6 AASB 5.7 AASB 5.8
AASB 5.33
AASB 5.25
AASB 116.73(a) AASB 116.30 AASB 116.15 AASB 116.16
AASB 116.73(a) AASB 116.31
AASB 116.39 AASB 116.40
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(k) Property, plant and equipment (continued)
Commentary
The Group has elected to transfer the revaluation surplus to retained earnings as the asset is being used. Alternatively, the amount could have been transferred upon disposal of the asset.
An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
X X
AASB 116.41
AASB 116.73(b) AASB 116.73(c)
Buildings Plant and equipment
15 to 20 years 5 to 15 years
AASB 116.67 AASB 116.68 AASB 116.71
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised. The assets residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate. (l) Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional requirements of AASB Int 4. Group as a lessee Finance leases that transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the income statement. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an operating expense in the income statement on a straightline basis over the lease term. Group as a lessor Leases in which the Group does not transfer substantially all the risks and benefits of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
AASB 116.51
AASB Int 4.6
AASB Int 4.14
AASB 117.8 AASB 117.20 AASB 117.25
AASB 117.27
AASB 117.33
AASB 117.8 AASB 117.52
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(m) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. (n) Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise. Fair values are evaluated annually by an accredited external, independent valuer, applying a valuation model recommended by the International Valuation Standards Committee. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of derecognition. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.
AASB 140.20 AASB 140.33 AASB 140.75(a) AASB 140.35 AASB 123.8
AASB 140.66 AASB 140.69
AASB 140.57 AASB 140.60 AASB 140.61
Commentary
The Group has elected to state land and buildings at fair value in accordance with AASB 116 and investment properties at fair value in accordance with AASB 140. Both AASB 116 and AASB 140 permit property, plant and equipment and investment properties to be carried at historic cost less provisions for depreciation and impairment. In these circumstances, disclosures about the cost basis and depreciation rates would be required. In addition, AASB 140 would require note disclosure about the fair value of any investment property recorded at cost. Therefore, companies would still need to determine the fair value.
(o) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination are their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible assets.
AASB 138.118
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AASB 138.107 AASB 138.108 AASB 138.109
(o) Intangible assets (continued) Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised. Research and development costs Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
X X X X X
AASB 138.113
AASB 138.54 AASB 138.57
The technical feasibility of completing the intangible asset so that it will be available for use or sale Its intention to complete and its ability to use or sell the asset How the asset will generate future economic benefits The availability of resources to complete the asset The ability to measure reliably the expenditure during development
AASB 138.74
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually. Patents and licences The patents have been granted for a period of 10 years by the relevant government agency with the option of renewal at the end of this period. Licences for the use of intellectual property are granted for periods ranging between 5 and 10 years depending on the specific licence. The licences provide the option for renewal based on whether the Group meets the conditions of the licence and may be renewed at little or no cost to the Group (further details are given in Note 14). As a result, those licences are assessed as having an indefinite useful life. A summary of the policies applied to the Groups intangible assets is as follows: Licences Useful lives Amortisation method used Indefinite No amortisation Patents Finite Amortised on a straight- line basis over the period of the patent Development costs Finite Amortised on a straight-line basis over the period of expected future sales from the related project Internally generated
AASB 136.10(a)
AASB 138.122(a)
AASB 138.118 (a)(b)
Internally generated or acquired
Acquired
Acquired
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(p) Financial instruments initial recognition and subsequent measurement i) Financial assets Initial recognition and measurement Financial assets within the scope of AASB 139 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. The Groups financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments and derivative financial instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification as described below: Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments as defined by AASB 139. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with net changes in fair value recognised in finance costs in the income statement. Financial assets designated upon initial recognition at fair value through profit and loss are designated at their initial recognition date and only if the criteria under AASB 139 are satisfied. The Group has not designated any financial assets at fair value through profit or loss. The Group evaluates its financial assets held for trading, other than derivatives, to determine whether the intention to sell them in the near term is still appropriate. When in rare circumstances the Group is unable to trade these financial assets due to inactive markets and managements intention to sell them in the foreseeable future significantly changes, the Group may elect to reclassify these financial assets. The reclassification to loans and receivables, available-for-sale or held to maturity depends on the nature of the asset. This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation, these instruments cannot be reclassified after initial recognition. Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.
AASB 139.10 AASB 139.11 AASB 139.50-50D AASB 139.9 AASB 139.46 AASB 7.21 AASB 139.9
AASB 139.43
AASB 139.9 AASB 139.38
AASB 139.AG14 AASB 139.55(a)
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(p) Financial instruments initial recognition and subsequent measurement (continued) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance costs for loans and in cost of sales or other operating expenses for receivables. Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturity investments are measured at amortised cost using the EIR, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance costs. The Group did not have any held-to-maturity investments during the years ended 31 December 2011 and 2010. Available-for-sale financial investments Available-for-sale financial investments include equity investments and debt securities. Equity investments classified as available-for-sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for-sale reserve to the income statement in finance costs. Interest earned whilst holding available-for-sale financial investments is reported as interest income using the EIR method. The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets and managements intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly. For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement.
AASB 139.50F AASB 139.54 AASB 139.9 AASB 139.46 AASB 139.55(b) AASB 139.67 AASB 139.9 AASB 139.56 AASB 139.46(b) AASB 139.9 AASB 139.46(a) AASB 139.56
AASB 139.50E AASB 139.50F
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(p) Financial instruments initial recognition and subsequent measurement (continued) Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
X X
AASB 7.21
The rights to receive cash flows from the asset have expired. The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
AASB 139.17(a) AASB 139.18(b)
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Groups continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. ii) Impairment of financial assets The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.
AASB 139.58 AASB 139.59 AASB 7.B5(f) AASB 139.20(a) AASB 139.20(c) AASB 139.18(b)
AASB 139.30(a)
AASB 139.63 AASB 139.64
AASB 139.AG84 AASB 7.16 AASB 7.B5(d)(i) AASB 7.B5(d)(ii) AASB 139.65
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(p) Financial instruments initial recognition and subsequent measurement (continued) The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the income statement. Available-for-sale financial investments For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Significant is evaluated against the original cost of the investment and prolonged against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairment are recognised directly in other comprehensive income. In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement. iii) Financial liabilities Initial recognition and measurement Financial liabilities within the scope of AASB 139 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs. The Groups financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, financial guarantee contracts, and derivative financial instruments. Subsequent measurement The measurement of financial liabilities depends on their classification, described as follows:
AASB 7.21 AASB 139.43 AASB 139.61 AASB 139.67 AASB 139.69
AASB 139.AG93 AASB 139.65
AASB 7.16 AASB 139.AG93
AASB 139.70
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(p) Financial instruments initial recognition and subsequent measurement (continued) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by AASB 139. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement. Financial liabilities designated upon initial recognition at fair value through profit and loss so designated at the initial date of recognition, and only if criteria of AASB 139 are satisfied. The Group has not designated any financial liability as at fair value through profit or loss. Loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement. Financial guarantee contracts Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the income statement. iv) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if:
X X
AASB 139.9, AASB 139.47(a)
AASB 139.55(a), AASB 139.47, AASB 139.56
AASB 139.55(a), AASB 139.47, AASB 139.9
AASB 139.47(c) AASB 139.9 AASB 139.14 AASB 137.36
AASB 139.39 AASB 139.41 AASB 139.40
AASB 132.42
There is a currently enforceable legal right to offset the recognised amounts There is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously
74

(p) Financial instruments initial recognition and subsequent measurement (continued) v) Fair value of financial instruments The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:
X X X
AASB 139.48A AASB 7.27
Using recent arms length market transactions Reference to the current fair value of another instrument that is substantially the same A discounted cash flow analysis or other valuation models
An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 15. (q) Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement The Group uses derivative financial instruments, such as forward currency contracts, interest rate swaps and forward commodity contracts, to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The fair value of commodity purchase contracts that meet the definition of a derivative under AASB 139 are recognised in the income statement in cost of sales. Commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the groups expected purchase, sale or usage requirements are held at cost. Any gains or losses arising from changes in the fair value of derivatives are taken directly to the income statement, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income. For the purpose of hedge accounting, hedges are classified as:
X
AASB 139.43 AASB 7.21
Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment Hedges of a net investment in a foreign operation
AASB 139.86(a)
AASB 136.86(b)
AASB 139.86(c) AASB 139.55(a) AASB 139.88
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instruments fair value in offsetting the exposure to changes in the hedged items fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
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(q) Derivative financial instruments and hedge accounting (continued) Hedges that meet the strict criteria for hedge accounting are accounted for as described below: Fair value hedges The change in the fair value of a hedging derivative is recognised in the income statement in finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the income statement in finance costs. For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through the income statement over the remaining term of the hedge using the EIR method. EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedge item is derecognised, the unamortised fair value is recognised immediately in the income statement. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in the income statement. The Group has an interest rate swap that is used as a hedge for the exposure of changes in the fair value of its 8.25% fixed rate secured loan. See Note 15 for more details. Cash flow hedges The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement in other operating expenses. The Group uses forward currency contracts as hedges of its exposure to foreign currency risk in forecasted transactions and firm commitments, as well as forward commodity contracts for its exposure to volatility in the commodity prices. The ineffective portion relating to foreign currency contracts is recognised in finance costs and the ineffective portion relating to commodity contracts is recognised in other operating income. Refer to Note 15 for more details. Amounts recognised as other comprehensive income are transferred to the income statement when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability. If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in equity is transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss. Hedges of a net investment Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognised as other comprehensive income while any gains or losses relating to the ineffective portion are recognised in the income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the income statement. The Group uses a loan as a hedge of its exposure to foreign exchange risk on its investments in foreign subsidiaries. Refer to Note 15 for more details.
AASB 139.97 AASB 139.100 AASB 139.98 AASB 139.95 AASB 139.93 AASB 139.89
AASB 139.92
AASB 139.101
AASB 139.102
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(q) Derivative financial instruments and hedge accounting (continued) Current versus non-current classification Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into a current and non-current portion based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows):
X
AASB 101.60
When the Group will hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the reporting date, the derivative is classified as non-current (or separated into current and non-current portions) consistent with the classification of the underlying item. Embedded derivates that are not closely related to the host contract are classified consistent with the cash flows of the host contract. Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of the underlying hedged item. The derivative instrument is separated into a current portion and a non-current portion only if a reliable allocation can be made.
(r) Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: Raw materials:
X
AASB 102.36(a) AASB 102.9 AASB 102.10 AASB 102.25 AASB 102.12 AASB 102.13
Purchase cost on a first in, first out basis
Finished goods and work in progress:

X
Cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs
AASB 139.98(b)
Initial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognised in other comprehensive income, in respect of the purchases of raw materials. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. (s) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the assets recoverable amount. An assets recoverable amount is the higher of an assets or cashgenerating units (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Groups CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement in expense categories consistent with the function of the impaired asset, except for a property previously revalued and the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.
AASB 102.6
AASB 136.6 AASB 136.9 AASB 136.66
AASB 136.60
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(s) Impairment of non-financial assets (continued) For assets excluding goodwill, an assessment is made at each reporting date whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the assets or CGUs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. The following assets have specific characteristics for impairment testing: Goodwill Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets Intangible assets with indefinite useful lives are tested for impairment annually as at 31 December either individually or at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.
AASB 136.10(b)
AASB 136.104 AASB 136.124
AASB 136.10(a)
Commentary
AASB 136.96 permits the annual impairment test for a CGU to which goodwill has been allocated to be performed at any time during the year, provided it is at the same time each year. Different CGUs and intangible assets may be tested at different times.
(t) Cash and short-term deposits Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.
AASB 107.6 AASB 107.7 AASB 107.46
Commentary
The Group has included bank overdrafts within cash and cash equivalents as they are considered an integral part of the Groups cash management.
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(u) Convertible preference shares Convertible preference shares are separated into liability and equity components based on the terms of the contract. On issuance of the convertible preference shares, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption. The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity. Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent years.
AASB 132.38 AASB 7.21 AASB 132.18 AASB 132.28 AASB 132.35 AASB 132.AG31(a)
Transaction costs are apportioned between the liability and equity components of the convertible preference shares based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised. (v) Treasury shares Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Groups own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in share premium. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them. Share options exercised during the reporting period are satisfied with treasury shares. (w) Provisions General Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. Warranty provisions Provisions for warranty-related costs are recognised when the product is sold or service provided. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually. Restructuring provisions Restructuring provisions are recognised only when general recognition criteria for provisions are fulfilled. Additionally, the Group follows a detailed formal plan about the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs and appropriate timeline. The employees affected have a valid expectation that the restructuring is being carried out or the implementation has been initiated already. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Decommissioning liability The Group records a provision for decommissioning costs of a manufacturing facility for the production of fire retardant materials. Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognised as part of the cost of the particular asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the decommissioning liability. The unwinding of the discount is expensed as incurred and recognised in the income statement as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.
AASB 137.14 AASB 137.53 AASB 137.54 AASB 137.47 AASB 137.59 AASB 137.60 AASB 137.72 AASB 132.33
AASB 119.133
AASB 119.71 AASB 137.72
AASB 137.45
AASB 116.16(c) AASB 137.45 AASB 137.47 AASB Int 1.8 AASB 137.59 AASB Int 1.5
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(w) Provisions (continued) Greenhouse gas emissions The Group receives free emission rights in certain European countries as a result of the European Emission Trading Schemes. The rights are received on an annual basis and, in return, the Group is required to remit rights equal to its actual emissions. The Group has adopted the net liability approach to the emission rights granted. Therefore, a provision is recognised only when actual emissions exceed the emission rights granted and still held. The emission costs are recognised as other operating costs. Where emission rights are purchased from other parties, they are recorded at cost, and treated as a reimbursement right, whereby they are matched to the emission liabilities and remeasured to fair value. The changes in fair value are recognised in the income statement.
AASB 8.10
Commentary
AASB Int 3 Emission Rights was withdrawn in June 2005 as the AASB is developing guidance on accounting for emission rights. In the absence of a specific standard, management must develop an accounting policy that is relevant and reliable. The Group has applied the net liability approach based on AASB 120.23. However, emission rights received could also be recognised as intangible assets at their fair value with all the disclosures required by AASB 138.
Waste electrical and electronic equipment (WEEE) The Group is a provider of electrical equipment that falls under the EU Directive on waste electrical and electronic equipment. The directive distinguishes between waste management of equipment sold to private households prior to a date as determined by each Member State (historical waste) and waste management of equipment sold to private households after that date (new waste). A provision for the expected costs of management of historical waste is recognised when the Group participates in the market during the measurement period as determined by each Member State, and the costs can be reliably measured. These costs are recognised as other operating costs in the income statement. With respect to new waste, a provision for the expected costs is recognised when products that fall within the directive are sold and the disposal costs can be reliably measured. Derecognition takes place when the obligation expires, is settled or is transferred. These costs are recognised as part of costs of sales. With respect to equipment sold to entities other than private households, a provision is recognised when the Group becomes responsible for the costs of this waste management, with the costs recognised as other operating costs or cost of sales as appropriate. Contingent liabilities recognised in a business combination A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of:
X
AASB Int 6
AASB 3.56 AASB 3.22 AASB 3.23
The amount that would be recognised in accordance with the general requirements for provisions above (AASB 137) Or The amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the requirements for revenue recognition (AASB 118)
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(x) Pensions and other post employment benefits The Group operates two defined benefit pension plans, both of which require contributions to be made to separately administered funds. The Group has also agreed to provide certain additional post employment healthcare benefits to senior employees in the United States. These benefits are unfunded. The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method. Actuarial gains and losses for both defined benefit plans are recognised in full in the period in which they occur in other comprehensive income. Such actuarial gains and losses are also immediately recognised in retained earnings and are not reclassified to profit or loss in subsequent periods. Unvested past service costs are recognised as an expense on a straight line basis over the average period until the benefits become vested. Past service costs are recognised immediately if the benefits have already vested immediately following the introduction of, or changes to, a pension plan. The defined benefit asset or liability comprises the present value of the defined benefit obligation (using a discount rate based on government bonds, as explained in Note 3), less unrecognised past service costs and less the fair value of plan assets out of which the obligations are to be settled. Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value is based on market price information and, in the case of quoted securities, it is the published bid price. The value of any defined benefit asset recognised is restricted to the sum of any unrecognised past service costs and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.
AASB 119.64 AASB 119.92 AASB 119.93A
AASB 119.93D AASB 119.96
AASB 119.54 AASB 119.7
AASB 119.58A
Commentary
The Group voluntarily changed its accounting policy for defined benefit plans, to recognise actuarial gains and losses in the period in which they occur in full in other comprehensive income in accordance with AASB 119.93A. Previously, the Group recognised the net cumulative unrecognised actuarial gains and losses, which exceeded 10% of the higher of the defined benefit obligation and the fair value of the plan assets at that date over the remaining working periods of the employees, in accordance with AASB 119.93. This is sometimes referred to as the corridor approach. Further details are disclosed in Note 2.4. The other disclosures about pension plans remained the same.
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(y) Share-based payment transactions Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). Employees working in the business development group are granted share appreciation rights, which can only be settled in cash (cash-settled transactions). Equity-settled transactions The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Groups best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense (Note 8.6). No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. When the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the sharebased payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where nonvesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further details are given in Note 11). Cash-settled transactions The cost of cash-settled transactions is measured initially at fair value at the grant date using a binomial model, further details of which are given in Note 26. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognised in employee benefits expense (see Note 8.6).
AASB 2.27 AASB 2.27A AASB 2.21
AASB 2.28 AASB 2.B42-B44
AASB 33.45 AASB 2.7
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2. 2.4 Summary of significant accounting policies (continued) Changes in accounting policies and disclosures
AASB 108.14
Changes in accounting policy AASB 119 Employee Benefits The Group has assessed its accounting policy with regard to the recognition of actuarial gains and losses arising from its two defined benefit plans. The Group previously recognised only the net cumulative unrecognised actuarial gains and losses of the previous period, which exceeded 10% of the higher of the defined benefit obligation and the fair value of the plan assets in accordance with AASB 119.93. As a consequence, the Groups statement of financial position did not reflect a significant part of the unrecognised net actuarial gains and losses. During 2011, the Group determined that it would change its accounting policy to recognise actuarial gains and losses in the period in which they occur in total in other comprehensive income (see Note 2.3(x)), as it believes this policy is more consistent with the practice of its immediate industry peers. Changes have been applied retrospectively in accordance with AASB 8 Accounting Policies, Changes in Accounting Estimates and Errors, resulting in the restatement of prior year financial information. As a result of the voluntary accounting policy change, the following adjustments were made to the financial statements: As of 1 January 2010: Increase in employee benefit liability: $1,438,000 Decrease in deferred tax liability: $432,000 Net decrease in opening retained earnings: $1,006,000 As of and for the year ended 31 December 2010: Increase in employee benefit liabilities: $454,000 Pension profits with the old policy reclassified to other comprehensive income: $53,000 Net effect on the employee benefit liability: $401,000 Net decrease in deferred tax liability: $120,000 Net expense recognised in other comprehensive income: $281,000 Net decrease in tax expense: $16,000 Net increase in profit after tax: $37,000 As of and for the year ended 31 December 2011: Decrease in employee benefit liability: $433,000 Pension expenses with the old policy reclassified to other comprehensive income: $122,000 Net decrease of the employee benefit liability: $311,000 Net increase in deferred tax liability: $94,000 Net income recognised in other comprehensive income: $217,000 Net decrease in tax expense: $37,000 Net increase in profit after tax: $85,000 The effect on earnings per share related to the restatement in 2010 and impact on 2011 was less than $0.01.
AASB 108.29 AASB 119.92
AASB 108.19(b)
AASB 108.29(c
AASB 108.29(c)(i)
AASB10 8.29(c)(ii)
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3. Significant accounting judgements, estimates and assumptions
The preparation of the Groups consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Judgements In the process of applying the Groups accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements: Operating lease commitments group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. Discontinued operations On 1 March 2011, the Board of Directors announced its decision to dispose of the rubber segment consisting of Hose Limited and, therefore, classified it as a disposal group held for sale. The Board considered the subsidiary met the criteria to be classified as held for sale at that date for the following reasons:
X
AASB 101.122
Hose Limited is available for immediate sale and can be sold to a potential buyer in its current condition The Board had a plan to sell Hose Limited and had entered into preliminary negotiations with a potential buyer. Should negotiations with the party not lead to a sale, a number of other potential buyers have been identified The Board expects negotiations to be finalised and the sale to be completed by 29 February 2012
AASB 5.7 AASB 5.8
For more details on the discontinued operation refer to Note 10. Consolidation of a special purpose entity In February 2011, the Group and a third party partner formed an entity to acquire land and construct and operate a fire equipment safety facility. The Group holds a 20% equity interest in this entity. However, the Group has majority representation on the entitys board of directors and is required to approve all major operational decisions. The operations, once they commence, will be solely used by the Group. Based on these facts and circumstances, management concluded that the Group controls this entity and, therefore, consolidates the entity in its financial statements. Additionally, the Group is effectively guaranteeing the returns to the third party. The shares of the third party partner are recorded as a long-term loan and the return on investment is recorded as interest expense. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
AASB 101.125
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3. Significant accounting judgements, estimates and assumptions (continued)
Revaluation of property, plant and equipment and investment properties The Group carries its investment properties at fair value, with changes in fair value being recognised in the income statement. In addition, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. The Group engaged independent valuation specialists to determine fair value as at 31 December 2011. For the investment property, the valuer used a valuation technique based on a discounted cash flow model as there is a lack of comparable market data because of the nature of the property. The determined fair value of the investment properties is most sensitive to the estimated yield as well as the long-term vacancy rate. The key assumptions used to determine the fair value of the investment properties, are further explained in Note 13. Impairment of non-financial assets An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in arms length transactions of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the assets performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are further explained in Note 16. These assumptions include managements expectation of the impact of the introduction of a carbon price under the Scheme. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for sharebased payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 26. Taxes Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group company's domicile. As the Group assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognised. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The Group has tax loss carry forwards amounting to $427,000 (2010: $1,198,000). These losses relate to subsidiaries that have a history of losses, do not expire and may not be used to offset taxable income elsewhere in the Group. The subsidiary has no taxable temporary differences nor any tax planning opportunities available that could partly support the recognition of these losses as deferred tax assets.
AASB 112.88 AASB 101.125
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If the Group was able to recognise all unrecognised deferred tax assets, profit would increase by $128,000. Further details on taxes are disclosed in Note 9. Pension benefits The cost of defined benefit pension plans and other post employment medical benefits and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers the government bonds with estimated maturities corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the respective country. Further details about the assumptions used are given in Note 25. Fair value measurement of contingent consideration Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a derivative and, thus, a financial liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount factor. As part of the identification and measurement of assets and liabilities in the acquisition of Extinguishers Limited, the Group identified an element of contingent consideration with a fair value of $714,000 at the acquisition date, remeasured to $1,071,500 as at the reporting date, which is classified as other financial liability (see Notes 4 and 15). Fair value of financial instruments When the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Development costs Development costs are capitalised in accordance with the accounting policy in Note 2.3. Initial capitalisation of costs is based on managements judgement that technological and economical feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits. At 31 December 2011, the carrying amount of capitalised development costs was $2,178,000 (2010: $1,686,000). This amount includes significant investments in the development of an innovative fire prevention system. Prior to being marketed, it will need to obtain a safety certificate issued by the relevant regulatory authorities. The innovative nature of the product gives rise to some uncertainty as to whether the certificate will be obtained. However, the Group is confident that the certificate will be received.
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Provision for decommissioning As part of the identification and measurement of assets and liabilities for the acquisition of Extinguishers Limited in 2011, the Group has recognised a provision for decommissioning obligations associated with a factory owned by Extinguishers Limited. In determining the fair value of the provision, assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove the plant from the site and the expected timing of those costs. The carrying amount of the provision as at 31 December 2011 was $1,221,000 (2010: $Nil). If the estimated pre-tax discount rate used in the calculation had been 10% higher than managements estimate, the carrying amount of the provision would have been $94,000 lower. Provision for WEEE The Group recognises a provision for liabilities associated with participation in the market for Waste Electrical and Electronic Equipment (WEEE) in accordance with the accounting policy stated in Note 2.3. The Group has made assumptions in relation to historical waste, regarding the level of market participation, the quantity of products disposed of and the expected cost of disposal. In relation to future waste, the Group has made assumptions about the age profile of products in the market and the cost of disposal. At 31 December 2011, the carrying amount of the provision for WEEE was $149,000 (2010: $53,000). Revenue recognition EndeavourPoints for loyalty programme The Group estimates the fair value of points awarded under the EndeavourPoints programme by applying statistical techniques. Inputs to the models include making assumptions about expected redemption rates, the mix of products that will be available for redemption in the future and customer preferences. As points issued under the programme do not expire, such estimates are subject to significant uncertainty. As at 31 December 2011, the estimated liability for unredeemed points was approximately $416,000 (2010: $365,000).
Commentary
AASB 101.125 requires an entity to disclose significant judgements applied in preparing the financial statements and significant estimates that involve a high degree of estimation uncertainty. The disclosure requirements go beyond those requirements that already exist in some other AASB such as AASB 137. These disclosures represent a very important source of information in the financial statements because they highlight areas in the financial statements that are most prone to change in the foreseeable future. Therefore, any information given should be sufficiently detailed to help the reader of the financial statements understand the impact of possible significant changes.
4.
Business combinations and acquisition of non-controlling interests
Acquisitions in 2011 Acquisition of Extinguishers Limited On 1 May 2011, the Group acquired 80% of the voting shares of Extinguishers Limited, an unlisted company based in Australia and specialising in the manufacture of fire retardant fabrics. The Group acquired Extinguishers Limited because it significantly enlarges the range of products in the fire prevention equipment segment that can be offered to its clients. The Group has elected to measure the non-controlling interest in the acquiree at fair value. Assets acquired and liabilities assumed The fair value of the identifiable assets and liabilities of Extinguishers Limited as at the date of acquisition were:
AASB 3.59 AASB 3.B64(a) AASB 3.B64(b) AASB 3.B64(d) AASB 3.B64(c)
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4. Business combinations and acquisition of non-controlling interests (continued)
Fair value recognised on acquisition $000 Assets Property, plant and equipment (Note 12) Cash and cash equivalents Trade receivables Inventories Patents and licences (Note 14) Liabilities Trade payables Contingent liability (Note 22) Provision for onerous operating lease costs (Note 22) Provision for restructuring (Note 22) Provision for decommissioning costs (Note 22) Deferred tax liability Total identifiable net assets at fair value Non-controlling interest measured at fair value Goodwill arising on acquisition (Note 14) Purchase consideration transferred 7,042 230 1,716 3,578 1,200 13,766 (2,542) (380) (400) (500) (1,200) (1,511) (6,533) 7,233 (1,547) 2,231 7,917
AASB 3.B64(o)(i) AASB 3.B64(i) AASB 7.40(d)
AASB 7.40(c)
Commentary
The references quoted refer to AASB 3 (effective 1 July 2009), which the Group applies for its financial period beginning 1 January 2010.
The fair value of the trade receivables amounts to $1,736,000. The gross amount of trade receivables is $1,754,000. None of the trade receivables have been impaired and it is expected that the full contractual amounts can be collected. Prior to the acquisition, Extinguishers Limited decided to eliminate certain product lines (further details are given in Note 22). The restructuring provision recognised was a present obligation of Extinguishers Limited immediately prior to the business combination. The execution of the restructuring plan was not conditional upon it being acquired by the Group. The goodwill of $2,231,000 comprises the value of expected synergies arising from the acquisition and a customer list, which is not separately recognised. Goodwill is allocated entirely to the fire prevention segment. Due to the contractual terms imposed on acquisition, the customer list is not separable. Therefore, it does not meet the criteria for recognition as an intangible asset under AASB 138 Intangible assets. None of the goodwill recognised is expected to be deductible for income tax purposes. A contingent liability at a fair value of $380,000 was determined at the acquisition date resulting from a claim of a supplier whose shipment has been rejected and payment has been refused by the Group due to deviations from the defined technical specifications of the goods. The claim is subject to legal arbitration and is only expected to be finalised in late 2012. As at the reporting date, the contingent liability has been reassessed and is determined to be $400,000, which is based on the expected probable outcome (see Note 22). The charge has been recognised in the income statement.
AASB 3.B64(h)
AASB 3.B64(e)
AASB 3.B64(k)
AASB 3.B64(j) AASB 3.56(a)
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AASB 3.B64 (o)(ii)
The fair value of the non-controlling interest in Extinguishers Limited has been estimated by applying a discounted earnings approach. Extinguishers Limited is an unlisted company and, as such, no market information is available. The fair value estimate is based on:
X X
An assumed discount rate of 14% A terminal value, calculated based on long-term sustainable growth rates for the industry ranging from two to four per cent, which has been used to determine income for the future years A reinvestment ratio of 60% of earnings
AASB 3.B64 (q)(i) AASB 3.B64 (q)(ii)
From the date of acquisition, Extinguishers Limited has contributed $17,857,000 of revenue and $750,000 to the net profit before tax of the Group. If the combination had taken place at the beginning of the year, revenue from continuing operations would have been $222,582,000 and the profit from continuing operations for the Group would have been $12,285,000. Purchase consideration Shares issued, at fair value Contingent consideration liability Total consideration Analysis of cash flows on acquisition: Transaction costs of the acquisition (included in cash flows from operating activities) Net cash acquired with the subsidiary (included in cash flows from investing activities) Transaction costs attributable to issuance of shares (included in cash flows from financing activities, net of tax) Net cash flow on acquisition $000 7,203 714 7,917
AASB 3.B64 (f)(iv) AASB 3.B64 (f)(iii) AASB 7.40(a)
(600) 230
AASB 7.40(c)
(32) (402)
AASB 3.B64 (f)(iv)
The Group issued 2,500,000 ordinary shares as consideration for the 80% interest in Extinguishers Limited. The fair value of the shares is the published price of the shares of the Group at the acquisition date, which was $2.88 each. The fair value of the consideration given is therefore $7,203,000. Transaction costs of $600,000 have been expensed and are included in administrative expenses. The attributable costs of the issuance of the shares of $32,000 have been charged directly to equity as a reduction in share premium. Contingent consideration As part of the purchase agreement with the previous owner of Extinguishers Limited, a contingent consideration has been agreed. There will be additional cash payments to the previous owner of Extinguishers Limited of: a) $675,000, if the entity generates $1,000,000 of profit before tax in a 12-month period after the acquisition date Or $1,125,000, if the entity generates $1,500,000 of profit before tax in a 12-month period after the acquisition date
AASB 3.B64 (f)(iv) AASB 3.B64(m)
AASB 3.B64 (g)(ii)
AASB 3.B64 (g)(iii) AASB 3.B64 (g)(i)
AASB 3.58 (b)(i)
b)
As at the acquisition date, the fair value of the contingent consideration was estimated to be $714,000. As at 31 December 2011, the key performance indicators of Extinguishers Limited show clearly that target (a) will be achieved and the achievement of target (b) is probable due to a significant expansion of the business and synergies implemented. Accordingly, the fair value of the contingent consideration has been adjusted to reflect this development and such charge has been recognised through profit or loss. The contingent consideration as at 31 December 2011 has been increased by $357,500 to $1,071,500 due to changes in the underlying assumptions that reflect the fair value of the discounted cash payment (see Note 3). This fair value adjustment is recognised in administrative expenses.
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Commentary
The classification of a contingent consideration requires an analysis of the individual facts and circumstances. It may be classified either as equity or as a financial liability in accordance with AASB 132 and AASB 139, as a provision in accordance with AASB 137 or in accordance with other AASBs, each resulting in different initial recognition and subsequent measurement. The Group has assessed the nature of the contingent consideration and determined it as being a financial liability, as the Group incurred a contractual obligation to deliver cash to the seller (AASB 132.11). Consequently, the Group is required to remeasure that liability to fair value at the reporting date (AASB 3.58(b)(i)). As part of the business combination, contingent payments to employees or selling shareholders are common methods of retention of key people for the combined entity. The nature of such contingent payments, however, needs to be evaluated in each individual circumstance as not all such payments qualify as contingent consideration, but are accounted for as a separate transaction. For example, contingent payments that are unrelated to the future service of the employee are deemed contingent consideration, whereas contingent payments that are forfeited when the employment is terminated, are deemed remuneration. Paragraphs B54 B55 of AASB 3 provide further guidance.
Acquisition of additional interest in Lightbulbs Limited On 1 October 2011, the Group acquired an additional 7.4% interest in the voting shares of Lightbulbs Limited, increasing its ownership interest to 87.4%. A cash consideration of $325,000 was paid to the non-controlling interest shareholders. The carrying value of the net assets of Lightbulbs Limited (excluding goodwill on the original acquisition) at the acquisition date was $1,824,000, and the carrying value of the additional interest acquired was $135,000. The difference of $190,000 between the consideration and the carrying value of the interest acquired has been recognised in retained earnings within equity. Acquisitions in 2010 On 1 December 2010, the Group acquired 80% of the voting shares of Lightbulbs Limited, a company based in Australia, specialising in the production and distribution of lightbulbs. The Group acquired this business to enlarge the range of products in the electronics segment. The Group elected to measure the non-controlling interest in the acquiree at the proportionate share of its interest in the acquirees identifiable net assets The fair value of the identifiable assets and liabilities of Lightbulbs Limited as at the date of acquisition were:
AASB 127.30 AASB 127.41(e)
AASB 3,59 AASB 3.B64(a) AASB 3.B64(b) AASB 3.B64(c) AASB 3.B64(d) AASB 3.B64(o)(i)
90

Fair value recognised on acquisition (Restated) $000 1,280 50 853 765 2,948 Trade payables Deferred tax liability Provision for maintenance warranties Net assets Non-controlling interest (20% of net assets fair value) Total net assets acquired Goodwill arising on acquisition (Note 14) Purchase consideration transferred Cash flow on acquisition Net cash acquired with the subsidiary Cash paid Net cash flow on acquisition (807) (380) (50) (1,237) 1,711 (342) 1,369 131 1,500 $000 50 (1,500) (1,450)
AASB 3.45 AASB 3.B67(a)(i) AASB 3.B67(a)(ii) AASB 7.40(a) AASB 3.B64(i) AASB 7.40(d)
Land and buildings (Note 12) Cash and cash equivalents Trade receivables Inventories
AASB 7.40(c)
AASB 7.40(c) AASB 7.40(b) AASB 3.B64(f)(i)
The net assets recognised in the 31 December 2010 financial statements were based on a provisional assessment of fair value as the Group had sought an independent valuation for the land and buildings owned by Lightbulbs Limited. The results of this valuation had not been received at the date the 2010 financial statements were approved for issue by management. The valuation of the land and buildings was completed in April 2011 and showed that the fair value at the date of acquisition was $1,280,000, an increase of $200,000 compared with the provisional value. The 2010 comparative information has been restated to reflect this adjustment. As a result, there was an increase in the deferred tax liability of $60,000 and an increase in the non-controlling interest of $28,000. There was also a corresponding reduction in goodwill of $112,000, to give total goodwill arising on the acquisition of $131,000. The increased depreciation charge on the buildings from the acquisition date to 31 December 2010 was not material. Lightbulbs Limited contributed $20,000 from the date of acquisition (1 December 2010) to 31 December 2010 to the profit for the year from continuing operations of the Group. If the combination had taken place at the beginning of that year, revenue from continuing operations would have been $198,078,000 and the profit for the year from continuing operations for the Group for 2010 would have been $7,850,000. The goodwill of $131,000 comprises the fair value of expected synergies arising from acquisition.
AASB 3.49 AASB 3.B67(a)(iii)
AASB 3.B64(q)
AASB 3.B64(e)
Commentary
In the 2010 business combination the Group elected to value the non-controlling interest by its proportionate share of the acquiree`s identifiable net assets. In the 2011 business combination the Group elected to value the non-controlling interest at fair value. This election can be made separately for each business combination, and is not a policy choice that determines an accounting treatment for all business combinations the Group will carry out (AASB 3.19).
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5. Interest in a joint venture
AASB 131.56 AASB 131.57
The Group has a 50% interest in Showers Limited, a jointly controlled entity involved in the manufacture of fire prevention equipment in Australia. The Groups share of the assets and liabilities as at 31 December 2011 and 2010 and income and expenses of the jointly controlled entity for the years ended 31 December 2011 and 2010, which is proportionally consolidated in the consolidated financial statements, are as follows: As at 1 January 2010 $000
2011 $000 Share of the joint ventures statement of financial position: Current assets Non-current assets Current liabilities Non-current liabilities Equity Share of the joint ventures revenue and profit: Revenue Cost of sales Administrative expenses Finance costs Profit before tax Income tax expense Profit for the year from continuing operations
2010 $000
AASB 131.56
1,613 1,432 (112) (510) 2,423
1,404 1,482 (551) (500) 1,835
1,088 1,445 (750) (505) 1,278
30,047 (27,244) (1,319) (102) 1,382 (794) 588
29,438 (26,710) (1,293) (100) 1,335 (778) 557

AASB 131.54 AASB 131.55
The joint venture has no contingent liabilities or capital commitments as at 31 December 2011 and 31 December 2010.
6.
Investment in an associate
AASB 128.37(a)
The Group has a 25% interest in Power Works Limited, which is involved in the manufacture of fire prevention equipment for power stations in Australia. Power Works Limited is a private entity that is not listed on any public exchange. The following table illustrates summarised financial information of the Groups investment in Power Works Limited: As at 1 January 2010 $000
AASB 128.37(e)
2011 $000 Share of the associates statement of financial position: Current assets Non-current assets Current liabilities Non-current liabilities Equity Share of the associates revenue and profit: Revenue Profit Carrying amount of the investment 8,323 83 764 1,631 3,416 (1,122) (3,161) 764
2010 $000 1,581 3,207 (976) (3,131) 681
AASB 128.37(b)
1,500 3,126 (920) (3,106) 600
8,160 81 681 600
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7. Segment information
AASB 101.138 AASB 8.22(a) AASB 8.22(b)
For management purposes, the Group is organised into business units based on its products and services and has three reportable segments, as follows:
X
The fire prevention equipment segment, which produces and installs extinguishers, fire prevention equipment and fire retardant fabrics. The electronics segment, which is a supplier of electronic equipment for defence, aviation, electrical safety markets and consumer electronic equipment for home use. It offers products and services in the areas of electronics, safety, thermal and electrical architecture. The investment property segment, which leases offices and manufacturing sites owned by the Group which are surplus to the Groups requirements.
No operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments. Transfer prices between operating segments are on an arms length basis in a manner similar to transactions with third parties.
Year ended 31 December 2011 Revenue External customers Inter-segment Total revenue Results Depreciation and amortisation Goodwill impairment (Note 16) Impairment on AFS financial assets (Note 8.3) Share of profit of an associate (Note 6) Segment profit Operating assets Operating liabilities Other disclosures Investment in an associate (Note 6) Capital expenditure Fire prevention equipment $000 139,842 139,842 Investment property $000 1,404 1,404 Total segments $000 210,509 7,465 217,974 Adjustments and eliminations $000 (7,465) (7,465)
AASB 8.28(b)
AASB 8.27(a)
Electronics $000 69,263 7,465 76,728
Consolidated $000 210,509

AASB 8.23(a) AASB 8.23(b)

210,509
(3,428) (111) 83 10,475 58,696 18,309
(389) (200) 2,968 44,814 7,252
321 18,467 4,704
(3,817) (200) (111) 83 13,764 121,977 30,265
(1,859) 18,926 46,151
(3,817) (200) (111) 83
AASB 8.23(e) AASB 8.23(e)
AASB 8.23(g)
11,905 140,903 76,416
764 18,849
2,842
1,216
764 22,907

764 22,907
Inter-segment revenues are eliminated upon consolidation and reflected in the adjustments and eliminations column. All other adjustments and eliminations are part of detailed reconciliations presented further below.
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7. Segment information (continued)
Fire prevention equipment $000 Revenue External customers Inter-segment Total revenue Results Depreciation and amortisation Impairment on property, plant and equipment (Note 12) Share of profit of an associate (Note 6) Segment profit Operating assets Operating liabilities Other disclosures Investment in an associate Capital expenditure 123,905 123,905 Rubber equipment (disc. operation) $000 45,206 45,206 Adjustments and eliminations Consolidated $000 (45,206) (7,319) (52,525) $000 191,903 191,903
Year ended 31 December 2010
Electronics $000 66,621 7,319 73,940
Investment property $000 1,377 1,377
Total segments $000 237,109 7,319 244,428
(2,460)
(472)
324
(2,608)
(324)
(2,932)
AASB 8.23(e)
(301) 81 6,449 41,711 8,015
5,396 40,409 4,066
314 9,887 1,688
326 11,587 12,378
(301) 81 12,485 103,594 26,147
(1,423) 2,211 30,480
(301) 81 11,062 105,805 56,627
AASB 8.23(i) AASB 8.23(g) AASB 8.23 AASB 8.23 AASB 8.23
681 5,260
4,363
1,192

681 10,815

681 10,815
Commentary
The chief operating decision maker of the Group regularly reviews certain other effects recorded in the statement of comprehensive income, i.e., depreciation and amortisation, impairments and the share of profit in associates. This is because management assumes those amounts to reflect the effectiveness of certain internal control procedures as well as the accuracy and effectiveness of certain transactions.
Adjustments and eliminations Finance income and expenses, and fair value gains and losses on financial assets are not allocated to individual segments as the underlying instruments are managed on a group basis. Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to those segments as they are also managed on a group basis. Capital expenditure consists of additions of property, plant and equipment, intangible assets and investment properties including assets from the acquisition of subsidiaries. Inter-segment revenues are eliminated on consolidation.
AASB 8.28
94

2011 $000 13,764 336 (1,502) 850 (1,366) (2) (175) 11,905 2010 $000 12,485 211 (1,223) (85) (326) 11,062 As at 1 January 2010 $000 95,772 321 8 1,659 137 97,897 As at 1 January 2010 $000 24,832 1,261 4,625 21,469 2,522 271 54,980
AASB 8.33(a)
Reconciliation of profit Segment profit Finance income Fair value loss on financial assets at fair value through profit or loss Fair value gain on financial assets at fair value through profit or loss Finance costs Net realised gains from available-for-sale financial assets (elimination) Inter-segment sales (elimination) Gain from discontinued operations Group profit
Reconciliation of assets Segment operating assets Deferred tax assets Loans to an associate (Note 28) Loans to directors (Note 28) Loan notes Derivatives Assets classified as held for sale Group operating assets
2011 $000 121,977 383 200 13 3,674 1,102 13,554 140,903
2010 $000 103,594 365 8 1,685 153 105,805
Reconciliation of liabilities Segment operating liabilities Deferred tax liabilities Current tax payable Loans Convertible preference shares Derivatives Liabilities classified as held for sale Group operating liabilities Geographic information
Revenues from external customers
2011 $000 30,265 3,060 3,963 20,538 2,778 2,687 13,125 76,416
2010 $000 26,147 1,235 4,013 22,334 2,644 254 56,627
Australia United States Total revenue per consolidated income statement The revenue information above is based on the location of the customer.
2011 $000 158,285 52,224 210,509
2010 $000 142,022 49,881 191,903

AASB 8.33(a) AASB 8.34
Revenue from one customer amounted to $25,521,000 (2010: $21,263,000), arising from sales by the fire prevention equipment segment.
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As at 1 January 2010 $000 24,350 5,240 29,590 Non-current assets 2011 $000 40,023 9,300 49,323 2010 $000 29,004 7,251 36,255
AASB 8.33(b)
Australia United States Total
Non-current assets for this purpose consist of property, plant and equipment, investment properties and intangible assets.
Commentary
Interest revenue and interest expense have not been disclosed by segment as these items are managed on a group basis, and are not provided to the chief operating decision maker at the operating segment level. Disclosure of operating segment assets and liabilities is only required when such measures are provided to the chief operating decision maker. The Group provides information to the chief operating decision maker about operating assets and liabilities. The remaining operations (e.g., treasury), which are amongst others reflected in adjustments and eliminations, do not constitute an individual operating segment. The Groups internal reporting is set up to report in accordance with AASB. The segment disclosures could be significantly more extensive if internal reports had been prepared on a basis other than AASB. In this case, a reconciliation between the internally reported items and the externally communicated items needs to be prepared. AASB 8 does not provide specific disclosure requirements for an operating segment classified as a discontinued operation. An entity is therefore not required to provide such segment information as soon as the classification criteria held for sale is met. It is, however, allowed to continue to present segment information as long as the definition of operating segment is met. The Group has elected to continue to present segment information for the prior year. In the current year, the discontinued operation has been eliminated and is part of the reconciling items.
8. 8.1
Other income/expenses and adjustments Other operating income

2011 $000 1,053 532 1,585 2010 $000 541 2,007 2,548
AASB 120.39(c) AASB 120.39(b) AASB 101.97
Government grants (Note 23) Net gain on disposal of property, plant and equipment
Government grants have been received for the purchase of certain items of property, plant and equipment. There are no unfulfilled conditions or contingencies attached to these grants.
8.2
Other operating expenses

2011 $000 (579) (102) (101) (306) (65) (1,153) 2010 $000 (31) (22) (353) (300) (706)
AASB 101.97 AASB 101.97
Bid defence costs Cost of WEEE (Note 22) Direct operating expenses (including repairs and maintenance) arising on rental-earning investment properties Change in fair value of investment properties (Note 13) Ineffectiveness on forward commodity contracts designated as cash flow hedges (Note 15.3) Total other operating expenses
AASB 140.75 (f)(ii) AASB 101.97
AASB 7.24(b)
Bid defence costs were incurred to get advice in respect of a hostile takeover bid by a competitor. The competitor did not proceed with the bid. Ineffectiveness resulting from cash flow hedges with respect to commodity forward contracts were incurred in the Electronics segment. Ineffectiveness on forward commodity contracts due to the change in forward points was $23,000.
96

8.3 Finance costs
2011 $000 (1,172) (40) (1,212) (111) (1,502) (43) (2,868) 2010 $000 (1,182) (40) (1,222) (1) (1,223)
AASB 7.20(b) AASB 7.20(e) AASB 7.20(a) AASB 137.60
Interest on debts and borrowings Finance charges payable under finance leases and hire purchase contracts Total interest expense Impairment loss on quoted available-for-sale equity investments (Note 15.1) Net loss on financial instruments at fair value through profit or loss Unwinding of discount on provisions (Note 22) Total finance costs
8.4
Finance income
2011 $000 2010 $000 20 316 850 1,186 211 211
AASB 101.85 AASB 7.20(a)(i) AASB 7.20(b)
Interest income on a loan to an associate (Note 28) Interest income from available-for-sale investments Fair value gain on financial instruments at fair value through profit or loss Total finance income
Net loss on financial instruments through profit or loss in Note 8.3 and 8.4 above relates to foreign exchange forward contracts that did not qualify for hedge accounting and embedded derivatives, which have been bifurcated. No ineffectiveness has been recognised on foreign exchange and interest rate hedges.
Commentary
Finance income and finance cost are not defined terms in AASB. Some jurisdictions limit the inclusion of certain income and expense within those items (e.g., restricted to interest income and expense), while other jurisdictions allow additional items to be included.
8.5
Depreciation, amortisation, foreign exchange differences and costs of inventories included in the consolidated income statement
2011 $000 2010 $000 2,800 301 174 (40) 52 131,140 282 175
AASB 101.104
Included in cost of sales: Depreciation Impairment of property, plant and equipment (Note 12) Amortisation and impairment of intangible assets (Note 14) Net foreign exchange differences Warranty provision (Note 22) Costs of inventories recognised as an expense Included in administrative expenses: Depreciation Minimum lease payments recognised as an operating lease expense
3,520 325 (65) 106 150,283 277 250
AASB 136.126(a)
AASB 121.52(a)
AASB 102.36(d)
AASB 117.35(c)
97

8.6 Employee benefits expense
2011 $000 38,205 3,854 1,395 153 412 44,019 2010 $000 38,050 3,837 1,361 113 492 43,853
AASB 138.126 AASB 101.104
Wages and salaries Social security costs Pension costs (Note 25) Post-employment benefits other than pensions (Note 25) Share-based payment transaction expense (Note 26) Total employee benefits expense
AASB 2.51(a)
8.7
Research and development costs
Research and development costs recognised as an expense in the income statement during the financial year amount to $2,235,000 (2010: $1,034,000).
8.8
Components of other comprehensive income

2011 $000 (218) (915) 401 (732) 2010 $000 (379) 412 33
AASB 101.92 AASB 7.23(d) AASB 101.97
Cash flow hedges: Gains/(losses) arising during the year Currency forward contracts Commodity forward contracts Reclassification adjustments for gains included in the income statement
Available-for-sale financial assets: Gains/(losses) arising during the year Reclassification adjustments for losses included in the income statement
(58) (2) (60)
3 3
AASB 101.92 AASB 7.20(a)(ii)
Commentary
The purpose of Note 8.8 is to provide an analysis of items presented net in the statement of comprehensive income which have been subject to reclassification. This analysis does not prepared for the remaining items of other comprehensive income, as those are either never reclassified to profit or loss or reclassification adjustments did not occur.
98

9. Income tax
AASB 112.79
The major components of income tax expense for the years ended 31 December 2011 and 2010 are:
Consolidated income statement

2011 $000 Current income tax: Current income tax charge Adjustments in respect of current income tax of previous year Deferred tax: Relating to origination and reversal of temporary differences Income tax expense reported in the income statement 3,732 (18) 179 3,893 2010 $000 3,901 (129) (340) 3,432
AASB 112.80(a) AASB 112.80(b)
AASB 112.80(c)
Consolidated statement of other comprehensive income

Deferred tax related to items charged or credited directly to OCI during the year: Net gain/(loss) on revaluation of cash flow hedges Unrealised gain/(loss) on available-for-sale financial assets Net gain/(loss) on revaluation of land and buildings Net gain/(loss) on hedge of net investment Net (loss)/gain on actuarial gains and losses Income tax charged directly to other comprehensive income
AASB 112.81(a)
220 18 (254) (83) (94) (193)
(9) (1) 120 110

AASB 112.81 (c)(i)
A reconciliation between tax expense and the product of accounting profit multiplied by Australias domestic tax rate for the years ended 31 December 2011 and 2010 is as follows: 2011 $000 11,905 213 12,118 3,635 (18) (316) (231) 60 107 121 528 3,886 3,893 (7) 3,886 2010 $000 11,062 (193) 10,869 3,261 (44) (162) (89) 145 316 3,427 3,432 (5) 3,427
Accounting profit before tax from continuing operations Profit/(loss) before tax from a discontinued operation Accounting profit before income tax At Australias statutory income tax rate of 30% (2010: 30%) Adjustments in respect to current income tax of previous years Government grants exempt from tax Utilisation of previously unrecognised tax losses Non-deductible expenses for tax purposes Impairment of goodwill Change in contingent consideration on acquisition of Extinguishers Limited Other non-deductible expenses Effect of higher tax rates in the US At the effective income tax rate of 31% (2010: 32%) Income tax expense reported in the consolidated income statement Income tax attributable to a discontinued operation
99

9. Income tax (continued)
Deferred tax Deferred tax relates to the following: Consolidated statement of financial position 2011 2010 $000 $000 Accelerated depreciation for tax purposes Revaluations of investment properties to fair value Revaluations of land and buildings to fair value Revaluations of available-for-sale investments to fair value Revaluation of a hedged loan to fair value Net gain on hedge of a net investment Share based payments Post-employment medical benefits Pension Revaluation of an interest rate swap (fair value hedge) to fair value Revaluation of cash flow hedges Impairment on available-for-sale unquoted debt instruments Deferred revenue on customer loyalty programmes Convertible preference shares Losses available for offsetting against future taxable income Deferred tax expense/(income) Net deferred tax assets/(liabilities) Reflected in the statement of financial position as follows: Deferred tax assets Deferred tax liabilities - continuing operations Deferred tax liabilities - discontinued operations Deferred tax liabilities net Reconciliation of deferred tax liabilities net 2011 $000 (870) (179) (193) 2 (1,511) (2,751) 2010 $000 (940) 340 110 (380) (870) (2,761) (1,330) (254) 17 (11) (83) 51 102 685 11 250 27 71 91 383 (2,751) (811) (1,422) (1) 100 59 689 31 65 55 365 (870) Consolidated income statement 2011 2010 $000 $000 442 (92) 11 49 (43) (90) (11) (27) (6) (36) (18) 179 (157) (90) (33) 27 (11) (32) (44) (340)
AASB 112.81(g)(i) AASB 112.81(g)(ii)
383 (3,060) (74) (2,751)
365 (1,235) (870)
Opening balance as of 1 January Tax income/(expense) during the period recognised in profit or loss Tax income/(expense) during the period recognised in other comprehensive income Discontinued operation Deferred taxes acquired in business combinations Closing balance as at 31 December
Commentary
Although not specifically required by AASB 101 or AASB 112, the reconciliation of the net deferred tax liability may be helpful for the reader.
100

AASB 112.73
The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority. Tax losses The Group has tax losses which arose in Australia of $427,000 (2010: $1,198,000, 1 January 2010: $1,494,000) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose. However, these losses relate to subsidiaries that have a history of losses, they do not expire and may not be used to offset taxable income elsewhere in the Group. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group and they have arisen in subsidiaries that have been loss-making for some time. The Group evaluated and concluded that it is not probable that deferred tax assets on existing tax losses as a result of the acquisition of Extinguishers Limited in 2011 will be recovered. The subsidiary has no taxable temporary differences nor any tax planning opportunities available that could partly support the recognition of these losses as deferred tax assets. If the Group were able to recognise all unrecognised deferred tax assets, profit would increase by $128,000. At 31 December 2011, there was no recognised deferred tax liability (2010: $Nil, 1 January 2010: $Nil) for taxes that would be payable on the unremitted earnings of certain of the Groups subsidiaries, associate or joint venture. The Group has determined that undistributed profits of its subsidiaries, joint venture or associate will not be distributed in the foreseeable future, as: i) The Group has an agreement with its associate that the profits of the associate will not be distributed until it obtains the consent of the Group. The parent company does not foresee giving such a consent at the reporting date. ii) The joint venture of the Group cannot distribute its profits until it obtains the consent from all venture partners. The parent company does not foresee giving such a consent at the reporting date. The temporary differences associated with investments in subsidiaries, associate and joint venture, for which a deferred tax liability has not been recognised, aggregate to $1,745,000 (2010: $1,458,000, 1 January 2010: $1,325,000). There are no income tax consequences attached to the payment of dividends in either 2011 or 2010 by the Group to its shareholders.
AASB 112.81(e)
AASB 112.87
AASB 112.67
AASB 112.81(f)
AASB 112.82A
Commentary
AASB 101.61 requires an entity to separately disclose the amount expected to be recovered or settled within 12 months and more than 12 months after the reporting date for each line item that combines such amounts. Deferred tax assets and liabilities may be considered one example, for items combining such amounts. However, AASB 101.56, in contrast, does not permit to present those items as current
Tax consolidation (i) Members of the tax consolidated group and the tax sharing arrangement Endeavour (International) Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July 2005. Endeavour (International) Limited is the head entity of the tax consolidated group. Members of the Group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.
AASB Int 1052.16 (a) AASB Int 1052.16 (c) AASB Int 53
101

(ii) Tax effect accounting by members of the tax consolidated group Measurement method adopted under AASB Interpretation 1052 Tax Consolidation Accounting The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed further below. In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Nature of the tax funding agreement Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement the funding of tax within the Group is based on accounting profit, which is not an acceptable method of allocation under AASB Interpretation 1052. The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a difference between the amount charged under the tax funding agreement and the allocation under AASB Interpretation 1052, the head entity accounts for these as equity transactions with the subsidiaries. The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The terms and conditions for these transactions are disclosed in Note 28. (iii) Tax related contingencies All tax related contingencies are disclosed in Note 29. Taxation of financial arrangements (TOFA) Legislation is in place which changes the tax treatment of financial arrangements including the tax treatment of hedging transactions. The Group has assessed the potential impact of these changes on the Groups tax position. No impact has been recognised and no adjustments have been made to the deferred tax and income tax balances at 31 December 2011 (2010: $Nil).
AASB Int 1052.16(c) AASB Int 1052.8, 9(c), 16(b)
AASB Int 1052.52
102

10. Discontinued operations
AASB 5.30 AASB 5.41
On 1 March 2011, the Group publicly announced the decision of its Board of Directors to dispose of Hose Limited. The business of Hose Limited has been operating in an unpredictable product environment, making it difficult for management to derive real growth and profitability from the segment. The disposal of Hose Limited is due to be completed on 28 February 2012 and, as at 31 December 2011, final negotiations for the sale were in progress. As at 31 December 2011, Hose Limited was classified as a disposal group held for sale and as a discontinued operation. The results of Hose Limited for the year are presented below: 2011 $000 42,809 (41,961) 848 (525) (110) 213 5 2 220 2010 $000 45,206 (44,880) 326 (519) (193) 5 (188)
AASB 5.33(b)(i) AASB 5.34
Revenue Expenses Gross profit Finance costs Impairment loss recognised on the remeasurement to fair value less costs to sell (Note 12) Profit/(loss) before tax from a discontinued operation Tax income: Related to current pre-tax profit/(loss) Related to measurement to fair value less costs to sell (deferred tax) Profit/(loss) for the year from a discontinued operation
AASB 5.33 (b)(iii)
AASB 112.81(h)(ii) AASB 112.81(h)(i)
The major classes of assets and liabilities of Hose Limited classified as held for sale as at 31 December are as follows: 2011 $000 Assets Intangibles (Note 14) Property, plant and equipment (Note 12) Debtors Equity shares unquoted Cash and short-term deposits (Note 19) Assets classified as held for sale Liabilities Creditors Deferred tax liability Interest-bearing liabilities (Note 15.2) Liabilities directly associated with assets classified as held for sale Net assets directly associated with disposal group Included in other comprehensive income: Available-for-sale reserve Deferred tax on available-for-sale reserve Reserve of disposal group classified as held for sale 66 (20) 46 135 4,637 6,980 508 1,294 13,554 2010 $000
AASB 5.38
AASB 5.38 AASB 5.40
(7,242) (74) (5,809) (13,125) 429

AASB 5.38 AASB 7.20(a)(ii)
103

10. Discontinued operations (continued)
AASB 5.33(c)
The net cash flows incurred by Hose Limited are as follows: 2011 $000 (1,999) (436) (2,435) 2010 $000 3,293 (436) 2,857
Operating Investing Financing Net cash (outflow)/inflow Earnings per share: Basic, profit/(loss) for the year, from discontinued operation Diluted, profit/(loss) for the year, from discontinued operation
AASB 133.68
$0.011 $0.010
($0.010) ($0.009)
Interest-bearing liabilities comprise a fixed rate bank loan of $5,809,000 having an effective interest rate of 7.5% that is repayable in full on 1 January 2016.
Commentary
AASB 5 specifies certain disclosures required in respect of discontinued operations and non-current assets held for sale. In April 2009, the AASB issued its second omnibus of Improvements to AASBs which clarified that disclosures required in other AASB do not apply to non-current assets held for sale and discontinued operations, except where other AASBs explicitly refer to non-current assets held for sale and discontinued operations. The Group has elected to present earnings per share from discontinued operations in the notes. Alternatively, it could have presented those amounts on the face on the statement of comprehensive income.
Impairment of property, plant and equipment Immediately before the classification of Hose Limited as a discontinued operation, the recoverable amount was estimated for certain items of property, plant and equipment and no impairment loss was identified. Following the classification, an impairment loss of $110,000 (net of tax $77,000) was recognised to reduce the carrying amount of the assets in the disposal group to the fair value less costs to sell. This was recognised in the income statement in the line item, Profit for the year from a discontinued operation. An independent valuation was obtained to determine the fair value of property, plant and equipment, which was based on recent transactions for similar assets within the same industry. The discontinued operation includes unquoted equity shares (level 3 in the fair value hierarchy) of Test Ltd. with a carrying amount of $508,000. For more detail on recognition and measurement (including valuation techniques used) of these instruments, see Note 2.3(p) and Note 15. This equity instrument is classified as available-for-sale and carried at fair value through other comprehensive income. The Group did not pledge the financial assets nor receive any collateral for it. As at the reporting date, the carrying amount equals the fair value of the instrument. Reconciliation of fair value measurements of Level 3 financial instruments The following reconciliation illustrates the movements in the unquoted equity instrument from the day of its reclassification to the end of the reporting period. The instrument is classified as level 3 within the fair value hierarchy (see Note 15).
AASB 136.130
AASB 5.33 (a)(iii)
AASB 7.8(h) AASB 7.14 AASB 7.15 AASB 7.25
AASB 7.25
AASB 7.27B(c)
104

10. Discontinued operations (continued)
Test Ltd $000 508 508 Total $000 508 508
AASB 7.27B(d)
1 March 2011 Sales Purchases Total gains and losses recognised in OCI 31 December 2011
The Group did not incur gains or losses recorded in the statement of comprehensive income with respect to level 3 financial instruments. Furthermore, the Group did not recognise any gain or loss in other comprehensive income, as the valuation of the equity instrument as of 31 December 2011 only insignificantly differed from last years valuation. The collaboration with Test Ltd is closely related with the discontinued operations of Hose Limited and was therefore reclassified as part of the discontinued operation. Refer to Note 30 with regard to the nature and extent of risks arising from financial instruments.
Commentary
AASB 5.5B clarifies that disclosure requirements in other AASBs do not apply to non-current assets held for sale (or disposal groups) unless those AASBs explicitly refer to these assets and disposal groups. However, AASB 5.5B(b) states, disclosure requirements continue to apply for assets and liabilities that are not within the scope of the measurement requirement of AASB 5, but within the disposal group. The illustration above reflects this circumstance, as the unquoted available-for-sale equity instrument is a financial instrument as defined in AASB 139 are, therefore, scoped out of the measurement requirements of AASB 5.
105

11. Earnings per share
AASB 133 applies to Listed Entities only
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The following reflects the income and share data used in the basic and diluted earnings per share computations: 2011 $000 Net profit attributable to ordinary equity holders of the parent from continuing operations Profit/(loss) attributable to ordinary equity holders of the parent from a discontinued operation Net profit attributable to ordinary equity holders of the parent for basic earnings Interest on convertible preference shares Net profit attributable to ordinary equity holders of the parent adjusted for the effect of dilution 7,724 220 7,944 247 8,191 2011 Thousands Weighted average number of ordinary shares for basic earnings per share * Effect of dilution: Share options Convertible preference shares Weighted average number of ordinary shares adjusted for the effect of dilution* 20,797 2010 $000 7,391 (188) 7,203 238 7,441 2010 Thousands 19,064
AASB 133.70(a)
AASB 133.70(a)
AASB 133.70(b)
112 833 21,742
177 833 20,074

AASB 133.70(d)
* The weighted average number of shares take into account the weighted average effect of changes in treasury share transactions during the year.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. To calculate earnings per share amounts for the discontinued operation (see Note 10), the weighted average number of ordinary shares for both basic and diluted amounts is as per the table above. The following table provides the profit/(loss) amount used: 2011 $000 Net profit/(loss) attributable to ordinary equity holders of the parent from a discontinued operation for basic and diluted earnings per share calculations 2010 $000
220
(188)
106

12. Property, plant and equipment
Freehold land and buildings $000 Cost or valuation At 1 January 2010 Additions Acquisition of a subsidiary (Note 4) Disposals Exchange adjustment At 31 December 2010 (restated) Additions Acquisition of a subsidiary (Note 4) Disposals Discontinued operations (Note 10) Revaluations Transfer* Exchange differences At 31 December 2011 Depreciation and impairment At 1 January 2010 Depreciation charge for the year Impairment (Note 8.5) Disposals Exchange adjustment At 31 December 2010 Depreciation charge for the year** Disposals Discontinued operations (Note 10) Transfer* Exchange differences At 31 December 2011 Net book value At 31 December 2011 At 31 December 2010 (restated) At 1 January 2010 11,887 1,587 1,280 (3,381) 10 11,383 1,612 2,897 (4,144) 846 (102) 30 12,522
AASB 101.78(a) AASB 116.73(e) AASB 116.73(d)
Construction in progress $000 4,500 4,500
Plant and equipment $000 24,602 6,235 (49) 26 30,814 4,543 4,145 (4,908) (3,980) 79 30,693
Total $000 36,489 7,822 1,280 (3,430) 36 42,197 10,655 7,042 (4,908) (8,124) 846 (102) 109 47,715
AASB 116.35
4,160 354 (3,069) 5 1,450 500 (1,283) (102) 20 585
11,944 2,728 301 (49) 12 14,936 3,297 (3,450) (2,094) 30 12,719
16,104 3,082 301 (3,118) 17 16,386 3,797 (3,450) (3,377) (102) 50 13,304
11,937 9,933 7,727
4,500
17,974 15,878 12,658
34,411 25,811 20,385
* This transfer relates to the accumulated depreciation as at the revaluation date that was eliminated against the gross carrying amount of the revalued asset. ** Depreciation for the year excludes an impairment loss of $110,000 (see Note 10).
AASB 136.126(a)
In 2010, the impairment loss of $301,000 represented the write-down of certain property, plant and equipment in the fire prevention segment to the recoverable amount. This was recognised in the income statement in the line item, Cost of sales. The recoverable amount was based on value in use and was determined at the level of the CGU. The CGU consisted of the Australia based assets of Sprinklers Limited, a subsidiary, and Showers Limited, a jointly controlled entity of the Group. In determining value in use for the CGU, the cash flows were discounted at a rate of 12.4% on a pre-tax basis.
107

12. Property, plant and equipment (continued)
AASB 123.26(a) AASB 123.26(b)
Capitalised borrowing costs The Group started the construction of a new fire safety facility in February 2011. This project is expected to be completed in February 2012. The carrying amount of the fire safety facility at 31 December 2011 was $3 million (2010: $Nil, 1 January 2010: $Nil). The fire safety facility is financed by a third party in a common arrangement. The amount of borrowing costs capitalised during the year ended 31 December 2011 was $303,000 (2010: $Nil, 1 January 2010: $Nil). The rate used to determine the amount of borrowing costs eligible for capitalisation was 11%, which is the effective interest rate of the specific borrowing. Finance leases and assets under construction The carrying value of plant and equipment held under finance leases and hire purchase contracts at 31 December 2011 was $1,178,000 (2010: $1,486,000, 1 January 2010: $1,432,000). Additions during the year include $45,000 (2010: $54,000) of plant and equipment under finance leases and hire purchase contracts. Leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase liabilities. Land and buildings with a carrying amount of $7,400,000 (2010: $5,000,000, 1 January 2010: $4,500,000) are subject to a first charge to secure two of the Groups bank loans (Note 15). Included in plant and equipment at 31 December 2011 was, in addition to the new fire safety facility, an amount of $1,500,000 (2010: $Nil, 1 January 2010: $Nil) relating to expenditure for a plant in the course of construction. Both facilities under construction will be recognised in freehold land and buildings after completion. Revaluation of land and buildings From 1 January 2011, the Group has changed its accounting policy for the measurement of land and buildings to the revaluation model. The Group engaged Chartered Surveyors & Co., an accredited independent valuer, to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence. This means that valuations performed by the valuer are based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. The date of the revaluation was 31 January 2011. If land and buildings were measured using the cost model, the carrying amounts would be as follows: As at 1 2010 January 2010 $000 $000 11,383 11,887 (1,450) (4,160) 9,933 7,727
AASB 117.31(a) AASB 7.43
AASB 116.74(a)
AASB 116.74(a)
AASB 116.74(b)
AASB 116.77(a)(e) AASB 108.17 AASB 108.18
Cost Accumulated depreciation and impairment Net carrying amount
2011 $000 11,778 (573) 11,205
AASB 116.77(e)
Commentary
The Group has changed its accounting policy for the measurement of land and buildings to the revaluation model. AASB 108.17 and AASB 108.18 exempt this change in accounting policy from the requirement to retrospectively apply the policy and to provide detailed disclosure as outlined in AASB 108.28 to AASB 108.31.
108

13. Investment properties
2011 $000 7,983 1,216 (306) 8,893 2011 $000 1,404 (101) (37) 1,266 2010 $000 7,091 1,192 (300) 7,983 2010 $000 1,377 (353) (127) 897
AASB 140.75(g) AASB 140.75(h) AASB 140.75(d) AASB 140.75(e) AASB 140.75(f)
Opening balance at 1 January Additions (subsequent expenditure) Net loss from a fair value adjustment Closing balance at 31 December Reconciliation of net profit on investment properties Rental income derived from investment properties Direct operating expenses (including repair and maintenance) generating rental income Direct operating expenses (including repair and maintenance) that did not generate rental income (included in cost of sales) Net profit arising from investment properties carried at fair value
AASB 140.76 AASB 140.76(a) AASB 140.76(d)
The Group has no restrictions on the realisability of its investment property and no contractual obligations to either purchase, construct or develop investment property or for repairs, maintenance and enhancements. Investment properties are stated at fair value, which has been determined based on valuations performed by Chartered Surveyors & Co., an accredited independent valuer, as at 31 December 2011 and 31 December 2010. Chartered Surveyors & Co. is an industry specialist in valuing these types of investment properties. The fair value of the properties have not been determined on transactions observable in the market because of the nature of the property and the lack of comparable data. Instead, a valuation model in accordance with that recommended by the International Valuation Standards Committee has been applied. The following main inputs have been used. 2011 6 7% 3.5% 9% 3% 2010 5 - 6% 3% 5% 4%
AASB 140.75(d)
Yields (%) Inflation rate (%) Long term vacancy rate (%) Long term growth in real rental rates (%)
Commentary
The Group has elected to value investment properties at fair value in accordance with AASB 140. AASB 140 permits property, plant and equipment and investment properties to be carried at historic cost less provision for depreciation and impairment. If the Group accounted for investment properties at cost, information about the cost basis and depreciation rates (similar to property, plant and equipment) would be required in addition to the disclosures about the fair value, including disclosures about the methods and significant assumptions used to determine fair value.
109

14. Intangible assets
Development costs $000 Cost At 1 January 2010 Additions internal development Acquisition of a subsidiary (restated) (Note 4) At 31 December 2010 (restated) Additions internal development Acquisition of a subsidiary (Note 4) Discontinued operations (Note 10) At 31 December 2011 Amortisation and impairment At 1 January 2010 Amortisation At 31 December 2010 Amortisation Impairment (Note 16) Discontinued operations (Note 10) At 31 December 2011 Net book value At 31 December 2011 At 31 December 2010 (restated) At 1 January 2010 Patents and licences $000
Goodwill $000
Total $000
AASB 138.118(c) AASB 138.118(e)
1,585 390 1,975 587 2,562
635 635 1,200 (138) 1,697
119 131 250 2,231 2,481
2,339 390 131 2,860 587 3,431 (138) 6,740
165 124 289 95 384
60 50 110 30 (3) 137
200 200
225 174 399 125 200 (3) 721
2,178 1,686 1,420
1,560 525 575
2,281 250 119
6,019 2,461 2,114
There are two main fire prevention research and development projects: (i) improved fire detection and sprinkler systems and (ii) fire retardant fabrics for motor vehicles and aircraft. The Groups electronics business research and development concentrates on the development of internet enabled safety equipment. Research and development costs that are not eligible for capitalisation have been expensed and are recognised in administrative expenses (Note 8.7). Acquisition during the year Patents and licences include intangible assets acquired through business combinations. These patents have been granted for a minimum of 10 years by the relevant government agency, while licences have been acquired with the option to renew at the end of the period at little or no cost to the Group. Previous licences acquired have been renewed and have allowed the Group to determine that these assets have indefinite useful lives. As at 31 December 2011, these assets were tested for impairment (Note 16).
AASB 138.118(d)
110

15. Other financial assets and financial liabilities
As at 1 January 2010 $000
AASB 7.6 AASB 7.8
15.1. Other financial assets

2011 $000 Financial instruments at fair value through other comprehensive income Cash flow hedges Foreign exchange forward contracts Financial instruments at fair value through profit or loss Derivatives not designated as hedges Foreign exchange forward contracts Embedded derivatives Total financial instruments at fair value Loans and receivables Loan notes Loan to an associate (Note 28) Loan to directors (Note 28) Total loans and receivables Available for sale investments Unquoted equity shares Quoted equity shares Quoted debt securities Total available for sale investments Total other financial assets Total current Total non-current 1,038 337 612 1,987 6,976 551 6,425 898 300 600 1,798 3,644 153 3,491 890 334 378 1,602 3,406 137 3,269
AASB 7.32A
2010 $000
252
153
137
640 210 1,102
153
137
3,674 200 13 3,887
1,685 8 1,693
1,659 8 1,667
Financial assets and liabilities at fair value through other comprehensive income reflect the change in fair value of foreign exchange forward contracts, designated as cash flow hedges to hedge the expected future sales in the United States and purchases in the United Kingdom, based on highly probable forecast transactions. Financial assets through profit or loss are those foreign exchange forward contracts that are not designated in hedge relationships as they are intended to reduce the level of foreign currency risk for expected sales and purchases. Loans and receivables are held to maturity and generate a fixed or variable interest income for the Group. The carrying value might be affected by changes in the credit risk of the counterparties and changes in variable interest rates for some instruments. Available-for-sale investment - unquoted equity shares A significant portion of the available for sale financial assets consist of an investment in shares of a nonlisted company, which are valued based on non-market observable information. Changes in underlying assumptions can lead to adjustments in the fair value of the investment (see sensitivity risk analysis in Note 30).
111

15. Other financial assets and financial liabilities (continued)
AASB 7.27 AASB 139.AG 74-79(c)
The Group holds non-controlling interests (between 2% and 9%) in entities where it has entered into research collaboration. The fair value of the unquoted ordinary shares has been estimated using a discounted cash flow model. The valuation requires management to make certain assumptions about the model inputs, including credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in managements estimate of fair value for these unquoted equity investments. Management has determined that the potential effect of using reasonably possible alternatives as inputs to the valuation model would reduce the fair value by $24,000 (2010: $25,000) using less favourable assumptions and increase the fair value by $21,000 (2010: $22,000) using more favourable assumptions, i.e. change in credit risk of 10% in either direction. Available-for-sale investment - quoted debt securities and equity shares The Group has investments in listed equity and debt securities. The fair value of the quoted debt securities and equity shares is determined by reference to published price quotations in an active market. Impairment on available-for-sale financial investments For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. The determination of what is significant or prolonged requires judgement. In making this judgement, the Group evaluates, among other factors, historical share price movements and the duration or extent to which the fair value of an investment is less than its cost. Based on these criteria, the Company identified an impairment of $88,000 on available-for-sale investment - quoted debt securities and an impairment of $23,000 on available-for-sale investment quoted equity securities, both of which are recognised within finance costs in the income statement (Note 8.3).
AASB 7.27B(e)
AASB 7.27
112

15. Other financial assets and financial liabilities (continued) 15.2. Other financial liabilities
2011 $000 Financial liabilities at fair value through other comprehensive income Cash flow hedges Foreign exchange forward contracts (Note 15.3) Commodity forward contracts (Note 15.3) Total financial liabilities at fair value through other comprehensive income Financial liabilities at fair value through profit or loss Contingent consideration (Note 3) Fair value hedges Interest rate swaps Derivatives not designated as hedges Foreign exchange forward contracts Embedded derivatives Total financial liabilities at fair value through profit or loss Other financial liabilities at amortised cost Financial guarantee contracts Total other financial liabilities at amortised cost Total other financial liabilities Total current Total non-current 2010 $000 As at 1 January 2010 $000
AASB 7.6 AASB 7.8
170 980 1,150
254 254
271 271
1,072 35 720 782 2,609
87 87 3,846 3,040 806
49 49 303 303
32 32 303 303
AASB 7.32A
The Group has entered into a hedge relationship for commodity forward contracts as the Group is exposed to changes in the price of copper. The forward contract does not result in physical delivery of copper, but is designed as a cash flow hedge to offset the effect of price changes. The Group was able to hedge around 45% of its copper purchase in the next reporting period with this instrument. The remaining volume of copper purchase is exposed to price volatility. Contingent consideration As part of the purchase agreement with the previous owner of Extinguishers Limited, a contingent consideration has been agreed. This consideration is dependent on the profit before tax of Extinguishers Limited during a 12- month period. The fair value at the acquisition date was $714,000, which has been adjusted as of 31 December 2011 due to a significantly enhanced performance compared to budget to a fair value of $1,071,500. The consideration is due for final measurement and payment to the former shareholders on 30 April 2012. No further significant change to the consideration is expected.
Commentary
AASB 7.7 requires disclosure of information that enables users of the financial statements to evaluate the significance of financial instruments for its financial position and performance. However, the standard does not specify the details to be disclosed. As the Group has a significant amount of different financial assets, liabilities and derivatives on its statement of financial position, it has decided to provide detailed information to the users of the financial statements about the different types of financial instruments and their fair values.
113

Interest-bearing loans and borrowings As at 1 January 2010 $000
Interest rate % Current interest-bearing loans and borrowings Obligations under finance leases and hire purchase contracts (Note 29) Bank overdrafts (Note 19) Other current loans $1,500,000 bank loan (2010: $1,400,000) $2,200,000 bank loan Total current interest-bearing loans and borrowings Non-current interest-bearing loans and borrowings Obligations under finance leases and hire purchase contracts (Note 29) 8% debentures 8.25% secured loan of US$3,600,000 Secured bank loan Other non-current loans $1,500,000 bank loan (2010: $1,400,000) $2,750,000 bank loan (2010: $2,500,000) $2,200,000 bank loan $5,809,000 bank loan Loan from a partner in a special purpose entity Share of a joint ventures loan
Maturity
2011 $000
2010 $000
AASB 7.7
7.8 BBSW +1.0
2012 On demand
83 966
51 2,650
47 2,750
BBSW +0.5 BBSW +0.5
1 Nov 2012 31 Mar 2011
1,411 2,460
74 2,775
1,758 4,555
7.8 8.2 *LIBOR +0.2 LIBOR +2.0
2013-2014 2013-2019 31 May 2017 31 Jul 2017
905 3,374 2,246 3,479
943 3,154 3,489
938 3,154 3,489
BBSW +0.5 BBSW +1.1 BBSW +0.5 7.5 11.00 BBSW +1.1
1 Nov 2012 2014-2016 31 Mar 2015 1 Jan 2016 2014 30 Jun 2015
2,486 2,078 3,000 510 18,078
1,357 2,229 2,078 5,809 500 19,559
1,357 2,229 2,078 3,164 505 16,914
Convertible preference shares Convertible preference shares Total non-current interestbearing loans and borrowings
* Includes the effects of related interest rate swap. BBSW Bank Bill Swap Rate
11.65
2014-2017
2,778
2,644
2,522
20,856
22,203
19,436
Commentary
AASB 7.7 requires disclosure of information that enables users of the financial statements to evaluate the significance of financial instruments for its financial position and performance. However, the standard does not require the details to be disclosed. As the Group has a significant amount of interest bearing loans and borrowings on its statement of financial position, it has decided to provide detailed information to the users of the financial statements about the effective interest rate as well as the maturity of the loans.
114

AASB 7.7
Bank overdrafts The bank overdrafts are secured by a portion of the Groups short-term deposits. $1,500,000 bank loan This loan is unsecured and is repayable in full on 1 November 2012. 8% debentures The 8% debentures are repayable in equal annual instalments of $350,000 commencing on 1 January 2013. 8.25% secured loan The loan is secured by a first charge over certain of the Groups land and buildings with a carrying value of $2,400,000 (2010: $Nil, 1 January 2010: $Nil). See fair value hedge (Note 15.3) below. Secured bank loan This loan has been drawn down under a six-year multi-option facility (MOF). The loan is repayable within 12 months after the reporting date, but has been classified as long term because the Group expects and has the discretion to exercise its rights under the MOF to refinance this funding. Such immediate replacement funding is available until 31 July 2017. The total amount repayable on maturity is $3,500,000. The facility is secured by a first charge over certain of the Groups land and buildings, with a carrying value of $5,000,000 (2010: $5,000,000, 1 January 2010: $4,500,000). $2,750,000 bank loan The Group increased its borrowings under this loan contract by $250,000 during the reporting period. This loan is repayable in two instalments of $1,250,000 due on 31 December 2014 and $1,500,000 due on 31 December 2016. $2,200,000 bank loan This loan is unsecured and is repayable in full on 31 March 2015. As of 31 December 2010, $74,000 was repayable on 31 March 2011. $5,809,000 bank loan This loan has been transferred to the discontinued operations net balance, see Note 10. Share of a joint ventures loan This relates to the Groups 50% share of the joint ventures $1,020,000 bank loan (2010: $1,000,000, 1 January 2010: $1,010,000) and is repayable in full on 30 June 2015. Loan from a partner in a special purpose entity In February 2011, the Group and a third party partner formed an entity to acquire, construct and operate a fire equipment safety facility. The partner contributed approximately $2.7 million in 2011 for the acquisition and construction of the fire safety test facility and is committed to provide approximately $1 million in each of the following two years to complete the project. The construction is expected to be completed in 2013 at a total cost of approximately $4.7 million. The partner is entitled to a 22% return on the outstanding capital upon the commencement of operations. At the end of the fourth annual period, the partner is entitled to a 100% capital return. The effective interest rate is 11% and the interest accumulated on the contributed amount totalled $303,000 at 31 December 2011. Convertible preference shares At 31 December 2011 and 2010, there were 2,500,000 convertible preference shares in issue. Each share has a par value of $1 and is convertible at the option of the shareholders into ordinary shares of the parent of the Group on 1 January 2014 on the basis of one ordinary share for every three preference shares held. Any preference shares not converted will be redeemed on 31 December 2017 at a price of $1.20 per share. The preference shares carry a dividend of 7% per annum, payable half-yearly in arrears on 30 June and 31 December. The dividend rights are non-cumulative. The preference shares rank ahead of the ordinary shares in the event of a liquidation. The equity portion of these shares in included in Note 20.
AASB 101.73
AASB 101.79(a)(v)
115

AASB 7.22
15.3. Hedging activities and derivatives

Derivatives not designated as hedging instruments The Group uses foreign currency denominated borrowings and forward currency contracts to manage some of its transaction exposures. These currency forward contracts are not designated as cash flow, fair value or net investment hedges and are entered into for periods consistent with currency transaction exposures, generally from 1 to 24 months. Cash flow hedges Foreign currency risk Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in the United States and forecast purchases in the United Kingdom. These forecast transactions are highly probable, and they comprise about 25% of the Groups total expected sales and about 65% of its total expected purchases. While the Group also enters into other foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and purchases, these other contracts are not designated in hedge relationships and are measured at fair value through profit and loss. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and purchases and changes in foreign exchange forward rates.
2011 Assets $000 Foreign currency forward contracts Fair value 252 153 (254) (170) 137 (271)
AASB 7.24(b) AASB 7.23(a)
Assets $000
2010 Liabilities Liabilities $000 $000
As at 1 January 2010 Assets Liabilities $000 $000
The terms of the foreign currency forward contracts have been negotiated for the expected highly probable forecast transactions to which hedge accounting has been applied. No significant element of hedge ineffectiveness requiring recognition in the income statement. Notional amounts are as provided in Note 30. The cash flow hedges of the expected future sales in January 2012 were assessed to be highly effective and a net unrealised gain of $252,000, with a deferred tax liability of $76,000 relating to the hedging instruments, is included in OCI. The cash flow hedges of the expected future purchases in February and March 2012 were assessed to be highly effective, and as at 31 December 2011, a net unrealised loss of $170,000, with a related deferred tax asset of $51,000 was included in OCI in respect of these contracts. At the end of December 2010, the cash flow hedges of the expected future sales in the first quarter of 2011 were assessed to be highly effective and an unrealised gain of $153,000 with a deferred tax liability of $46,000 was included in OCI in respect of these contracts. The cash flow hedges of the expected future purchases in the first quarter of 2011 were also assessed to be highly effective and an unrealised loss of $254,000, with a deferred tax asset of $76,000 was included in OCI in respect of these contracts. The amount removed from OCI during the year and included in the carrying amount of the hedging items as a basis adjustment was immaterial for both 2011 and 2010. The amounts retained in OCI at 31 December 2011 are expected to mature and affect the income statement by a gain of $82,000 in 2012. Reclassifications to profit and loss during the year for non-matured balances included in OCI are shown in Note 8.8. Commodity price risk The Group purchases copper on an ongoing basis as its operating activities in the electronic division require a continuous supply of copper for the production of its electronic devices. The increased volatility in copper price over the past 12 months has led to the decision to enter into commodity forward contracts.
AASB 7.23(c)
AASB 7.23(c)
AASB 7.23(c)
AASB 7.23(d) AASB 7.23(e) AASB 7.23(a
116

These contracts, which commenced on 1 July 2011, are expected to reduce the volatility attributable to the fluctuation in the copper price of cash flows in respect of highly probable forecast copper purchases in accordance with the risk management strategy outlined by the board of directors. The contracts are intended to hedge the volatility of the purchase price of copper for a period between 3 and 12 months based on existing purchase agreements. The Group designated only the spot-to-spot movement of the entire commodity purchase price as the hedged risk. The forward points of the commodity forward contracts are therefore excluded from the hedge designation. Changes in fair value of the forward points recognised in the income statement in finance costs were immaterial during the year. As at 31 December 2011, the fair value of outstanding commodity forward contracts amounted to a liability of $980,000. The ineffectiveness recognised in other operating expenses in the income statement for the current year was $65,000 (see Note 8.2). The cumulative effective portion of $915,000 is reflected in other comprehensive income. Fair value hedge At 31 December 2011, the Group had an interest rate swap agreement in place with a notional amount of US$3,600,000 ($2,246,000) (2010: $Nil, 1 January 2010: $Nil) whereby the Group receives a fixed rate of interest of 8.25% and pays a variable rate equal to LIBOR+0.2% on the notional amount. The swap is being used to hedge the exposure to changes in the fair value of its 8.25% secured loan. The decrease in fair value of the interest rate swap of $35,000 (2010: $Nil) has been recognised in finance costs and offset with a similar gain on the bank borrowings. The ineffectiveness recognised in 2011 was immaterial. Hedge of net investments in foreign operations Included in loans at 31 December 2011 was a borrowing of US$3,600,000 which has been designated as a hedge of the net investment in the subsidiaries in the United States, Wireworks Inc. and Sprinklers Inc. This borrowing is being used to hedge the Groups exposure to US$ foreign exchange risk on these investments. Gains or losses on the retranslation of this borrowing are transferred to equity to offset any gains or losses on translation of the net investments in the subsidiaries. There is no ineffectiveness in the years ended 31 December 2011 and 2010. Embedded derivatives In 2011, the Group entered into long-term sale contracts with customers in Switzerland and Norway. The selling prices in these contracts are fixed and set in Canadian dollars. These contracts require physical delivery and will be held for the purpose of the delivery of the commodity in accordance with the buyers expected sale requirements. These contracts have embedded foreign exchange derivatives that require bifurcation. The Group also entered into various purchase contracts for brass and chrome (for which there is an active market) with a number of suppliers in South Africa and Russia. The purchase prices in these contracts are linked to the price of electricity. These contracts have embedded commodity swaps that require bifurcation. These embedded foreign currency and commodity derivatives have been separated and are carried at fair value through profit or loss. The carrying value of the embedded derivatives at 31 December 2011 amounted to $210,000 (other financial assets) and $782,000 (other financial liabilities) (2010: both $Nil, 1 January 2010: both $Nil). The effect on profit or loss is reflected in finance income and finance costs, respectively.
AASB 139.AG33(d) AASB 7.22 AASB 7.22 AASB 7.24(a)
AASB 7.24(c)
) AASB 139.AG33(e)
117

AASB 7.25 AASB 7.26
15.4. Fair values

Set out below is a comparison by class of the carrying amounts and fair value of the Groups financial instruments that are carried in the financial statements. Carrying amount As at 1 January 2011 2010 2010 $000 $000 $000 Financial assets Other financial assets Loans and other receivables Available-for-sale financial investments Foreign exchange forward contracts Embedded derivatives Derivatives in effective hedges Cash and short-term deposits Total Financial liabilities Interest-bearing loans and borrowings Obligations under finance leases and hire purchase contracts Floating rate borrowings* Fixed rate borrowings Convertible preference shares Bank overdrafts Financial guarantee contracts Contingent consideration Derivative financial liabilities at fair value through profit or loss Foreign exchange forward contracts Embedded derivatives Derivatives in effective hedges Total Fair value As at 1 January 2010 $000
2011 $000
2010 $000
3,887 1,987 640 210 252 17,112 24,088
1,693 1,798 153 14,916 18,560
1,667 1,602 137 11,066 14,472
3,741 1,987 640 210 252 17,112 23,942
1,654 1,798 153 14,916 18,521
1,633 1,602 137 11,066 14,438
(988) (12,210) (6,374) (2,778) (966) (87) (1,072)
(994) (985) (9,727) (11,416) (8,963) (6,318) (2,644) (2,522) (2,650) (20,600) (49) (2,750) (32)
(1,063) (12,210) (6,321) (2,766) (966) (87) (1,072)
(1,216) (9,727) (8,944) (2,621) (2,650) (49)
(1,217) (11,416) (6,341) (2,537) (2,750) (32)
(720) (782) (1,185) (27,162)
(254) (25,281)
(271) (44,894)
(720) (782) (1,185) (27,172)
(254) (25,461)
(271) (24,564)
* Includes an 8.25% secured loan carried at amortised cost adjusted to fair value movement due to the hedged interest rate risk.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
X
AASB 7.27
Cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken to account for the expected losses of these receivables. As at 31 December 2011, the carrying amounts of such receivables, net of allowances, are not materially different from their calculated fair values.
118

15.
X
Other financial assets and financial liabilities (continued)

Fair value of quoted notes and bonds is based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. Fair value of available-for-sale financial assets is derived from quoted market prices in active markets, if available. Fair value of unquoted available-for-sale financial assets is estimated using appropriate valuation techniques. The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward contracts and commodity forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodity.
As at 31 December 2011, the marked to market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value. Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data. As at 31 December 2011, the Group held the following financial instruments carried at fair value in the statement of financial position: Assets measured at fair value 31 December 2011 $000 Financial assets at fair value through profit or loss: Foreign exchange forward contracts hedged Foreign exchange forward contracts non-hedged Embedded derivatives Available-for-sale financial assets: Equity shares Debt securities 1,375 612 337 612 1,038 252 640 210 252 640 210 Level 1 $000 Level 2 $000 Level 3 $000
AASB 7.27A
119

31 December 2011 $000 Financial liabilities at fair value through profit or loss: Foreign exchange forward contracts hedged Commodity forward contracts Interest rate swaps Foreign exchange forward contracts non-hedged Embedded derivatives 170 980 35 720 782 170 980 35 720 782
AASB 7.27B(b) AASB 7.27B(c)
Liabilities measured at fair value Level 1 $000 Level 2 $000 Level 3 $000
During the reporting period ending 31 December 2011, there were no transfers between Level 1 and Level 2 fair value measurements. As at 31 December 2010, the Group held the following financial instruments measured at fair value: Assets measured at fair value 31 December 2010 $000 Financial assets at fair value through profit or loss: Foreign exchange forward contracts hedged Available-for-sale financial assets: Equity shares Debt securities Liabilities measured at fair value 31 December 2010 $000 Financial liabilities at fair value through profit or loss: Foreign exchange forward contracts hedged 254 254 Level 1 $000 Level 2 $000 Level 3 $000 1,198 600 300 600 898 153 153
AASB 7.27A
Level 1 $000
Level 2 $000
Level 3 $000
During the reporting period ended 31 December 2010, there were no transfers between level 1 and level 2 fair value measurements. Reconciliation of fair value measurements of Level 3 financial instruments The Group carries unquoted equity shares as available-for-sale financial instruments classified as level 3 within the fair value hierarchy. The Group has equity interests in three unlisted entities with which it entered into a research and collaboration agreement. As part of the agreement, the Group invested in equity instruments of those entities. A reconciliation of the beginning and closing balances including movements is summarised below:
AASB 7.27B(b) AASB 7.27B(c)
AASB 7.27B(c) AASB 7.27B(d)
120

Evo Ltd $000 At 1 January 2010 Total gains and losses recognised in OCI At 31 December 2010 At 1 January 2011 Sales Purchases Reclassification to a discontinued operation (Note 10) Total gains and losses recognised in OCI At 31 December 2011 232 2 234 234 (232) (2) Lab Ltd $000 156 156 156 870 12 1,038 Test Ltd $000 502 6 508 508 (508) Total $000 890 8 898 898 (232) 870 (508) 10 1,038
AASB 7.27B (e)
The Group did not incur gains or losses recorded in the statement of comprehensive income with respect to level 3 financial instruments. Fair value would not significantly varies if changing one or more of the inputs. The research agreement with Evo Ltd expired in 2011, the equity instruments were sold to a third party. The collaboration with Lab Ltd was significantly increased due to strong results arising from their research activities. The collaboration with Test Ltd is closely related with the discontinued operations of Hose Limited and was therefore reclassified as part of the discontinued operation (see Note 10). All transactions were performed at an arms length basis.
16.
Impairment testing of goodwill and intangibles with indefinite lives
Goodwill acquired through business combinations and licences with indefinite lives has been allocated to two CGUs, which are also operating and reportable segments, for impairment testing as follows:
X X
Electronics CGU Fire prevention equipment CGU
Carrying amount of goodwill and licences allocated to each of the CGUs: Electronics unit 1 Jan 2011 2010 2010 $000 $000 $000 50 250 119 Fire prevention equipment unit 1 Jan 2011 2010 2010 $000 $000 $000 2,231 Total 2011 $000 2,281 2010 $000 250 1 Jan 2010 $000 119
Goodwill Licences with indefinite useful lives
AASB 136.134(a)
360
1,050
240
240
1,410
240
240
AASB 136.134(b)
Electronics CGU The Group performed its annual impairment test as at 31 December 2011. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December 2011, the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of goodwill and impairment of the assets of the operating segment. In addition, the overall decline in construction and development activities around the world as well as the ongoing economic uncertainty have led to a decreased demand in both the fire prevention equipment and electronics CGUs. The recoverable amount of the electronics CGU has been determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period. The projected cash flows have been updated to reflect the decreased demand for products and services. The pre-tax discount rate applied to cash flow projections is 15.5% (2010: 12.1%) and cash flows beyond the five-year period are extrapolated using a 3.0% growth rate (2010: 5.0%) that is the same as the long-term average growth rate for the electronics industry. As a result of this analysis, management has recognised an impairment charge of $200,000 against goodwill previously carried at $250,000, which is recorded within administrative expenses in the income statement.
AASB 136.130(a)
AASB 136.134(c) AASB 136.134 (d)(iii) AASB 136.134 (d)(iv) AASB 136.134 (d)(v) AASB 136.126(a)
121

16. Impairment testing of goodwill and intangibles with indefinite lives (continued)
AASB 136.134(c) AASB 136.134 (d)(iii) AASB 136.134 (d)(iv) AASB 136.134 (d)(v)
Fire prevention equipment CGU The recoverable amount of the fire prevention equipment CGU is also determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period. The projected cash flows have been updated to reflect the decreased demand for products and services. The pre-tax discount rate applied to the cash flow projections is 14.4% (2010: 12.8%). The growth rate used to extrapolate the cash flows of the fire prevention equipment unit beyond the five-year period is 2.9% (2010: 3.8%). This growth rate exceeds the average growth rate for the industry in which the Fire Prevention Equipment unit operates by 0.75%. Management of the fire prevention equipment unit believes this growth rate is justified based on the acquisition of Extinguishers Limited. This acquisition has resulted in Group obtaining control of an industry patent, thereby preventing other entities from manufacturing a specialised product for a period of 10 years. The Group has an option to renew the patent after the 10 years have expired. As a result of the updated analysis, management did not identify an impairment for this CGU to which goodwill of $2,231,000 is allocated. Key assumptions used in value in use calculations The calculation of value in use for both electronics and fire prevention equipment units are most sensitive to the following assumptions:
X X X X X
AASB 136.134 (d)(iii) AASB 136.134 (d)(iv) AASB 136.134 (d)(v)
AASB 136.134 (d)(i) AASB 136.134 (d)(ii)
Gross margin Discount rates Raw materials price inflation Market share during the budget period Growth rate used to extrapolate cash flows beyond the budget period
Gross margins Gross margins are based on average values achieved in the three years preceding the start of the budget period. These are increased over the budget period for anticipated efficiency improvements. An increase of 1.5% per annum was applied for the electronics unit and 2% per annum for the fire prevention equipment unit. Discount rates Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Groups investors. The cost of debt is based on the interest bearing borrowings the Group is obliged to service. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available marked data. In determining impairment, management has considered the potential impact of the release of the Clean Energy Bill 2011 (the Bill or the Scheme) which will have an impact on the Australian economy and also on the Group. The Bill, which is substantially enacted as at 31 December 2011, will commence on the 1st of July 2012. None of the entities in the Group are liable entities under the Scheme, as direct emissions (that are covered by the Scheme) at any of its facilities do not exceed 25,000 tonnes of CO2-e, based on its emissions as per the Groups financial year 2011 Green House accounts. Management does not expect that it will exceed this threshold in the foreseeable future. Management has estimated there will be an increase in the energy price, as well an increase in prices of other goods and services, as a result of the price on carbon. However, they are finalising their analysis and are unable to quantify this impact, yet. Management is also reviewing whether it is eligible for any government assistance and whether it will be able to pass on part of these price increases to its customers. As a result, there is significant uncertainty about the impact the Scheme will have, if any. Accordingly, management have not adjusted any cash flows, but rather only adjusted the discount rates to reflect uncertainty around the actual price increases, the amount of government assistance and the ability to pass on costs.
122

16. Impairment testing of goodwill and intangibles with indefinite lives (continued)
Raw materials price inflation Estimates are obtained from published indices for the countries from which materials are sourced, as well as data relating to specific commodities. Forecast figures are used if data is publicly available (principally for Australia and the United States), otherwise past actual raw material price movements are used as an indicator of future price movements. Market share assumptions These assumptions are important because, as well as using industry data for growth rates (as noted below), management assesses how the units position, relative to its competitors, might change over the budget period. Management expects the Groups share of the electronics market to be stable over the budget period, whereas for the reasons explained above, management expects the Groups position, relative to its competitors, to strengthen following the acquisition of Extinguishers Limited. Growth rate estimates Rates are based on published industry research. For the reasons explained above, the long-term rate used to extrapolate the budget for the fire prevention equipment unit has been adjusted by an additional element because of the acquisition of a significant industry patent. Sensitivity to changes in assumptions With regard to the assessment of value in use of the fire prevention equipment unit, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount. For the electronics unit, the estimated recoverable amount is equal to its carrying value and, consequently, any adverse change in a key assumption would result in a further impairment loss. The implications of the key assumptions for the recoverable amount are discussed below:
X
AASB 136.134(f)
AASB 136.134 (f)(i)
Raw materials price inflation Management has considered the possibility of greater than budgeted increases in raw material price inflation. This may occur if anticipated regulatory changes result in an increasing demand that cannot be met by suppliers. Budgeted price inflation lies within a range of 1.9% to 2.6%, depending on the country from which materials are purchased. Should the Group be unable to pass on, or absorb through efficiency improvements, additional cost increases of an average of 4.5%, a further impairment may result. Growth rate assumptions Management recognises that the speed of technological change and the possibility of new entrants can have a significant impact on growth rate assumptions. The effect of new entrants is not expected to have an adverse impact on the forecasts included in the budget, but could yield a reasonably possible alternative to the estimated long-term growth rate of 5.2%. A reduction of 0.8% in the long-term growth rate would result in a further impairment.
AASB 136.134 (f)(ii) AASB 136.134 (f)(iii)
AASB 136.134 (f)(ii) AASB 136.134 (f)(iii)
17.
Inventories
2011 $000 6,046 13,899 4,930 24,875 As at 1 2010 January 2010 $000 $000 7,793 8,250 11,224 12,951 6,472 5,950 25,489 27,151
AASB 102.36(e) AASB 102.36(b)
AASB 101.78(c)
Raw materials (at cost) Work in progress (at cost) Finished goods (at cost or net realisable value) Total inventories at the lower of cost and net realisable value
During 2011, $286,000 (2010: $242,000) was recognised as an expense for inventories carried at net realisable value. This is recognised in cost of sales.
123

18. Trade and other receivables (current)
2011 $000 26,501 551 620 27,672 As at 1 2010 January 2010 $000 $000 23,158 24,490 582 602 550 445 24,290 25,537
AASB 101.78(b) AASB 7.6
Trade receivables Receivables from an associate (Note 28) Receivables from other related parties (Note 28)
For terms and conditions relating to related party receivables, refer to Note 28. Trade receivables are non-interest bearing and are generally on 30-90 day terms. As at 31 December 2011, trade receivables of an initial value of $108,000 (2010: $97,000, 1 January 2010: $95,000) were impaired and fully provided for. See below for the movements in the provision for impairment of receivables. Individually Collectively impaired impaired $000 $000 29 66 4 8 (4) (7) 1 29 10 (3) (2) 34 68 16 (5) (6) 1 74
AASB 7.34(a)
AASB 7.37
Total $000 95 12 (11) 1 97 26 (8) (8) 1 108
AASB 7.16
At 1 January 2010 Charge for the year Utilised Unused amounts reversed Discount rate adjustment At 31 December 2010 Charge for the year Utilised Unused amounts reversed Discount rate adjustment At 31 December 2011
As at 31 December, the ageing analysis of trade receivables is as follows: Neither past due nor Total impaired $000 $000 26,501 17,596 23,158 16,455 Past due but not impaired < 30 days $000 4,791 3,440 3060 days $000 2,592 1,840 6190 days $000 1,070 945 91120 days $000 360 370 > 120 days $000 92 108
AASB 7.37
2011 2010
See Note 30 on credit risk of trade receivables to understand how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.
AASB 7.36(c)
124

19. Cash and short-term deposits
2011 $000 11,316 5,796 17,112 As at 1 2010 January 2010 $000 $000 11,125 6,816 3,791 4,250 14,916 11,060
Cash at banks and on hand Short-term deposits
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. At 31 December 2011, the Group had available $5,740,000 (2010: $1,230,000, 1 January 2010: $1,200,000) of undrawn committed borrowing facilities. The Group has pledged a part of its short-term deposits to fulfil collateral requirements. Refer to Note 31 for further details. For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 31 December: 2011 $000 11,316 5,796 1,294 18,406 (966) 17,440 As at 1 2010 January 2010 $000 $000 11,125 6,016 3,791 4,250 14,916 (2,650) 12,266 11,066 (2,750) 8,316
AASB 107.Aus20.1 AASB 107.50(a)
AASB 107.48
AASB 107.45
Cash at banks and on hand Short-term deposits Cash at banks and short-term deposits attributable to a discontinued operation (Note 10) Bank overdrafts (Note 15) Reconciliation of net profit after tax to net cash flows from operations Profit before tax from continuing operations Profit/(loss) before tax from discontinued operations Profit before tax Non-cash adjustment to reconcile profit before tax to net cash flows: Depreciation and impairment of property, plant and equipment Amortisation and impairment of intangible assets Share-based payment transaction expense Decrease in investment properties Decrease in financial instruments Gain on disposal of property, plant and equipment Fair value adjustment of a contingent consideration Finance income Finance costs Other losses Share of profit of an associate Movements in provisions, pensions and government grants Working capital adjustments: Increase in trade and other receivables and prepayments Decrease in inventories Increase in trade and other payables Interest received Income tax paid Net cash flows from operating activities
11,905 213 12,118
11,062 (193) 10,869
3,907 325 412 306 1,633 (532) 358 (1,186) 2,868 373 (83) (729)
3,383 174 492 300 569 (2,007) (211) 1,223 (81) 107
(8,877) 4,091 2,944 17,928 336 (3,759) 14,505
(2,730) 2,185 3,591 17,864 211 (4,379) 13,696
125

20. Issued capital and reserves
2011 Thousands 22,588 2,500 25,088 Thousands 19,388 2,500 21,888 2010 Thousands 20,088 2,500 22,588 $000 19,388 2,500 21,888
AASB 101.78(e) AASB 101.79(a)(i) AASB 101.79(a)(iii)
Authorised shares
Ordinary shares of $1 each 7% convertible preference shares of $1 each (Note 15)
Ordinary shares issued and fully paid At 31 December 2010 Issued on 1 May 2011 in exchange for issued share capital of Extinguishers Limited (Note 4) At 31 December 2011
AASB 101.79(a)(iv)
During the year, the authorised share capital was increased by $2,500,000 by the issue of 2,500,000 ordinary shares of $1 each. Share premium At 1 January 2010 Increase on 1 November 2010 for cash on exercise of share options in excess of cost of treasury shares At 31 December 2010 Increase on 1 May 2011 because of issuance of share capital for the acquisition of Extinguishers Limited (Note 4) Increase on 1 November 2011 for cash on exercise of share options in excess of cost of treasury shares Decrease due to transaction costs for issued share capital At 31 December 2011 Treasury shares At 1 January 2010 Issued on 1 November 2010 for cash on exercise of share options (Note 26) At 31 December 2010 Issued on 1 November 2011 for cash on exercise of share options (Note 26) At 31 December 2011 Thousands 335 (65) 270 (75) 195 $000 80 80 4,703 29 (32) 4,780 $000 774 (120) 654 (146) 508
AASB 101.79(a)(vi) AASB 101.78(e)
Share options exercised in each respective year have been settled using the treasury shares of the Group. The reduction in the treasury share equity component is equal to the cost incurred to acquire the shares, on a weighted average basis. Any excess between the cash received from employees and reduction in treasury shares is recorded in share premium. Share option schemes The Group has two share option schemes under which options to subscribe for the Groups shares have been granted to certain executives and senior employees (Note 26). Other capital reserves Share-based payment transactions $000 338 298 636 307 943 Convertible preference shares $000 228 228 228
As at 1 January 2010 Share-based payment transactions (Note 26) At 31 December 2010 Share-based payment transactions (Note 26) At 31 December 2011
Total $000 566 298 864 307 1,171
126

20. Issued capital and reserves (continued)
AASB 101.79(b)
Nature and purpose of reserves Other capital reserves Share-based payment transactions The share-based payment transaction reserve is used to recognise the value of equity-settled sharebased payment transactions provided to employees, including key management personnel, as part of their remuneration. Refer to Note 28 for further details of these plans. Convertible preference shares The convertible preference share reserve covers the equity component of the issued convertible shares. The liability component is reflected in financial liabilities. All other reserves as stated in the consolidated statement of changes in equity Cash Flow hedge reserve The cash flow hedge reserve contains the effective portion of the cash flow hedge relationships incurred as at the reporting date. $512,000 is made up of the net 2011 movements in forward currency contracts and the effective portion of the forward commodity contract, net of tax. The 2010 movement of $24,000 corresponds also to the net movements in cash flow hedges net of tax. Available-for-sale reserve This reserve records fair value changes on available-for-sale financial assets. Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations. Asset revaluation reserve The asset revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity. The reserve can only be used to pay dividends in limited circumstances.
127

21. Dividends paid and proposed
2011 $000 Declared and paid during the year: Dividends on ordinary shares: Final franked dividend for 2010: 5.66 cents per share (2009: 3.93 cents per share) Interim franked dividend for 2011: 4.66 cents per share (2010: 4.42 cents per share) Dividends on convertible redeemable preference shares (equity component): Final dividend for 2010: 0.46 cents per share (2009: 0.46 cents per share) Interim dividend for 2011: 0.46 cents per share (2009: 0.46 cents per share) 2010 $000
AASB 101.107, Aus138.3(a),(b)
1,069 877 1,946
736 838 1,574
13 13 26
13 13 26
Proposed for approval at the annual general meeting (not recognised as a liability as at 31 December): Dividends on ordinary shares: Final dividend for 2011: 5.01 cents per share (2010: 5.66 cents per share)
AASB 101.137(a)
1,087 Parent
1,082
Franking credit balance The amount of franking credits available for the subsequent financial year are: X Franking account balance as at the end of the financial year at 30% (2010: 30%)
X
2010 $000
2009 $000
4,594 3,612 (219) 7,987
3,267
AASB 101.Aus138.4(a)
Franking credits that will arise from the payment of income tax payable as at the end of the financial year Franking debits that will arise from the payment of dividends as at the end of the financial year* Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date Franking credits that the entity may be prevented from distributing in the subsequent financial year
3,140
AASB 101.Aus138.4(b)
AASB 101.Aus138.4(c)
(190) 6,217
AASB 101.Aus138.5, AASB 112.81(i)
The amount of franking credits available for future reporting periods: Impact on the franking account of dividends proposed or declared before the financial report was authorised for issue but not recognised as a distribution to equity holders during the period*
* AASB 112 requires the relevant dividend to be recognised as a liability at reporting date. As Endeavour (International) Limited has not recognised the subsequent declaration of the year end dividend as a liability, the related franking debits have not been included.
(366) 7,621
(350) 5,867
Tax rates The tax rate at which paid dividends have been franked is 30% (2010: 30%). Dividends proposed will be franked at the rate of 30% (2010: 30%).
AASB 101.Aus138.4(a) AASB 101.Aus138.4(a)
128

22. Provisions
Social security Waste electrical Maintenance contributions on and electronic warranties share options equipment $000 $000 $000 66 3 31 1 22 52 4 53 118 66 22 44 118 60 58 3 3 4 4 31 18 13 53 38 15
Total $000 100 75 175 100 40 60 175 98 77

AASB 137.84(a) AASB 137.84(b) AASB 137.84(c)
At 1 January 2010 Arising during the year At 31 December 2010 At 1 January 2010 Current Non-current At 31 December 2010 Current Non-current
Commentary
The above table shows movements in provisions for the comparative period voluntarily, as AASB 137.84 does not require such disclosure.
Social security Onerous contributions Maintenance operating on share warranties Restructuring Decommissioning lease options $000 $000 $000 $000 $000 At 1 January 2011 Acquisition of a subsidiary (Note 4) Arising during the year Utilised Unused amounts reversed Discount rate adjustment and imputed interest At 31 December 2011 Current Non-current 118 112 (60) (6) 500 (39) (6) 1,200 400 (20) 4 26 (19)
Waste electrical and electronic equipment $000 53 102 (8)
Contingent liability $000 380 20
Total $000 175 2,480 260 (146) (12)

AASB 137.84(b) AASB 137.84(c) AASB 137.84(d) AASB 137.84(a)
2 166 114 52 166
11 466 100 366 466
21 1,221 1,221 1,221
6 386 205 181 386
1 12 3 9 12
2 149 28 121 149
400 400 400
43 2,800 850 1,950 2,800
AASB 137.84(e) AASB 137.84(c) AASB 101.60
Maintenance warranties A provision is recognised for expected warranty claims on products sold during the last two years, based on past experience of the level of repairs and returns. It is expected that most of these costs will be incurred in the next financial year and all will have been incurred within two years after the reporting date. Assumptions used to calculate the provision for warranties were based on current sales levels and current information available about returns based on the two-year warranty period for all products sold. Restructuring Extinguishers Ltd recorded a restructuring provision prior to the Groups acquisition. The provision relates principally to the elimination of certain of its product lines. The restructuring plan was drawn up and announced to the employees of Extinguishers Limited in 2010 when the provision was recognised in its financial statements. The restructuring is expected to be completed by 2013.
AASB 137.85
129

22. Provisions (continued)
Decommissioning A provision has been recognised for decommissioning costs associated with a factory owned by Extinguishers Limited. The Group is committed to decommissioning the site as a result of the construction of the manufacturing facility for the production of fire retardant fabrics. Onerous operating lease On acquisition of Extinguishers Limited, a provision was recognised for the fact that the lease premiums on the operating lease were significantly higher than the market rate at acquisition. The provision has been calculated based on the difference between the market rate and the rate paid. Social security contributions on share options The provision for social security contributions on share options is calculated based on the number of options outstanding at the reporting date that are expected to be exercised. The provision is based on market price of the shares at the reporting date as the best estimate of market price at the date of exercise. It is expected that the costs will be incurred during the exercise period of 1 January 2011 to 31 December 2013. Waste electrical and electronic equipment The provision for waste electrical and electronic equipment is calculated based on sales in the current year (new waste) and expected disposals of old waste (sales before August 2007). Contingent liability A contingent liability at a fair value of $380,000 was determined at the acquisition date of Extinguishers Limited. The claim is subject to legal arbitration and only expected to be finalised in late 2012. At the reporting date, the provision was reassessed and as a result thereof, it has been increased to $400,000 (see Note 4).
AASB 3.56(a)
130

23. Government grants
2011 $000 1,551 2,951 (1,053) 3,449 149 3,300 3,449 2010 $000 1,450 642 (541) 1,551 151 1,400 1,551 150 1,300 1,450
AASB 120.39(c) AASB 120.39(b)
2009 $000
At 1 January Received during the year Released to the income statement At 31 December Current Non-current
Government grants have been received for the purchase of certain items of property, plant and equipment. There are no unfulfilled conditions or contingencies attached to these grants.
24.
Deferred revenue
2011 $000 365 1,426 (1,375) 416 220 196 416 2010 $000 364 1,126 (1,125) 365 200 165 365 2009 $000
At 1 January Deferred during the year Released to the income statement At 31 December Current Non-current
190 174 364
The deferred revenue refers to the accrual and release of EndeavourPoints transactions. As at 31 December 2011, the estimated liability for unredeemed points amounted to approximately $416,000 (2010: $365,000, 1 January 2010: $364,000).
131

25. Pensions and other post-employment benefit plans
AASB 119.120 AASB 119.120A(b)
The Group has two defined benefit pension plans, one final salary plan in Australia and one average salary plan in the US, covering substantially all of its employees, both of which require contributions to be made to separately administered funds. The Group has also agreed to provide certain additional post-employment healthcare benefits to senior employees in the United States. These benefits are unfunded. The following tables summarise the components of net benefit expense recognised in the income statement and the funded status and amounts recognised in the statement of financial position for the respective plans: Net benefit expense 2011 (recognised in cost of sales) Postemployment medical $000 (132) (21) (153)
Current service cost Interest cost on benefit obligation Expected return on plan assets Past service cost Net benefit expense Actual return on plan assets Net benefit expense 2010 (recognised in cost of sales)
Australia plan $000 (815) (201) 127 (55) (944) 445
US plan $000 (452) (55) 56 (451) 293
Total $000 (1,399) (277) 183 (55) (1,548) 738
AASB 119.120A(g)
AASB 119.120A(m)
Current service cost Interest cost on benefit obligation Expected return on plan assets Past service cost Net benefit expense Actual return on plan assets Benefit asset/(liability) As at 31 December 2011
Australia plan $000 (788) (218) 126 (107) (987) (338)
Postemployment US plan medical $000 $000 (356) (105) (65) (8) 47 (374) (166) (113)
Total $000 (1,249) (291) 173 (107) (1,474) (504)
AASB 119.120A(g)
AASB 119.120A(m)
Defined benefit obligation Fair value of plan assets Unrecognised past service costs Benefit liability
Australia plan $000 (4,940) 2,617 (2,323) 428 (1,895)
Postemployment US plan medical $000 $000 (1,093) (339) 705 (388) (388) (339) (339)
Total $000 (6,372) 3,322 (3,050) 428 (2,622)
AASB 119.120A(f)
132

25. Pensions and other post-employment benefit plans (continued)
Australia plan $000 (4,108) 1,763 (2,345) 483 (1,862) Postemployment US plan medical $000 $000 (1,115) (197) 680 (435) (435) (197) (197) Benefit asset/(liability) As at 31 December 2010
Defined benefit obligation Fair value of plan assets Unrecognised past service costs Benefit liability Benefit asset/(liability) As at 1 January 2010
Total $000 (5,420) 2,443 (2,977) 483 (2,494)
AASB 119.120A(f)
Defined benefit obligation Fair value of plan assets Unrecognised past service costs Benefit liability
Australia plan $000 (3,973) 2,134 (1,839) 590 (1,249)
Postemployment US plan medical $000 $000 (1,275) (88) 676 (599) (599) (88) (88)
Total $000 (5,336) 2,810 (2,526) 590 (1,936)
AASB 119.120A(f)
Changes in the present value of the defined benefit obligation are as follows: Postemployment US plan medical $000 $000 1,275 88 65 8 356 105 (192) (379) (10) (4) 1,115 55 452 (299) (141) (89) 1,093 197 21 132 (11) 339
Defined benefit obligation at 1 January 2010 Interest cost Current service cost Benefits paid Actuarial losses/(gains) on obligation Exchange differences Defined benefit obligation at 31 December 2010 Interest cost Current service cost Benefits paid Actuarial losses/(gains) on obligation Exchange differences Defined benefit obligation at 31 December 2011
Australia plan $000 3,973 218 788 (974) 103 4,108 201 815 (569) 385 4,940
Total $000 5,336 291 1,249 (1,166) (276) (14) 5,420 277 1,399 (868) 244 (100) 6,372
AASB 119.120A(c)
133

AASB 119.120A(e)
Changes in the fair value of plan assets are as follows: Australia plan $000 2,134 126 746 (974) (269) 1,763 127 978 (569) 318 2,617 US plan $000 676 47 553 (192) (408) 4 680 56 25 (299) 237 6 705 Total $000 2,810 173 1,299 (1,166) (677) 4 2,443 183 1,003 (868) 555 6 3,322
Fair value of plan assets at 1 January 2010 Expected return Contributions by employer Benefits paid Actuarial losses Exchange differences Fair value of plan assets at 31 December 2010 Expected return Contributions by employer Benefits paid Actuarial gains Exchange differences Fair value of plan assets at 31 December 2011
The Group expects to contribute $1,500,000 to its defined benefit pension plans in 2011. The acquisitions of Extinguishers Limited in 2011 and Lightbulbs Limited in 2010 did not affect plan assets or the defined benefit obligation, as neither company had defined benefit plans. The major categories of plan assets as a percentage of the fair value of the total plan assets are as follows: Pension plans Australia plan US plan 2011 2010 2011 2010 % % % % 44 49 13 10 29 29 9 9 10 5 33 32 10 8 19 15 7 9 26 34
AASB 119.120A(q)
AASB 119.120A(j)
Australia equities American equities Australia bonds American bonds Property
The plan assets include a property occupied by the Group with a fair value of $150,000 (2010: $140,000, 1 January 2010: $130,000). The overall expected rate of return on assets is determined based on the market expectations prevailing, applicable to the period over which the obligation is to be settled. These are reflected in the principal assumptions below. The principal assumptions used in determining pension and post-employment medical benefit obligations for the Groups plans are shown below:
AASB 119.120A(k)
AASB 119.120A(l)
AASB 119.120(n)
134

2011 % Discount rate: Australia plan US plan/post-employment medical plan Expected rate of return on assets: Australia plan US plan Future salary increases: Australia plan US plan Future pension increases: Australia plan US plan Healthcare cost increase rate Post retirement mortality for pensioners at the age of 65: Australia plan Male Female US plan/post-employment medical plan Male Female 4.9 5.7 2010 % 5.5 5.9
7.2 8.3
5.9 6.8
3.5 3.8
4.0 4.1
2.1 2.2 7.2
2.1 2.3 7.4
20.0 23.0
20.0 23.0
19.0 22.0
19.0 22.0
A one percentage point change in the assumed rate of increase in healthcare costs would have the following effects: Increase $000 2011 Effect on the aggregate current service cost and interest cost Effect on the defined benefit obligation 2010 Effect on the aggregate current service cost and interest cost Effect on the defined benefit obligation 6 12 4 7 Decrease $000 (2) (8) (2) (5)
AASB 119.120A(o)
135

AASB 101.125 AASB 101.129(b)
A one percentage point change in the assumed discount rate would have the following effects: Increase $000 2011 Effect on the aggregate current service cost and interest cost Effect on the defined benefit obligation 2010 Effect on the aggregate current service cost and interest cost Effect on the defined benefit obligation (43) (34) (34) (28) Decrease $000 37 31 30 26
Commentary
Although not specifically required by AASB 119, the discount rate assumption or other assumptions give rise to estimation uncertainty which can result in having a significant risk for a material adjustment. AASB 101.122 requires adequate disclosure about the assumptions that helps users to understand the source of estimation uncertainty. Therefore, a sensitivity analysis involving the discount rate is regarded as important information and should be strongly considered.
Change in policy: The cumulative amount of actuarial gains or losses recognised since 1 January 1999 in OCI is $323,000 (2010: $134,000). The Group is unable to determine how much of the pension scheme deficit recognised on 1 January 1999 and taken directly to equity of $1,839,000 is attributable to actuarial gains and losses since inception of the pension schemes because that information was not required to be determined in those earlier periods. Consequently, it is impractical to determine the amount of actuarial gains and losses that would have been recognised in OCI before 1 January 1999.
AASB 108.22 AASB 108.25 AASB 108.28(h)
Commentary
AASB 119 provides no transitional relief from the requirement to disclose cumulative actuarial gains or losses recognised in OCI. Full retrospective application would require disclosure of such gains or losses since the inception of the defined benefit plans. The Group measured defined benefit plans in accordance with AASB 119 from 1 January 1999 and has details of actuarial variances from that date. As a different measurement basis was previously used, the Group concluded that it was impractical for gains or losses to be determined for prior periods to that date.
136

AASB 119.120A(p)
Amounts for the current and previous four periods are as follows: Australia plan 2009 $000 (3,973) 2,134 (1,839) 320 (920) US plan 2009 $000 (1,275) 676 (599) 256 (175)
Defined benefit obligation Plan assets (Deficit)/surplus Experience adjustments on plan liabilities Experience adjustments on plan assets
2011 $000 (4,940) 2,617 (2,323) (572) 318
2010 $000 (4,108) 1,763 (2,345) (257) (464)
2008 $000 (1,758) 2,536 778 (125) (548)
2007 $000 (1,585) 2,284 699 245 (486)
Defined benefit obligation Plan assets (Deficit)/surplus Experience adjustments on plan liabilities Experience adjustments on plan assets
2011 $000 (1,093) 705 (388) 145 243
2010 $000 (1,115) 680 (435) 402 (217)
2008 $000 (890) 1,085 195 (150) 220
2007 $000 (1,093) 815 (278) 345 372
Defined benefit obligation Experience adjustments on plan liabilities
2011 $000 (339) (48)
Post-employment medical benefits 2010 2009 2008 $000 $000 $000 (197) (88) (80) (37) (22) 15
2007 $000 (78) 20
137

26. Share-based payment plans
AASB 2.45(a)
Senior executive plan Under the senior executive plan (SEP), share options of the parent are granted to senior executives of the parent with more than 12 months of service. The exercise price of the share options is equal to the market price of the underlying shares on the date of grant. The share options vest if and when the Groups earnings per share amount increases by 10% three years from the date of grant and the senior executive is employed on such date. If this increase is not met, the share options do not vest. The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share options were granted. The contractual term of each option granted is five years. There are no cash settlement alternatives. The Group does not have a past practice of cash settlement for these share options. General employee share-option plan At its discretion, the Group may grant share options of the parent to employees, other than senior executives, of the parent under the General Employee Share-option Plan (GESP), once they have been in service for two years. The vesting of the share options is dependent on the total shareholder return (TSR) of the Group as compared with a group of principal competitors. Employees must remain in service for a period of three years from the date of the grant. The fair value of share options granted is estimated at the date of the grant using a Monte-Carlo simulation model, taking into account the terms and conditions upon which the share options were granted. The model simulates the TSR and compares it against a group of principal competitors. It takes into account historic and expected dividends, and share price fluctuation covariance of the Group and its competitors to predict the distribution of relative share performance. The exercise price of the share options is equal to the market price of the underlying shares on the date of grant. The contractual term of the share options is five years and there are no cash settlement alternatives for the employees. The Group does not have a past practice of cash settlement for these awards. Share appreciation rights Employees in the business development group are granted share appreciation rights (SARs), which can only be settled in cash. These SARs vest when a specified target number of new sales contracts are closed and the employee is employed at the vesting date. The contractual term of the SARs is six years. The fair value of the SARs is measured at each reporting date using a binomial option pricing model taking into account the terms and conditions upon which the instruments were granted and the current likelihood of achieving the specified target. The carrying amount of the liability relating to the SARs at 31 December 2011 is $299,000 (2010: $194,000, 1 January 2010: $Nil). No SARs had vested at 31 December 2011 and 31 December 2010. The expense recognised for employee services received during the year is shown in the following table: 2011 $000 307 105 412 2010 $000 298 194 492
AASB 2.46
AASB 2.45(a)
AASB 2.47(a)(iii)
AASB 2.46
AASB 2.51(b)
Expense arising from equity-settled share-based payment transactions Expense arising from cash-settled share-based payment transactions Total expense arising from share-based payment transactions
AASB 2.51(a)
There have been no cancellations or modifications to any of the plans during 2011 or 2010. Movements in the year The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year (excluding SARs):
138

26. Share-based payment plans (continued)
2011 Number Outstanding at 1 January Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at 31 December Exercisable at 31 December
1 2
2011 WAEP $2.85 $3.85 $2.33 $3.02 $3.24 $2.98
2010 Number 525,000 155,000 (25,000) (65,000)1 (15,000) 575,000 100,000
2010 WAEP $2.75 $3.03 $2.33 $3.08 $2.13 $2.85 $2.51
575,000 250,000 (75,000)2 (25,000) 725,000 110,000
AASB 2.45(c)
AASB 2.45(d) AASB 2.45(b)
The weighted average share price at the date of exercise of these options was $4.09. The weighted average share price at the date of exercise of these options was $3.13.
AASB 2.45(c)
The weighted average remaining contractual life for the share options outstanding as at 31 December 2011 is 2.94 years (2010: 2.60 years). The weighted average fair value of options granted during the year was $1.32 (2010: $1.18). The range of exercise prices for options outstanding at the end of the year was $2.33 to $3.85 (2010: $2.13 to $3.13). The following tables list the inputs to the models used for the three plans for the years ended 31 December 2011 and 31 December 2010: 2011 SEP 3.13 15.00 5.10 6.50 3.10 Binomial 2010 SEP 3.01 16.30 5.00 3.00 2.86 Binomial 2011 GESP 3.13 16.00 5.10 4.25 3.10 Monte Carlo 2010 GESP 3.01 17.50 5.00 4.25 2.86 Monte Carlo 2011 SAR 3.13 18.00 5.10 6.00 3.12 Binomial 2010 SAR 3.01 18.10 5.00 6.00 2.88 Binomial
AASB 2.47(a)(ii) AASB 2.47(a) AASB 2.45(d)
AASB 2.47(a)(i)
Dividend yield (%) Expected volatility (%) Riskfree interest rate (%) Expected life of share options/SARs (years) Weighted average share price ($) Model used
Dividend yield (%) Expected volatility (%) Riskfree interest rate (%) Expected life of options/SARs (years) Weighted average share price ($) Model used
The expected life of the share options and SARs is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.
139

27. Trade and other payables (current)
2011 $000 17,640 1,833 43 30 10 19,556 Terms and conditions of the above financial liabilities:
X X X X
Trade payables Other payables Interest payable Joint venture (Note 28) Other related parties (Note 28)
As at 1 2010 January 2010 $000 $000 19,496 18,725 1,495 1,565 269 289 12 9 9 12 21,281 20,600
AASB 7.39
Trade payables are non-interest bearing and are normally settled on 60-day terms Other payables are non-interest bearing and have an average term of six months Interest payable is normally settled quarterly throughout the financial year For terms and conditions relating to joint ventures and other related parties, refer to Note 28
AASB 7.39(b)
For explanations on the Groups credit risk management processes, refer to Note 30.
140

28. Related party disclosures
AASB 124.13
The financial statements include the financial statements of the Group and the subsidiaries listed in the following table: % equity interest Name Extinguishers Limited Bright Sparks Limited Wireworks Inc. Sprinklers Inc. Lightbulbs Limited Hose Limited Fire Equipment Test Lab Limited Country of incorporation Australia Australia United States United States Australia Australia Australia 2011 80.0 95.0 98.0 100.0 87.4 100.0 20.0 2010 95.0 98.0 100.0 80.0 100.0
Commentary
AASB 124 does not explicitly require a separate list of subsidiaries, jointly controlled entities or associates. However, AASB 127.42(b) requires this information for the separate financial statements of an entity. In many cases, the separate financial statements of a parent entity are presented as part of the consolidated financial statements. The Group concluded that presenting these entities would be beneficial for the users of its consolidated financial statements.
The Group holds a 20% equity interest in the newly formed Fire Equipment Test Lab Limited. However, the Group has majority representation on the entitys board of directors and is required to approve all major operational decisions. The operations, once they commence, will be solely used by the Group. Based on these facts and circumstances, management determined that, in substance, the Group controls this entity and therefore has consolidated this entity in its financial statements. The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year. For information regarding outstanding balances at 31 December 2011 and 2010, refer to Notes 18 and 27: Purchases from related parties $000 Amounts owed by related parties* $000 620 550 445 551 582 602 Amounts owed to related parties* $000
AASB 124.18 AASB 124.19 AASB 124.22
Sales to related parties $000 Entity with significant influence over the Group: International Fires P.L.C. 2011 2010 As at 1 January 2010 2011 2010 As at 1 January 2010 7,115 5,975 2,900 2,100
AASB 124.17 AASB 124.18
Associate: Power Works Limited
Joint venture in which the parent is a venturer: Showers Limited
2011 2010 As at 1 January 2010
590 430
30 12 9
Key management personnel of the Group: Other directors interests
2011 2010 As at 1 January 2010
225 135
510 490
20
10 9 12
* The amounts are classified as trade receivables and trade payables, respectively.
141

28. Related party disclosures (continued)
Interest received 2011 2010 As at 1 January 2010 2011 2010 As at 1 January 2010 20 1 Amounts owed by related parties 200 13 8 8
AASB 124.13
Loans from/to related parties Associate: Power Works Limited (Note 15.1)
AASB 124.18
Key management personnel of the Group: Directors loan (Note 15.1)
The ultimate parent Endeavour (International) Limited is the ultimate parent based and listed in Australia. The ultimate parent of the Group is S.J. Limited and is based in United States. There were no transactions other than dividends paid, between the Group and S.J. Limited during the financial year (2010: $Nil). Associate Power Works Limited The Group has a 25% interest in Power Works Limited (2010: 25%, 1 January 2010: 25%). Joint venture in which the Group is a venturer Showers Limited The Group has a 50% interest in Showers Limited (2010: 50%, 1 January 2010: 50%). Terms and conditions of transactions with related parties The sales to and purchases from related parties are made at terms equivalent to those that prevail in arms length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2011, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2010: $Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
AASB 124.13 AASB Aus 13.1 AASB 101.138(c)
AASB 124.23 AASB 124.18(b)
Commentary
The disclosure that transactions with related parties are made at terms equivalent to an arms length transaction is only required if an entity can substantiate such terms, i.e., AASB 124.23 does not require such disclosure. The Group was able to substantiate the terms and therefore provides the disclosure.
Commitments with related parties On 1 July 2011, Bright Sparks Limited entered into a two-year agreement ending 30 June 2013 with Wireworks Inc. to purchase specific electrical and optical cables that Bright Sparks Limited uses in its production cycle. Bright Sparks Limited expects the potential purchase volume to be $750,000 in 2012 and $250,000 in the first six months of 2013. The purchase price is based on Wireworks Inc.s actual cost plus 5% margin and will be settled in cash within 30 days after receiving the inventory. Loan to an associate The loan granted to Power Works Limited is intended to finance an acquisition of new machines for the manufacturing of fire prevention equipment. The loan is unsecured and repayable in full on 1 June 2014. Interest is charged at 10%.
AASB 124.18(b)
AASB 124.19(d)
142

AASB 124.13
Transactions with key management personnel Directors loan The Group offers senior management a facility to borrow up to $20,000, repayable within five years from the date of disbursement. Such loans are unsecured and the interest rate is the average rate incurred on long-term loans (currently BBSW + 0.8). Any loans granted are included in financial instruments on the face of the statement of financial position. Other directors interests During both 2011 and 2010, purchases at market prices were made by group companies from Gnome Industries Limited, of which the spouse of one of the directors is a director and controlling shareholder. One director has a 25% (2010: 25%, 1 January 2010: 25%) equity interest in Home Fires Limited. The Group has a contract for the supply of fire extinguishers. During 2011 and 2010, the Group supplied extinguishers to Home Fires Limited at market prices.
AASB 124.19(f) AASB 124.18
Compensation of key management personnel of the Group 2011 $ Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payment Total compensation 4,762,058 213,152 42,000 125,000 117,360 5,295,570 2010 $ 3,704,261 162,000 7,100 61,040 3,934,401
AASB 124.17
AASB 124.17(a) AASB 124.17(b) AASB 124.17(d) AASB 124.17(e) AASB 124.17(a)
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel. Generally, the non-executive directors do not receive pension entitlements from the Group. During 2011, an amount of $40,000 was paid to a director who retired from an executive directors position in 2010.
143

Vested at 31 December 2011 Balance at beginning of period 1 Jan 11 Granted as remuneration Balance at end of period 31 Dec 11
AASB 124.13
AASB 124.Aus29.3
(b) Option holdings of key management personnel
31 Dec 2011 Directors M.P. Boiteau C.P. Muller Executives R.S. Jaffe G.K. Dellas L.A. Basier A.R. Davis S. Cunica C. Dhalliwell Total
Options exercised
Net change Other#
Total
Exercisable
Not exercisable
74,000 50,000
50,000 50,000
(5,000) (1,500)
(9,000) -
110,000 98,500
110,000 98,500
34,000 48,500
76,000 50,000
60,000 1,000 500 31,000 216,500
24,000 24,000 15,000 8,000 171,000
(23,000) (29,500)
(4,000) (4,000) (8,000) (25,000)
24,000 33,000 25,000 15,500 27,000 333,000
24,000 33,000 25,000 15,500 27,000 333,000
12,000 20,800 115,300
24,000 21,000 25,000 15,500 6,200 217,700
Vested at 31 December 2010 Balance at beginning of period 1 Jan 09 Balance at end of period 31 Dec 10
31 Dec 2010 Directors M.P. Boiteau C.P. Muller Executives G.K. Dellas L.A. Basier A.R. Davis S. Cunica Total
#
Granted as remuneration
Options exercised
Net change other#
Total
Exercisable
Not exercisable
75,400 40,900
9,600 9,600
(3,000) (500)
(8,000) -
74,000 50,000
74,000 50,000
2,000 -
72,000 50,000
74,000 1,000 (2,900) 31,000 219,400
3,400 22,600
(12,000) (15,500)
(2,000) (10,000)
60,000 1,000 500 31,000 216,500
60,000 1,000 500 31,000 216,500
39,000 24,800 65,800
21,000 1,000 500 6,200 150,700
Includes forfeitures
144

AASB 124.13
AASB 124.Aus29.4
Shareholdings of key management personnel Shares held in Endeavour (International) Limited (number)
Balance 1 Jan 11 Ord Pref Granted as remuneration Ord Pref On exercise of options Ord Pref Net change other Ord Pref Balance 31 Dec 11 Ord Pref
31 Dec 2011 Directors J. Barraclough M.P. Boiteau C.P. Muller F van den Berg A.N. Lockwood M. Evans M.A. Vlahov C. Smart P.R. Garcia Executives R.S. Jaffe G.K. Dellas L.A. Basier A.R. Davis S. Cunica Total
310,940 699,000 101,000 112,000 49,000 35,000 37,000 10,000
20,000 6,000 5,000 -
10,000 10,000 10,000 5,000 10,000 5,000 -
5,000 1,500 -
1,000 (2,000) 15,000 (10,000) 10,000 -
321,940 702,000 117,500 122,000 59,000 40,000 37,000 15,000 10,000
20,000 6,000 5,000 -
510,000 34,000 1,897,940
31,000
50,000 100,000
23,000 29,500
(2,000) 30,000 49,000 10,000 101,000
50,000 531,000 30,000 49,000 44,000 - 2,128,440
31,000
31 Dec 2010 Directors J. Barraclough M.P. Boiteau C.P. Muller F van den Berg A.N. Lockwood M. Evans M.A. Vlahov P.R. Garcia Executives G.K. Dellas S. Cunica Total
Balance 01 Jan 10 Ord Pref
Granted as remuneration Ord Pref
On exercise of options Ord Pref
Net change other Ord Pref
Balance 31 Dec 10 Ord Pref
299,940 698,000 85,500 102,000 39,000 25,000 37,000 10,000
20,000 6,000 5,000 -
10,000 10,000 10,000 10,000 10,000 -
3,000 500 -
1,000 (2,000) 15,000 (10,000) -
310,940 699,000 101,000 112,000 49,000 35,000 37,000 10,000
20,000 6,000 5,000 -
500,000 24,000 1,820,440
31,000
50,000
12,000 15,500
(2,000) 10,000 12,000
510,000 34,000
31,000
AASB 124.Aus29.5
- 1,897,940
All equity transactions with KMP other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm's length.
145

29. Commitments and contingencies
AASB 117.35(d)
Operating lease commitments Group as lessee The Group has entered into commercial leases on certain motor vehicles and items of machinery. These leases have an average life of between three and five years with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases. Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows: 2011 $000 Within one year After one year but not more than five years More than five years 255 612 408 1,275 Operating lease commitments Group as lessor The Group has entered into commercial property leases on its investment property portfolio, consisting of the Groups surplus office and manufacturing buildings. These non-cancellable leases have remaining terms of between 5 and 20 years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows: 2011 $000 1.418 5.630 5.901 12.949 Finance lease and hire purchase commitments The Group has finance leases and hire purchase contracts for various items of plant and machinery. These leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease. Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows: 2010 $000 1.390 5.520 5.864 12.774 2010 $000 250 600 400 1,250
AASB 117.35(a)
AASB 117.56(c)
AASB 117.56(a)
Within one year After one year but not more than five years More than five years
AASB 117.31(e)
146

29. Commitments and contingencies (continued)
2011 Present value of payments (Note 15) $000 83 905 988 988 2010 Present value of payments (Note 14) $000 51 943 994 994 Consolidated
Minimum payments $000 Within one year After one year but not more than five years More than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments Property, plant and equipment commitments 85 944 1,029 (41) 988
Minimum payments $000 56 1,014 1,070 (76) 994
AASB 117.31(b)
The Group had contractual obligations to purchase plant and equipment for $2,310,000 at balance date (2010: $4,500,000) principally relating to the completion of operating facilities of Sprinklers Inc. This commitment is expected to be settled within 12 months from balance date. The 2010 commitment was settled during 2011. Commitments relating to jointly controlled operations At 31 December 2011, the Group has commitments of $4,590,000 (2010: $4,500,000) principally relating to the completion of the Showers joint venture operating facilities, and commitments of $310,000 (2010: $516,000) for the acquisition of new machinery to be used in the jointly controlled operation. Commitments contracted for at reporting date but not recognised as liabilities in respect of the Showers joint venture are as follows: 2011 $000 Property, plant and equipment Within one year: Completion of operating facilities Acquisition of new machinery After one year but not more than five years: Completion of operating facilities Acquisition of new machinery After more than five years 2010 $000
AASB 116.74(c), AASB 101Aus138.6(a)
AASB 116.74(c), AASB 131.55(a)
2,500 200 2,090 110 4,900
2,000 206
2,500 310 5,016
147

AASB 140.75(h), AASB 101Aus138.6(a)
Commitments relating to investment property The Company and Group had contractual obligations to purchase investment property for $1,650,000 at balance date (Company and Group 2010: $Nil). This commitment is expected to be settled within 12 months from balance date. At balance date the Company and Group had contractual obligations in respect of repairs and maintenance of investment property. These amounts are not recognised as a liability. These repairs and maintenance commitments are expected to be settled as follows: 2011 $000 Repairs and maintenance of investment property Within one year After one year but not more than five years After more than five years 150 525 142 817 2010 $000 130 455 226 811
AASB 101Aus138.6(a) AASB 101Aus138.6(b) AASB 101Aus138.6(c) AASB 140.75(h)
AASB 140.75(h)
Remuneration commitments 2011 $000 Commitments for the payment of salaries and other remuneration under long-term employment contracts in existence at the reporting date but not recognised as liabilities, payable: Within one year After one year but not more than five years After more than five years 425 425 850 425 850 1,275 2010 $000
AASB 101.Aus138.6
AASB 101.Aus138.6(a) AASB 101.Aus138.6(b) AASB 101.Aus138.6(c)
Amounts disclosed as remuneration commitments include commitments arising from the service contracts of directors and executives referred to in the remuneration report of the directors report that are not recognised as liabilities and are not included in the compensation of KMP. Legal claim contingency An overseas customer has commenced an action against the Group in respect of equipment claimed to be defective. The estimated payout is $850,000 should the action be successful. A trial date has not yet been set and therefore it is not practicable to state the timing of the payment, if any. The Group has been advised by its legal counsel that it is only possible, but not probable, that the action will succeed. Accordingly, no provision for any liability has been made in these financial statements. Guarantees The Group has provided the following guarantees at 31 December 2011:
X
AASB 137.86
Guarantee of 25% of the bank overdraft of the associate to a maximum amount of $500,000 (2010: $250,000), which is incurred jointly with other investors of the associate (carrying amounts of the related financial guarantee contracts were $67,000 and $34,000 at 31 December 2011 and 2010, respectively, see Note 15) Guarantee to an unrelated party for the performance in a contract by the joint venture entity. No liability is expected to arise Guarantee of its share of $20,000 (2010: $15,000) of the associates contingent liabilities which have been incurred jointly with other investors
AASB 124.20(h) AASB 131.54(a) AASB 128.40 AASB 137.86
AASB 131.54(b)
AASB 128.40(a)
148

AASB 137.86(a),(b), AASB 112.88
Tax related contingencies Amended assessments from the Australian Taxation Office (ATO) As a result of the ATO's program of routine and regular tax audit, the Group anticipates that ATO audits may occur in the future. The Group is similarly subject to routine tax audits in certain overseas jurisdictions. The ultimate outcome of any future tax audits cannot be determined with an acceptable degree of reliability at this time. Nevertheless, the Group believes that it is making adequate provision for its taxation liabilities (including amounts shown as deferred and current tax liabilities) and is taking reasonable steps to address potentially contentious issues with the ATO. However, there may be an impact to the Group if any of the revenue authority investigations result in an adjustment that increases the Group's taxation liabilities. Ongoing transactions - transfer pricing The Group has offshore operations in the United States (Note 57). As disclosed in Note 28, there are intra Group transactions, which include the Company and its US based subsidiaries Wireworks Inc. and Sprinklers Inc. These transactions are on an arm's length basis and are conducted at normal market prices and on normal commercial terms. Whilst there are no investigations currently in progress, such transactions are not subject to any statutory limit in Australia. This is an area of focus for the United States Internal Revenue Service and the ATO. At present, it is expected that any impact would not be material to the Group. Contingent liabilities The Group recognised a contingent liability of $400,000 in the course of the acquisition of Extinguishers Limited. Refer to Note 4 for additional information.
149

30. Financial risk management objectives and policies
AASB 7.33
The Groups principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Groups operations and to provide guarantees to support its operations. The Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds available-for-sale investments and enters into derivative transactions. The Group is exposed to market risk, credit risk and liquidity risk. The Groups senior management oversees the management of these risks. The Groups senior management is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the Group. The financial risk committee provides assurance to the Groups senior management that the Groups financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Groups policy that no trading in derivatives for speculative purposes shall be undertaken. The board of directors reviews and agrees policies for managing each of these risks which are summarised below. Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, available-for-sale investments and derivative financial instruments. The sensitivity analyses in the following sections relate to the position as at 31 December in 2011 and 2010. The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of the hedge designations in place at 31 December 2011. The analyses exclude the impact of movements in market variables on the carrying value of pension and other post-retirement obligations, provisions and on the non-financial assets and liabilities of foreign operations. The following assumptions have been made in calculating the sensitivity analyses:
X
AASB 7.33
AASB 7.40
The statement of financial position sensitivity relates to derivatives and available-for-sale debt instruments The sensitivity of the relevant income statement item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 December 2011 and 2010 including the effect of hedge accounting The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges and hedges of a net investment in a foreign subsidiary at 31 December 2011 for the effects of the assumed changes of the underlying risk
150

30. Financial risk management objectives and policies (continued)
Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Groups exposure to the risk of changes in market interest rates relates primarily to the Groups long-term debt obligations with floating interest rates. The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Groups policy is to keep between 40% and 60% of its borrowings at fixed rates of interest and excluding borrowings that relate to discontinued operations. To manage this, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge underlying debt obligations. At 31 December 2011, after taking into account the effect of interest rate swaps, approximately 43% of the Groups borrowings are at a fixed rate of interest (2010: 60%). Interest rate sensitivity The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Groups profit before tax is affected through the impact on floating rate borrowings as follows: Increase/decrease in basis points 2011 Euro US dollar Euro US dollar 2010 Euro US dollar Euro US dollar Effect on profit before tax $000 (48) (13) 33 12
AASB 7.40(a)
+45 +60 -45 -60
+10 +15 -10 -15
(19) 12
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years. Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Groups exposure to the risk of changes in foreign exchange rates relates primarily to the Groups operating activities (when revenue or expense is denominated in different currency from the Groups functional currency) and the Groups net investments in foreign subsidiaries. The Group manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 24-month period. Transactions that are certain are hedged without any limitation in time. When the nature of the hedge relationship is not an economic hedge, it is the Groups policy to negotiate the terms of the hedging derivatives to match the terms of the underlying hedge items to maximise hedge effectiveness. The Group hedges its exposure to fluctuations on the translation into euro of its foreign operations by holding net borrowings in foreign currencies and by using foreign currency swaps and forwards.
AASB 7.33 AASB 7.40(b)
151

At 31 December 2011 and 2010, the Group hedged 75% and 70% respectively of its foreign currency sales for which highly probable forecasted transactions existed at the reporting date. Foreign currency sensitivity The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar and AUD exchange rate, with all other variables held constant. The impact on the Groups profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives. The impact on the Groups equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges and net investment hedges. The Groups exposure to foreign currency changes for all other currencies is not material. Change in US$ rate 2011 +9% -9% +8% 8% Effect on profit before tax $000 (30) 20 (40) 40 Effect on profit before tax $000 26 (15) 31 (28) Effect on equity $000 (154) 172 (146) 158
AASB 7.40(a)
2010
Change in AUD rate 2011 +9% -9% +8% 8%
Effect on equity $000 102 (113) 92 (96)
AASB 7.40(a)
2010
The movement on the post-tax effect is a result of a change in the fair value of derivative financial instruments not designated in a hedging relationship and monetary assets and liabilities denominated in US dollars, where the functional currency of the entity is a currency other than US dollars. Although the derivatives have not been designated in a hedge relationship, they act as a commercial hedge and will offset the underlying transactions when they occur. The movement on equity arises from changes in US dollar borrowings (net of cash and cash equivalents) in the hedge of net investments in US operations and cash flow hedges. These movements will offset the translation of the US operations net assets into euro. Commodity price risk The Group is affected by the volatility of certain commodities. Its operating activities require the ongoing purchase and manufacture of electronic parts and therefore require a continuous supply of copper. Due to the significantly increased volatility of the price of the underlying, the Groups Board of Directors has developed and enacted a risk management strategy regarding commodity price risk and its mitigation. Based on a 12-month forecast about the required copper supply, the Group hedges the purchase price using forward commodity purchase contracts. The forecast is deemed to be highly probable. Forward contracts with a physical delivery that qualify for normal purchase, sale or usage and that are therefore not recognised as derivatives are disclosed in Note 15.3. Commodity price sensitivity The following table shows the effect of price changes in copper net of hedge accounting impact (see Note 15.3 for information about hedge accounting).
152

Change in yearend price 2011 Copper Effect on profit before tax $000 (220) 220 Effect on equity
AASB 7.40(a)
+15% -15%
$000 (585) 585
Equity price risk The Groups listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Groups senior management on a regular basis. The Groups Board of Directors reviews and approves all equity investment decisions. At the reporting date, the exposure to unlisted equity securities at fair value was $1,038,000. A change of 10% in the overall earnings stream of the valuations performed could have an impact of approximately $120,000 increasing or decreasing the equity of the Group. If it decreases, depending on whether or not the decrease in the overall earnings is significant or prolonged, the impact could be a loss. At the reporting date, the exposure to listed equity securities at fair value was $337,000. A decrease of 10% on the NYSE market index could have an impact of approximately $55,000 on the income or equity attributable to the Group, depending on whether or not the decline is significant or prolonged. An increase of 10% in the value of the listed securities would only impact equity, but would not have an effect on profit or loss. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Trade receivables Customer credit risk is managed by each business unit subject to the Groups established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit or other forms of credit insurance. At 31 December 2011, the Group had 55 customers (2010: 65 customers, 1 January 2010: 60 customers) that owed the Group more than $250,000 each and accounted for approximately 71% (2010: 76%, 1 January 2010: 72%) of all receivables owing. There were 5 customers (2010: 7 customers, 1 January 2010: 3 customers) with balances greater than $1 million accounting for just over 17% (2010: 19%, 1 January 2010: 13%) of the total amounts receivable. The requirement for an impairment is analysed at each reporting date on an individual basis for major clients. Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actually incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 15. The Group does not hold collateral as security. The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.
AASB 7.33(b)
AASB 7.33
AASB 7.34(c) AASB 7.36(c) AASB 7.B8
153

AASB 7.33 AASB 7.36
Financial instruments and cash deposits Credit risk from balances with banks and financial institutions is managed by the Groups treasury department in accordance with the Groups policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Groups Board of Directors on an annual basis, and may be updated throughout the year subject to approval of the Groups Finance Committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterpartys failure. The Groups maximum exposure to credit risk for the components of the statement of financial position at 31 December 2011 and 2010 is the carrying amounts as illustrated in Note 16 except for financial guarantees and derivative financial instruments. The Groups maximum exposure for financial guarantees and financial derivative instruments are noted in either Note 30 or in the liquidity table below, respectively. Liquidity risk The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. The Groups objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, preference shares, finance leases and hire purchase contracts. The Groups policy is that not more than 25% of borrowings should mature in the next 12-month period. 10.6% of the Groups debt will mature in less than one year at 31 December 2011 (2010: 11.1%) based on the carrying value of borrowings reflected in the financial statements. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders. Excessive risk concentration Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the groups performance to developments affecting a particular industry. In order to avoid excessive concentrations of risk, the groups policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the group to manage risk concentrations at both the relationship and industry levels. The table below summarises the maturity profile of the Groups financial liabilities based on contractual undiscounted payments. Less than On demand 3 months $000 $000 966 21 3,620 14,766 87 2,740 1,970 6,643 17,527 3 to 12 months $000 1,578 1,170 391 3,139 1 to 5 years > 5 years $000 $000 10,554 8,000 676 2,324 150 1,191 1,329 12,571 11,653
AASB 7.33 AASB 7.39(c)
AASB 7.B8
Year ended 31 December 2011 Interest-bearing loans and borrowings Convertible preference shares Other liabilities Trade and other payables Financial guarantee contracts Financial derivatives
Total $000 21,119 3,000 150 19,556 87 7,621 51,533
AASB 7.39(a)(b)
154

On Less than demand 3 months $000 $000 2,650 18 4,321 14,904 49 549 1,255 7,569 16,177 3 to 12 months $000 133 2,056 2,189 1 to 5 years > 5 years $000 $000 8,872 11,600 202 624 2,376 9,698 13,976 Total $000 23,273 21,281 202 3,000 49 1,804 49,609
Year ended 31 December 2010 Interest-bearing loans and borrowings Trade and other payables Other liabilities Convertible preference shares Financial guarantee contracts Financial derivatives
The disclosed financial derivative instruments in the above table are the gross undiscounted cash flows. However, those amounts may be settled gross or net. The following table shows the corresponding reconciliation of those amounts to their carrying amounts. On demand $000 800 (1,970) (1,170) (1,170) On demand $000 500 (549) (49) (49) Less than 3 months $000 1,000 (2,740) (1,740) (1,731) Less than 3 months $000 1,000 (1,254) (254) (254) 3 to 12 months $000 250 (391) (141) (139) 3 to 12 months $000 1 to 5 years $000 700 (1,191) (491) (463) 1 to 5 years $000 over 5 years $000 950 (1,329) (379) (343) over 5 years $000
Year ended 31 December 2011 Inflows Outflows Net Discounted at the applicable interbank rates
Total $000 3,700 (7,621) (3,921) (3,846)
AASB 7.39(a)(b)
Year ended 31 December 2010 Inflows Outflows Net Discounted at the applicable interbank rates Capital management
Total $000 1,500 (1,803) (303) (303)
Capital includes convertible preference shares and equity attributable to the equity holders of the parent. The primary objective of the Groups capital management is to ensure that it maintains a strong credit rating and healthy capital ratios to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2011 and 31 December 2010. The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Groups policy is to keep the gearing ratio between 20% and 40%. The Group includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations.
AASB 101.134 AASB 101.135
155

2011 $000 20,538 19,556 (17,112) 22,982 2,778 62,077 64,855 87,837 26% 2010 $000 22,334 21,281 (14,916) 28,699 2,644 48,438 51,082 79,781 36%
AASB 101.134
Interest-bearing loans and borrowings (Note 15.2) Trade and other payables (Note 27) Less: cash and short-term deposits (Note 19) Net debt Convertible preference shares (Note 15.2) Equity Total capital Capital and net debt Gearing ratio
Commentary
AASB 101.134 and AASB 101.135 require entities to make qualitative and quantitative disclosures regarding their objectives, policies and processes for managing capital. The Group has disclosed a gearing ratio as this is the measure it uses to monitor capital. The Group considers both capital and net debt as relevant components of funding, hence, part of its capital management. However, other measures or a different type of gearing ratio may be more suitable for other entities.
Collateral The Group has pledged part of its short-term deposits in order to fulfil the collateral requirements for the hedging derivatives in place. At 31 December 2011 and 2010, the fair values of the short-term deposit pledged were $5 million and $2 million, respectively. The counterparties have an obligation to return the securities to the Group. There are no other significant terms and conditions associated with the use of collateral. The Group did not any hold collateral at 31 December 2011 and 2010.
AASB 7.15 AASB 7.36(b)
31.
Events after the reporting period

AASB 110.21 AASB 110.10
On 14 January 2012, a building with a net book value of $1,695,000 and inventory with a net book value of $750,000 was severely damaged by flooding resulting in estimated impairment losses of $2,445,000. It is expected that insurance proceeds will fall short of the costs of rebuilding and the loss of inventories by $750,000. The financial effects of these events have not been reflected in the 2011 financial statements. On 22 February 2012, the directors of Endeavour (International) Limited declared a final dividend on ordinary shares in respect of the 2010 financial year. The total amount of the dividend is $1,087,345 which represents a fully franked dividend of 5.01 cents per share. The dividend has not been provided for in the 31 December 2011 financial statements.
156

32. Auditors' remuneration
CA 300(11B)(a), CA 300(11C)(a)
The auditor of Endeavour (International) Limited is Ernst & Young. Consolidated 2011 2010 $ $ Amounts received or due and receivable by Ernst & Young (Australia) for: X An audit or review of the financial report of the entity and any other entity in the consolidated group
X
1,206,000
1,185,500
Other services in relation to the entity and any other entity in the consolidated group Tax compliance Assurance related Special audits required by regulators 37,000 50,300 38,500 1,331,800 43,500 80,400 23,000 1,332,400
AASB 101.Aus138.1(a), Aus138.2(a) AASB 101.Aus138.1(b), Aus138.2(b), CA 300(11B)(a), CA 300(11C)(b)
Amounts received or due and receivable by related practices of Ernst & Young (Australia) for: X Due diligence services provided by overseas Ernst & Young firm
55,000 1,386,800
35,000 1,367,400
AASB 101.Aus138.1(c), Aus138.2(c)
Amounts received or due and receivable by non Ernst & Young audit firms for: Review of the financial report X
X X
105,000 14,900 6,200 126,100
102,400 14,600 5,050 122,050
Taxation services Other non-audit services
AASB 101.Aus138.2(d) AASB 101.Aus138.2(e), CA 300(11B)(a) AASB 101.Aus138.2(e), CA 300(11B)(a)
Amounts received or due and receivable by related practices of non Ernst & Young audit firms for: Other non-audit services X
8,827
8,544
AASB 101.Aus138.2(f), CA 300(11B)(a)
157

33. Information relating to Endeavour (International) Limited (the parent entity)
2011 $000 Current assets Total assets Current liabilities Total liabilities 44,183 74,682 17,444 22,980 2010 $000 39,413 69,086 20,233 25,223
Reg 2M.3.01(1)(a) Reg 2M.3.01(1)(b) Reg 2M.3.01(1)(c) Reg 2M.3.01(1)(d) Reg 2M.3.01(1)
Issued capital Retained earnings Asset revaluation reserve Net unrealised gains reserve Employee equity benefits reserve Cash flow hedge reserve
17,933 33,404 47 64 209 45 51,702 7,771 7,810
15,706 27,895 47 50 145 20 43,863 5,228 5,298
Reg 2M.3.01(1)(e) Reg 2M.3.01(1)(e) Reg 2M.3.01(1)(e) Reg 2M.3.01(1)(e) Reg 2M.3.01(1)(e) Reg 2M.3.01(1)(e) Reg 2M.3.01(1)(e) Reg 2M.3.01(1)(f) Reg 2M.3.01(1)(g) Reg 2M.3.01(1)(h)
Profit or loss of the parent entity Total comprehensive income of the parent entity
The parent has issued the following guarantees in relation to the debts of its subsidiaries: X Pursuant to Class Order 98/1418, Endeavour (International) Limited, Light Bulbs Limited, Hose Limited has entered into a Deed of Cross Guarantee on 12 March 2001. The effect of the deed is that Endeavour (International) Limited has guaranteed to pay any deficiency in the event of winding up of any controlled entity or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee in the event that Endeavour (International) Limited is wound up or if it does not meet its obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The parent has a contingent liability whereby an overseas customer has commenced an action against the Group in respect of equipment claimed to be defective. It has been estimated that the liability, should the action be successful, is $850,000. Refer to Note 29 for further details of the liability. The parent entity has contractual obligations to purchase plant and equipment for $975,000 at balance date (2011: $350,000) principally relating to the completion of operating facilities of Sprinklers Inc. Refer to Note 29 for further details of the commitment.
Reg 2M.3.01(1)(i)
Reg 2M.3.01(1)(j)
158
Directors' declaration
In accordance with a resolution of the Directors of Endeavour (International) Limited, I state that: 1. In the opinion of the Directors: (a) The financial statements and notes of Endeavour (International) Limited for the financial year ended 31 December 2011 are in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of its financial position as at 31 December 2011 and performance Complying with Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001
CA 295(4)
CA 295(5)(a)
CA 295(4)(d)(i)-(ii)
(ii)
(b) The financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2(a) (c) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable
CA 295(4)(ca)
CA 295(4)(c)
2.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 31 December 2011.
CA 295(4)(e)
On behalf of the board
M.P. Boiteau Director 25 February 2012
CA 295(5)(c)
CA 295(5)(b)
159
Independent auditor's report

To the members of Endeavour (International) Limited
Report on the financial report

We have audited the accompanying financial report of Endeavour (International) Limited, which comprises the consolidated statement of financial position as at 31 December 2011, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the years end or from time to time during the financial year.
Directors' responsibility for the financial report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2.2, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entitys preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have met the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditors Independence Declaration, a copy of which is included in the directors report. The Auditors Independence Declaration would have been expressed in the same terms if it had been given to the directors at the date this auditors report was signed. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.
160
Auditor's opinion
In our opinion: 1. The financial report of Endeavour (International) Limited is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the consolidated entitys financial position at 31 December 2011 and of its performance for the year ended on that date Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001
(ii)
2.
The financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board
Report on the remuneration report

We have audited the remuneration report included in pages 23 to 36 of the directors report for the year ended 31 December 2011. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditors opinion
In our opinion the remuneration report of Endeavour (International) Limited for the year ended 31 December 2011, complies with section 300A of the Corporations Act 2001.
Ernst & Young
D.G. Brown Partner Sydney Date: 25 February 2012
161
ASX Y\\alagfYd af^gjeYlagf
ASX additional information

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 21 February 2012. (a) Distribution of equity securities (i) Ordinary share capital X 20,322,000 fully paid ordinary shares are held by 864 individual shareholders All issued ordinary shares carry one vote per share and carry the rights to dividends. (ii) Preference share capital X 2,795,000 7.09% convertible non-cumulative redeemable preference shares are held by five individual shareholders All issued convertible non-cumulative redeemable preference shares have a nominal value of $1 and are convertible at the option of the Company or the shareholder into ordinary shares on 1 July 2011 on the basis of one ordinary share for every three preference shares held. Each preference share carries one right to vote but the right is limited to matters affecting the rights of such shares. (iii) Options X 725,000 options are held by 15 individual option holders Options do not carry a right to vote. The number of shareholders, by size of holding, in each class are: Fully paid ordinary shares 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over 830 21 3 4 6 864 45 Redeemable preference shares 2 3 5 ASX 4.10.5
ASX 4.10.6 ASX 4.10.5 ASX 4.10.16
ASX 4.10.6
ASX 4.10.5 ASX 4.10.16 ASX 4.10.6 ASX 4.10.7, ASX 19.12
Options 1 1 3 6 4 15 ASX 4.10.8 ASX 4.10.4
Holding less than a marketable parcel (b) Substantial shareholders
Fully paid Ordinary shareholders S.J. Limited International Fires Plc Macca Limited JOG Pty Ltd Number 10,740,177 2,332,965 1,044,551 1,044,551 15,162,244 Percentage 52.85 11.48 5.14 5.14 74.61
163
ASX additional information (continued)

(c) Twenty largest holders of quoted equity securities Ordinary shareholders S.J. Limited International Fires Plc Macca Limited JOG Pty Ltd The Hong Kong Family Trust Lockwood & Daughters Limited E.B. Car Limited Maris Superannuation Trust Lee Pty Limited Askham Limited Mays Pty Ltd A. Lal Graham Ltd I.G. Wong Jackson Limited Tomkins Limited Hadnam Limited Feeney & Co Limited M. Olde Scott Limited Number 10,740,177 2,332,965 1,044,551 1,044,551 387,693 154,916 154,916 77,098 39,650 39,650 39,650 15,420 15,420 15,420 8,811 8,811 6,608 6,608 6,608 6,608 16,146,131 Fully paid Percentage 52.85 11.48 5.14 5.14 1.91 0.76 0.76 0.38 0.19 0.19 0.19 0.08 0.08 0.08 0.04 0.04 0.03 0.03 0.03 0.03 79.43
ASX 4.10.9
(d) Unquoted equity securities shareholdings greater than 20% Number Convertible non-cumulative redeemable preference shares International Fires Plc 101,000
ASX 4.10.16
164
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Appendix A Closed group class order disclosures

Closed group class order disclosures The consolidated financial statements include the financial statements of Endeavour (International) Limited and the subsidiaries listed in the following table:
Country of incorporation Australia Australia United States United States Australia Australia Australia Australia Australia % Equity interest 2011 2010 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Investment $000 2011 2010 4,018 2,664 1,946 1,119 1,500 1,500 12,747 2,664 1,946 2,000 1,641 989 1,500 1,500 12,240
Name Extinguishers Limited Bright Sparks Pty Ltd Wireworks Inc. Sprinklers Inc. Light Bulbs Limited Hose Limited * Pipe Limited A L One Pty Ltd A L Two Pty Ltd
* Classified as held for sale
Entities subject to class order relief Pursuant to Class Order 98/1418, relief has been granted to Light Bulbs Limited and Hose Limited from the Corporations Act 2001 requirements for the preparation, audit and lodgement of their financial reports. As a condition of the Class Order, Endeavour (International) Limited, Light Bulbs Limited and Hose Limited (the Closed Group), entered into a Deed of Cross Guarantee on 12 March 2001. The effect of the deed is that Endeavour (International) Limited has guaranteed to pay any deficiency in the event of winding up of controlled entity or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee in the event that Endeavour (International) Limited is wound up or if it does not meet its obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The consolidated income statement and balance sheet of the entities that are members of the Closed Group are as follows: Consolidated income statement# Closed group 2011 2010 $000 $000 Profit from continuing operations before income tax Income tax expense Profit after tax from continuing operations Loss after tax from discontinued operation (refer Note 10) Net profit for the period Retained earnings at the beginning of the period Dividends provided for or paid Aggregate amounts transferred to reserves depreciation transfer for buildings Retained earnings at the end of the period 11,090 (3,253) 7,837 (19) 7,818 25,417 (1,972) 31,263 8,316 (2,292) 6,024 (188) 5,836 21,181 (1,600) 25,417
ASIC CO 98/1418
ASIC CO 98/1418
ASIC CO 98/1418
# If the deed of cross guarantee and the subsequent closed group disclosures were contained in the accounts of Endeavour (International) Limited, then an assessment would need to be made as to the fair value of the deed of cross guarantee (as a financial liability to the Parent) and the details of the valuation and significant assumptions, estimates and judgements used within that valuation would need to be disclosed. Please refer to the disclosure surrounding financial guarantees in the financial statements of Endeavour (International) Limited (see Note 33) for an example of the recognition and disclosure requirements for financial guarantees.
165
Appendix A Closed group class order disclosures (continued)

Consolidated balance sheet# Closed group 2011 2010 $000 $000 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Assets and disposal group classified as held for sale Total current assets Non-current assets Available-for-sale investments Other financial assets Investment in associate Deferred tax assets Property, plant and equipment Investment properties Intangible assets Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Interest-bearing loans and borrowings Income tax payable Liabilities directly associated with assets classified as held for sale Total current liabilities Non-current liabilities Interest-bearing loans and borrowings Deferred income tax liabilities Convertible redeemable preference shares Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Retained earnings Other reserves TOTAL EQUITY
# ASIC CO 98/1418
12,076 13,809 20,342 90 46,317 12,811 59,128
5,697 18,224 16,542 79 40,542 40,542
989 16,047 764 90 16,776 8,893 43,559 102,687
8,314 681 90 14,104 7,983 58 31,230 71,772
15,206 516 3,113 18,835 13,627 32,462
13,635 690 2,500 16,825 16,825
5,969 2,312 2,503 10,784 43,246 59,441
5,874 1,189 2,486 9,549 26,374 45,398
27,933 31,322 186 59,441
22,482 22,931 (15) 45,398
Endeavour (International) Limited has not adopted the new terminology under AASB 101 for financial statements in the closed group class order disclosures as ASIC CO 98/1418 still refers to an income statement and balance sheet.
166
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Appendix B Agricultural assets example disclosures

Statement of financial position (extract) As at 31 December 2011
Note Consolidated 2011 2010 $000 $000
ASSETS Non-current assets Biological assets
xx
1,094
849
AASB 101.54(f)
Notes to the financial statements (extract) For the Year ended 31 December 2011 2
XX
Summary of significant accounting policies (extract) Inventory (extract)

AASB 141.13
The cost of grapes grown by the Group is the fair value less costs to sell at the time the grapes are harvested which becomes the initial cost. Thereafter this inventory is carried at the lower of cost and net realisable value.
XX
Grape vines and grapes

AASB 141.47
Grape vines are measured at their fair value less costs to sell. The fair value of vineyards, including land, grape vines, and other vineyard infrastructure, is determined by an independent valuer, using the present value of expected net cash flows from the vineyards, discounted using a post-tax market determined rate. The fair value of land and other vineyard infrastructure is deducted from the overall fair value of vineyards, to determine the fair value of grape vines. Changes in fair value less costs to sell of grape vines are recognised in the statement of comprehensive income in the year they arise. Grapes are initially measured at their fair value less costs to sell at the time of harvest. The fair value of grapes is determined by reference to market prices for grapes in the local area, at the time of harvest. The gain on initial recognition of grapes is recognised in the statement of comprehensive income in the year of harvest. At the time of harvest, grapes are recorded as inventory.
XX
AASB 141.47
AASB 141.47
AASB 141.13,28
Revenue (extract) Consolidated 2011 2010 $000 $000
Change in fair value less costs to sell of grape vines Gain arising on initial recognition of harvested grapes
125 227 352
83 240 323
AASB 141.48 AASB 141.40
167
Appendix B Agricultural assets example disclosures (continued)

Notes to the financial statements (extract) (continued) For the year ended 31 December 2011 xx Biological assets Biological assets consist of grape vines. The Group grows grapes to use in the production of wine, as part of its normal operations. Vineyards are located in South Australia, and in the South Island of New Zealand. Grapes are harvested between March and May each year. At 31 December 2011, the Group held approximately 160,000 grape vines planted on approximately 8,000 hectares of land (2010: 140,000 grape vines planted on 7,000 hectares). During the year ended 31 December 2011 the Group harvested approximately 50,000 tonnes of grapes (2010: 45,000 tonnes). Consolidated 2011 2010 $000 $000 Grape vines Carrying amount at 1 January Gain/(loss) from changes to fair value less costs to sell Purchases of new vines Harvest of grapes Acquisition of subsidiary Grape vines included in discontinued operation held for sale (Note 11) Exchange adjustment Carrying amount at 31 December 849 125 225 (230) 107 18 1,094 850 83 105 (133) (46) (10) 849
AASB 141.50 AASB 141.50(a) AASB 141.50(b) AASB 141.50(d) AASB 141.50(e) AASB 141.50(c) AASB 141.50(f) AASB 141.41 AASB 141.41,46(a)
AASB 141.46(b)(i)
AASB 141.46(b)(ii)
The fair value less costs to sell of grape vines is determined by independent valuation at balance date. Significant assumptions applied in this determination of fair value are: 2011 (i) (ii) (iii) (iv) (v) (vi) 2010
AASB 141.47
Average remaining life of grape vines. 20 years 21 years Average annual yield per hectare of mature vineyards. 6 tonnes 6 tonnes Post tax average real rate at which net cash flows are 12.6% 12.4% discounted. Annual rate of inflation. 3% 3% In 2011 and 2010 it was assumed that grape prices will remain at current levels, adjusted for inflation. In 2011 and 2010 it was assumed that vineyard maintenance costs will remain at current levels, adjusted for inflation.
AASB 141.49(a)
Grape vines with a carrying value of $500,000 (2010: $450,000) were pledged as security for noncurrent interest-bearing loans and borrowings, as disclosed in Note 15. At 31 December 2011, the Group had commitments to purchase vineyards for $250,000, including grape vines with a fair value of $178,000 (2010: $Nil). The Group is exposed to financial risks in respect of agricultural activity. The agricultural activity of the Group consists of the management of vineyards to produce grapes for use in the production of wine. The primary financial risk associated with this activity occurs due to the length of time between expending cash on the purchase or planting and maintenance of grape vines and on harvesting grapes and making the wine, and ultimately receiving cash from the sale of wine to third parties. The Group's strategy to manage this financial risk is to actively review and manage its working capital requirements. In addition, the Group maintains credit facilities at a level sufficient to fund the Group's working capital during the period between cash expenditure and cash inflow. At 31 December 2011, the Group had unused credit facilities in the form of undrawn unsecured bank overdrafts of $582,000 (2010: $973,000).
AASB 141.49(b)
AASB 141.49(c)
168
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Contents
Corporate information ................................................................................................................................................... 170 Directors' report ............................................................................................................................................................ 171 Consolidated statement of financial position .................................................................................................................... 173 Consolidated statement of comprehensive income ........................................................................................................... 175 Consolidated statement of changes in equity ................................................................................................................... 177 Consolidated statement of cash flows .............................................................................................................................. 178 Notes to the consolidated financial statements ................................................................................................................ 179 1 Basis of preparation and accounting policies ........................................................................................................ 179 2 Operating segments ........................................................................................................................................... 180 3 Revenue, income and expenses ........................................................................................................................... 184 4 Discontinued operations ..................................................................................................................................... 184 5 Cash and cash equivalents .................................................................................................................................. 185 6 Dividends paid ................................................................................................................................................... 185 7 Commitments and contingencies ......................................................................................................................... 186 8 Business combination ......................................................................................................................................... 187 9 Events after the balance sheet date ..................................................................................................................... 188 Directors' declaration ..................................................................................................................................................... 189 Independent auditor's review report ................................................................................................................................ 190
169
Corporate information
ABN 00 000 000 000 Directors J. Barraclough, Chairman M.P. Boiteau, Chief Executive Officer C.P. Muller A.N. Lockwood M.A. Vlahov C. Smart P.R. Garca Company Secretary G.K. Dellas Registered office Homefire House Ashdown Square Australia Principal place of business Bush Avenue Mulberry Park Australia Phone: 61 3 9876 5432 Share Register Everest Registry Services 23rd Floor 43 Terry Street Australia Phone: 61 3 9876 5431 Endeavour (International) Limited shares are listed on the Australian Stock Exchange (ASX). Solicitors Solicitors & Co 7 George Street Australia Bankers Bank Limited George Street Australia Auditors Ernst & Young Australia
ASX 4.10.12 ASX 4.10.10 CA 153
ASX 4.10.11
ASX 4.10.13
170
Directors' report
Your directors submit their report for the half-year ended 30 June 2012. Directors The names of the company's directors in office during the half-year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated. J. Barraclough (Chairman) M.P. Boiteau, B.Sc (Director and Chief Executive Officer) C.P. Muller (Finance Director) F. van den Berg (resigned 15 January 2011) A.N. Lockwood M.A. Vlahov C. Smart P.R. Garcia (alternate director) Review and results of operations The Group experienced a slight decrease in both revenue and profits during the half-year. Sales revenue for the half-year was $107,127 (2011: $119,869) representing a decrease of 10.63%. This was largely a result of the strategic decision to remove discount lines from the electronics segment. Gross profit remained steady for the half-year at $25,219 (2011: $25,215). Consolidated net profit from continuing operations after income tax for the half-year was $5,178 (2011: $7,442), down 30.42% on the previous corresponding half-year. This was largely the result of the increased costs of concentrated marketing efforts in both television and newspaper mediums as well as the additional administrative costs of establishing and providing on-site child care and gymnasium facilities so as to ensure the well-being of our staff. We firmly believe that these additional costs will provide on-going benefits in the form of lower staff turnover and improved productivity. Rounding The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (unless otherwise stated) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies.
ASIC 98/0100 CA 306(1)(a) CA 302(a)
CA 306(1)(b)
171
Directors report (continued)

Auditor independence declaration We have obtained the following independence declaration from our auditors, Ernst & Young.
CA 306(2)
Auditor's independence declaration to the directors of Endeavour (International) Limited

In relation to our review of the financial report of Endeavour (International) Limited for the half-year ended 30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
D.G. Brown Partner Sydney 29 July 2012
Ernst & Young
Signed in accordance with a resolution of the directors.
CA 306(3)(a)
CA 306(3)(c)
J. Barraclough Director Sydney, 29 July 2012

CA 306(3)(b)
172
Consolidated statement of financial position

As at 30 June 2012
Assets Note Consolidated 30 June 2012 31 Dec 2011 $000 $000
AASB 134.8(a)
AASB134.20(a)
Assets Current assets Inventories Trade and other receivables Prepayments Other current financial assets Cash and short-term deposits Assets classified as held for sale 5
44,918 20,906 165 475 19,189 85,653 1,545 87,198
24,875 27,672 244 551 17,112 70,454 13,554 84,008
Non-current assets Property, plant and equipment Investment properties Intangible assets Investment in an associate Other non-current financial assets Deferred tax assets Total assets Liabilities and equity Current liabilities Trade and other payables Interest-bearing loans and borrowings Other current financial liabilities Government grants Deferred revenue Income tax payable Provisions Liabilities directly associated with the assets classified as held for sale Non-current liabilities Interest-bearing loans and borrowings Provisions Government grants Other liabilities Deferred tax liabilities Total liabilities
36,453 8,986 7,490 797 5,494 927 60,147 147,345
34,411 8,893 6,019 764 6,425 383 56,895 140,903
52,679 1,550 755 599 100 245 299 56,227 56,227 15,578 396 1,500 2,568 2,485 22,527 78,754
19,556 2,460 3,040 149 220 3,963 850 30,238 13,125 43,363 20,856 1,950 3,300 3,887 3,060 33,053 76,416
173
Consolidated statement of financial position (continued)

As at 30 June 2012
Assets Note Consolidated 30 June 2012 31 Dec 2011 $000 $000 21,888 4,780 (508) 1,203 39,580 (670) 46 66,319 2,272 68,591 147,345 21,888 4,780 (508) 1,171 35,351 (651) 46 62,077 2,410 64,487 140,903
AASB 134.8(b)(i)
AASB134.20(a)
Equity Issued capital Share premium Treasury shares Other capital reserves Retained earnings Other components of equity Reserves of a disposal group classified as held for sale Equity attributable to owners of the parent Non-controlling interests Total equity Total equity and liabilities
174
Consolidated statement of comprehensive income

For the half-year ended 30 June 2012
Note 2012 $000 Continuing operations Sale of goods Rendering of services Rental revenue Other revenue Revenue Cost of sales Gross profit Other operating income Selling and distribution expenses Marketing expenses Occupancy expenses Administrative expenses Other operating expenses Finance costs Share of profit of an associate Profit from continuing operations before income tax Income tax expense Profit from continuing operations after income tax Discontinued operations Loss from discontinued operations after income tax Net profit for the period Other comprehensive income Net (loss)/gain on available-for-sale financial assets Net movement of cash flow hedges Exchange differences on translation of foreign operations Actuarial gain/(loss) on defined benefit plans Revaluation of land and buildings Income tax relating to the components of other comprehensive income Other comprehensive income for the year, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 3 95,876 10,131 702 418 107,127 (81,908) 25,219 742 (5,338) (2,467) (1,400) (8,083) (1,775) (683) 33 6,248 (1,070) 5,178 110,313 8,455 506 595 119,869 (94,654) 25,215 1,398 (5,245) (1,350) (1,854) (7,435) (1,401) (597) 81 8,812 (1,370) 7,442 Consolidated 2011 $000
AASB 134.8(b)(i)
AASB 134.20(b)
5,178
(188) 7,254
87 111 (201) (1) 63 3 (78) (19) 5,159
173 15 (225) 2 (120) (9) (202) 7,052
175
Consolidated statement of comprehensive income (continued)

Consolidated 2012 2011 $000 $000 Profit attributable to: Owners of the parent Non-controlling interests
AASB 134.8(b)(i)
AASB 134.20(b)
5,316 (138) 5,178
7,493 (239) 7,254
Total comprehensive income attributable to: Owners of the parent Non-controlling interests
5,297 (138) 5,159
7,291 (239) 7,052
Earnings per share Basic, profit for the year attributable to X ordinary equity holders of the parent
X
Cents 26.16 24.50
Cents 39.61 36.19
AASB 134.11
Diluted, profit for the year attributable to ordinary equity holders of the parent
Earnings per share for continuing operations Basic, profit from continuing operations attributable to ordinary equity holders of the parent Diluted, profit from continuing operations attributable to ordinary equity holders of the parent
26.16
35.29
24.50
31.87
176
Consolidated statement of changes in equity

For the half year ended 30 June 2012
Issued capital $000 As at 1 January 2012 Profit for the period Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Share based payments Dividends At 30 June 2012 21,888 Share Treasury premium shares $000 $000 4,780 (508) Other capital reserves $000 1,171 Retained earnings $000 35,351 5,316 Cash flow hedge reserve $000 (582) Foreign Available- currency Asset refor-sale translation valuation reserve reserve reserve $000 $000 $000 (86) (495) 512 Discontinued operations $000 46 Total $000 62,077 5,316
AASB 134.8(c) AASB 134.20(c)
Noncontrolling interest $000 2,410 (138)
Total equity $000 64,487 5,178
126
61
(249)
43
(19)
(19)
5,316
126
61
(249)
43
5,297
(138)
5,159
21,888
4,780
(508)
32 1,203
(1,087) 39,580
(456)
(25)
(744)
555
46
32 (1,087) 66,319
2,272
32 (1,087) 68,591
For the half year ended 30 June 2011

Issued capital $000 As at 1 January 2011 Profit for the period Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Share based payments Dividends At 30 June 2011 19,388 Share Treasury premium shares $000 $000 80 (654) Other capital reserves $000 864 Retained earnings $000 29,272 7,493 Cash flow hedge reserve $000 (70) Foreign Available- currency Asset refor-sale translation valuation reserve reserve reserve $000 $000 $000 2 (444) Discontinued operations $000 Total $000 48,438 7,493 Noncontrolling interest $000 740 239 Total equity $000 49,178 7,254
(16)
(225)
37
(202)
(202)
7,493
(16)
(225)
37
7,291
(239)
7,052
19,388
80
(654)
32 898
(1,082) 35,683
(86)
(669)
37
32 (1,082) 54,679
501
32 (1,082) 55,180
177
Consolidated statement of cash flows

Note 2012 $000 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest paid Income tax paid Receipt of government grants Net cash flows from/(used in) operating activities Cash flows from investing activities Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Proceeds from sale of available-for-sale financial assets Payments for available-for-sale financial assets Interest received Dividends received Purchase of investment property Acquisition of subsidiary, net of cash acquired Proceeds on disposal of subsidiary, net of cash disposed Net cash flows from/(used in) investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Repayment of finance lease liability Equity dividends paid Dividends paid to non-controlling interest Net cash flows from financing activities Net increase in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Consolidated 2011 $000
AASB 134.8(d)
AASB 134.20(d)
107,961 (106,865) (615) (3,546) (3,065)
116,820 (114,049) (515) (2,898) 1,552 910
910 (642) 849 (222) 265 56 (1,190) 142 168
2,032 (2,214) 134 (568) 308 185 (1,786) (1,909)
5,411 (1,000) (350) 1,220 5,281 2,384 130 15,683 18,197
200 4,135 (1,784) (295) 1,166 (24) 3,398 2,399 89 12,286 14,774
178
Notes to the consolidated financial statements

1. Basis of preparation and accounting policies Basis of preparation This general purpose condensed financial report for the half-year ended 30 June 2011 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report. It is recommended that the half-year financial report be read in conjunction with the annual report for the year ended 31 December 2011 and considered together with any public announcements made by Endeavour (International) Limited during the half-year ended 30 June 2012 in accordance with the continuous disclosure obligations of the ASX listing rules. Apart from the changes in accounting policy noted below, the accounting policies and methods of computation are the same as those adopted in the most recent annual financial report. Changes in accounting policy The following amending Standards have been adopted from 1 January 2012. Adoption of these Standards did not have any effect on the financial position or performance of the Group:
X
AASB 134.8(e)
AASB 134.19
Not Mandatory
AASB 134(16)(a)
AASB 134.16(a)
AASB 124 Related Party Transactions (amendment) The AASB issued an amendment to AASB 124 that clarifies the definitions of a related party. The new definitions emphasise a symmetrical view of related party relationships and clarifies the circumstances in which persons and key management personnel affect related party relationships of an entity. In addition, the amendment introduces an exemption from the general related party disclosure requirements for transactions with Government and entities that are controlled, jointly controlled or significantly influenced by the same Government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Group. AASB 132 Financial Instruments: Presentation (amendment) The AASB issued an amendment that alters the definition of a financial liability in AASB 132 to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entitys non-derivative equity instruments, to acquire a fixed number of the entitys own equity instruments for a fixed amount in any currency. The amendment has had no effect on the financial position or performance of the Group because the Group does not have these type of instruments. AASB Int 14 Prepayments of a Minimum Funding Requirement (amendment) The amendment removes an unintended consequence when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover such requirements. The amendment permits a prepayment of future service cost by the entity to be recognised as a pension asset. The Group is not subject to minimum funding requirements in Australia, therefore the amendment of the interpretation has no effect on the financial position nor performance of the Group.
The Group has not elected to early adopt any other new standards or amendments that are issued by not yet effective.
179

2. Operating segments Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources. The operating segments are identified by management based on the manner in which the product is sold, whether retail or wholesale, and the nature of the services provided, the identity of service line manager and country of origin. Discrete financial information about each of these operating businesses is reported to the executive management team on at least a monthly basis. The reportable segments are based on aggregated operating segments determined by the similarity of the products produced and sold and/or the services provided, as these are the sources of the Groups major risks and have the most effect on the rates of return. Types of products and services Electronics The electronics business is a producer and supplier of electronic equipment for defence, aviation and electrical safety markets. The products are used in the areas of electronics, safety, thermal and electrical architecture. The electronics business has been determined as both an operating segment and reportable segment. In addition, the electronics business provides services in the form of installation of equipment as well as on-going support and maintenance. These services are provided under existing contracts as well as on a non-contractual basis. Whilst the non-contractual service segment is reported separately for internal purposes it is not material and as such the operating segment is not reported separately. Instead, it is combined with contract service for the purpose of determining the Groups reportable segments. Fire prevention equipment The fire prevention equipment business is a producer and supplier of fire prevention equipment and fire retardant fabrics for industrial markets. The fire prevention equipment business has been determined as both an operating segment and reportable segment. In addition, the fire prevention business provides services in the form of assessment, installation of equipment, training and on-going support and maintenance. The services are provided under contract and are aggregated for the purpose of determining the Groups reportable segments. Investment property The investment property business leases offices and manufacturing sites owned by the Group that are surplus to the Groups requirements. It does not actively trade in the investment property market. Accounting policies and inter-segment transactions The accounting policies used by the Group in reporting segments internally are the same as those contained in Note 1 to the accounts and in the prior period except as detailed below: Proportionate consolidation of associates results Operating results and share of assets and liabilities are proportionately consolidated for the purposes of internal reporting whereas for the preparation of the financial statements they are equity accounted. Inter-entity sales Inter-entity sales are recognised based on an internally set transfer price. The price is set bi-annually and aims to reflect what the business operation could achieve if they sold their output and services to external parties at arms length. Corporate charges Corporate charges comprise non-segmental expenses such as head office expenses and interest. Corporate charges are allocated to each business segment on a proportionate basis linked to segment revenue so as to determine a segmental result.
AASB 134.8(e)
AASB 134.16(g) AASB 8.22(a) AASB 8.7 AASB 8.8
AASB 8.9
AASB 8.11
AASB 8.22(b)
AASB 8.11
AASB 8.14, 15, 16
AASB 8.11
AASB 8.12
AASB 8.27
180

2. Operating segments (continued) Segment loans payable and loans receivable Segment loans are initially recognised at the consideration received excluding transaction costs. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Income tax expense Income tax expense is calculated based on the segment operating net profit using a notional charge of 30% (2011: 30%). No effect is given for taxable or deductible temporary differences. It is the Groups policy that if items of revenue and expense are not allocated to operating segments then any associated assets and liabilities are also not allocated to segments. This is to avoid asymmetrical allocations within segments which management believe would be inconsistent. The following items and associated assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment:
X X X X X X
AASB 134.8(e)
AASB 134.16(g)
AASB 8.27(f)
Dividend revenue Fair value gains/losses on held-for-trading derivatives Fair value gains on hedged loan Net gains on disposal of available-for-sale investments Finance costs including adjustments on provisions due to discounting Impairment of assets impairment of assets are not included in the measurement of segment profit or loss where they are not expected to recur. In the current period, the Group incurred losses due to a fire at a manufacturing facility, which are not included in the measure of segment profit or loss as they are not expected to recur
The following table presents revenue and profit information for reportable segments for the half-years ended 30 June 2012 and 30 June 2011.
Electronics Sales
Electronics Services
$000 Half-year ended 30 June 2012 Revenue Sales to external customers Other revenues from external customers Other revenue Inter-segment sales Total segment revenue Proportionately consolidated revenue Inter-segment elimination Other revenue Total revenue per the statement of comprehensive income
$000
Continuing operations Fire Fire prevention prevention Investment property equipment equipment Services Sales $000 $000 $000
Total $000
16,752 3,377 4,518 24,647
20,156 20,156
19,687 2,945 22,632
44,347 3,809 48,156
702 93 795
100,942 10,833 93 4,518 116,386
(5,066) (4,626) 433 107,127
181

2. Operating segments (continued)
Electronics Sales Electronics Services Continuing operations Fire Fire prevention prevention Investment property equipment equipment Services Sales $000 $000 $000 805 1,191 138
AASB 134.8(e)
AASB 134.16(g)
Total $000 3,023
$000 Result Segment result Reconciliation of segment net profit after tax to net profit/loss before tax Income tax expense at 30% (2011:30%) Corporate charges Dividend revenue Net gain on disposal of property, plant and equipment Fair value gain/(loss) on held for trading derivatives Fair value gains on hedged loan Net gains on disposal of availablefor-sale financial assets Finance costs including adjustments to provisions due to discounting Other Net profit before tax per the statement of comprehensive income 364
$000 525
909 1,860 56 455 100 15 29
(683) 484 6,248
Total assets have increased by 10.5% since the last annual report. Segment assets for the half-year ended 30 June 2012 are as follows: Segment assets Segment operating assets Intersegment eliminations Proportionately consolidated assets Unallocated assets Available-for-sale financial assets Derivative assets Investment in associate Deferred tax assets Intangibles Pension assets Total assets from continuing operations per the statement of financial position The total assets for the half year ended 30 June 2011 had not materially changed from the 31 December 2010 annual report and therefore comparatives for segment assets have not been provided.
AASB 134.16(g)(iv)
25,798
16,490
44,221
18,600
12,480
117,589
(2,809) 22,762 1,855 385 797 927 4,290 4
145,800
182

2. Operating segments (continued)
Electronics Sales Electronics Services Continuing operations Fire Fire prevention prevention Investment property equipment equipment Services Sales $000 $000 $000
AASB 134.8(e)
AASB 134.16(g)
Total $000
$000 Half-year ended 30 June 2011 Revenue Sales to external customers Other revenues from external customers Other revenues Inter-segment sales Total segment revenue Proportionately consolidated revenue Inter-segment elimination Unallocated revenue Total revenue per the statement of comprehensive income Result Segment results Reconciliation of segment net profit after tax to net profit/loss before tax Income tax expense at 30% Corporate charges Dividend revenue Net gain on disposal of property plant and equipment Fair value gains on hedged loan Net gains on disposal of availablefor-sale financial assets Finance costs including adjustments to provisions due to discounting Other Net profit before tax per the statement of comprehensive income
$000
18,335 2,793 3,768 24,896
22,340 22,340
25,436 1,118 26,554
48,241 4,544 52,785
506 125 631
114,352 8,961 125 3,768 127,206
(4,039) (3,918) 620 119,869
793
691
896
1,737
165
4,282
1,285 1,400 185 221 25 180
683 551 8,812
183

3. Revenue, income and expenses Consolidated 2012 $000 (a) Other revenue Interest Dividends Other 265 56 97 418 2011 $000 308 185 102 595
AASB 134.8(e)
(b) Other income Government grants released Net gains on disposal of available-for-sale financial assets Net gains on disposal of property, plant and equipment Net gain on held for trading derivatives Fair value gain on hedged loan Fair value gain on investment property
50 29 455 100 15 93 742
847 180 221 25 125 1,398
(c) Other expenses Net loss on held for trading derivatives Direct operating expenses from rental earnings Consulting Research on product development Write down in value of inventories
245 530 572 428 1,775
285 185 470 461 1,401
AASB 134.17(a)
(d) Disclosure of tax effects relating to each component of other comprehensive income 2 Available-for-sale financial assets Gain/(loss) on cash flow hedges Exchange differences on translating foreign operations Gains on property valuations
26 (15) 48 19 78
52 (25) 18 (36) 9
4. Discontinued operations No components of the entity have been disposed of, or classified as, held for sale in the current halfyear reporting period. The discontinued operations below relate to the previous half-year reporting period. On 1 May 2011, the board of directors entered into a sale agreement to dispose of Hose Limited, a company that manufactures rubber hosepipes. The disposal was completed on 28 February 2012, on which date control of the business passed to the acquirer. Hose Limited formed the rubber equipment segment that was part of the Australian operations. These businesses had been operating in an unpredictable product environment making it difficult for management to achieve any real growth and profitability from the segment. The results of the discontinued operations for the period of the half-year until disposal are presented below: Consolidated 2012 Hose Ltd $000 8,082 (8,132) (50) 6 (33) (77) 2 (75)
Revenue Expenses Gross profit/(loss) Gain on disposal Finance costs Loss from discontinued operations before tax Income tax Loss from discontinued operations after tax
184

5. Cash and cash equivalents Consolidated 2012 $000 For the purpose of the half-year statement of cash flows, cash and cash equivalents are comprised of the following: Cash at bank and in hand Short-term deposits 2011 $000
AASB 134.8(e)
13,393 5,796 19,189 (992) 18,197
11,375 5,085 16,460 (1,686) 14,774
Bank overdrafts
6. Dividends paid Consolidated 2012 2011 $000 $000 (a) Dividends declared and paid during the half-year on ordinary shares: Final franked dividend for the financial year ended 31 December 2011: 5.01 cents, paid 15 February 2012 (2011: 5.66 cents) Dividends proposed and not yet recognised as a liability: Interim franked dividend for the half-year ended 30 June 2012: 5.65 cents, proposed to be paid 15 August 2012 (2011: 5.42 cents)
AASB 134.16(f)
1,087
1,082
Not Mandatory
(b)
890
851
185

6. Dividends paid (continued) Parent (c) Franking credit balance The amount of franking credits available for the subsequent financial year are:
X
AASB 134.8(e)
AASB 134.16(f)
2012 $000
2011 $000
Franking account balance as at the end of the financial year at 30% (2011: 30%) Franking credits that will arise from the payment of income tax payable as at the end of the financial year Franking debits that will arise from the payment of dividends as at the end of the financial year* Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date Franking credits that the entity may be prevented from distributing in the subsequent financial year
4,594 3,612 (219) 7,987
3,267
3,140
(190) 6,217
The amount of franking credits available for future reporting periods:

X
Impact on the franking account of dividends proposed or declared before the financial report was authorised for issue but not recognised as a distribution to equity holders during the period*
AASB 101.Aus138.5, AASB 112.81(i)
(366) 7,621
(350) 5,867
* AASB 112 requires the relevant dividend to be recognised as a liability at
reporting date. As Endeavour (International) Limited has not recognised the subsequent declaration of the year end dividend as a liability, the related franking debits have not been included.
(d) Tax rates The tax rate at which paid dividends have been franked is 30% (2011: 30%). Dividends proposed will be franked at the rate of 30% (2011: 30%). 7. Commitments and contingencies The only changes to the commitments and contingencies disclosed in the most recent annual financial report are specified below. Capital commitments At 30 June 2012 the Group had commitments of $4,590,000 (2011: $4,500,000) relating principally to the completion of Sprinklers Inc. operating facilities and commitments of $310,000 (2011: $516,000) relating to the Group's interest in the jointly controlled operation, Showers Pty Ltd. These commitments are for the acquisition of new machinery. Legal claim An overseas customer has commenced an action against the Group in respect of equipment claimed to be defective. The liability, should the action be successful, is estimated to be $850,000. A trial date has not yet been set and therefore it is not possible to estimate the timing of any payment. The Group has been advised by its Counsel that it is possible, but not probable, that the action will succeed and accordingly no liability has been recognised in these financial statements.
AASB 134.17(e) AASB 101.Aus138.4(a) AASB 101.Aus138.4(a) AASB 134.16(j)
186

8. Business combination Initial acquisition of Sparkers Limited On 2 February 2012, Endeavour (International) Limited acquired 93% of the voting shares of Sparkers Limited, an unlisted public company based in Australia specialising in the manufacture of fire retardant fabrics to expand market share and to control a key industry patent. The consideration transferred was $3,930,000 and comprised an issue of equity instruments, cash and a contingent consideration component. The Group issued 623,000 ordinary shares with a fair value of $3.03 each, based on the quoted price of the shares of Endeavour (International) Limited at the date of exchange. At the date of acquisition, Endeavour (International) Limited was involved in the manufacture of protective fire clothing. As a result of the combination it was decided that the manufacture of such clothing would be discontinued as soon as possible after the acquisition. The Group has provisionally recognised the fair values of the identifiable assets and liabilities of Sparkers Limited based upon the best information available as of the reporting date. Provisional business combination accounting is as follows: Consolidated Fair value at Carrying acquisition date value $000 $000 Plant and equipment Deferred tax asset Cash and cash equivalents Trade receivables Inventories Existing customer contracts and lists Patents 2,001 327 230 1,986 3,005 513 687 8,749 (4,300) (83) (378) (7) (483) (1,100) (6,351) 2,398 (168) 1,700 3,930 1,433 300 230 1,986 2,179 513 6,641 (4,300) (83) (350) (483) (322) (5,538)
AASB 134.8(e)
AASB 134.16(i)
AASB 3.59(a) AASB 3.B64(a), (b), (c), (d)
AASB 3.B64(f)
AASB 3.63
AASB 3.B67(a)(i),( ii) AASB 3.B64(i)
AASB 107.40(c)
Trade payables Other payables Provision for maintenance warranties Provision for unfavourable contracts Provision for restructuring Deferred tax liability
Provisional fair value of identifiable net assets Non-controlling interest in identifiable acquired net assets Goodwill arising on acquisition
AASB 3.B64(o)(i)
Acquisition-date fair-value of consideration transferred: Shares issued, at fair value Cash paid Contingent consideration liability Consideration transferred Direct costs relating to the acquisition The cash outflow on acquisition is as follows: Net cash acquired with the subsidiary Cash paid Net consolidated cash outflow
AASB 3.B64(f)
1,888 1,420 622 3,930 250
AASB 3.B64(g)(i)
AASB 3.53
230 (1,420) (1,190)
AASB 107.40(c) AASB 107.40(b)
187

8. Business combination (continued) The consolidated statement of comprehensive income includes sales revenue and net profit for the halfyear ended 30 June 2012 of $4,700,000 and $300,000 respectively, as a result of the acquisition of Sparkers Limited. Had the acquisition of Sparkers Limited occurred at the beginning of the reporting period, the consolidated statement of comprehensive income would have included revenue and profit of $5,490,000 and $370,000 respectively. The value of the non-controlling interest was determined based on its 7% interest in the fair value of the identifiable net assets as at the acquisition date. The restructuring provision recognised on acquisition was a present obligation of Sparkers Limited immediately prior to the business combination and its execution was not conditional upon it being acquired by Endeavour (International) Limited. Key factors contributing to the $1,700,000 of goodwill are the synergies existing within the acquired business, and synergies expected to be achieved as a result of combining Sparkers Limited with the rest of the Group. The goodwill balance represents goodwill attributed to the parent only (i.e. as indicated above goodwill attributable to the non-controlling interest has not been recognised). Sparkers Limited held contracts with various suppliers at fixed prices for a certain period. As at acquisition date these prices were not at market rates and were considered unfavourable. These unfavourable contracts were not recognised as a liability in the books of Extinguishers Limited. As part of the business combination accounting, these unfavourable contracts have been assigned a fair value and recognised as a liability. The contracts have three years to run and will not be renewed. Included in the business acquired were receivables with a gross contractual and fair value of $1,986,000 resulting from trade sales with customers. Management expects these amounts to be collected in full and converted to cash consistent with customer terms, which call for payment within 30-45 days of the initial sale. Included in the business acquired was a contingent liability in relation to alleged non-performance under a sale contract. This contingent liability has not been recognised separately as part of the business combination accounting on the basis that management disagrees with the alleged non-performance and believes it constitutes a possible obligation. Under the terms of the acquisition agreement, the Group must pay former owners of Sparkers Limited an additional cash payment based upon various performance metrics including revenue and EBITDA targets during the 2012 fiscal year, as defined in the purchase agreement. The potential undiscounted amount of all future payments that could be required is between $0 and $750,000. The Group has forecast several scenarios, and probability weighted each to determine a fair value for this contingent payment arrangement, which has been included in the determination of the consideration transferred. Future changes in estimates of this amount will be recorded directly in the statement of comprehensive income in the periods in which they occur. C. Donnelly, the former managing director and co-owner of Sparkers, has renegotiated an employment contract with Endeavour (International) Limited. Part of Ms. Donnellys remuneration is performancebased. Given these contingent payments are linked to Ms. Donnellys future services to the Group, these payments are not included in the consideration transferred, rather they will be accounted for as remuneration expense in the period incurred. 9. Events after the balance sheet date On 14 July 2012, a building with a net book value of $1,695,000 was severely damaged by an earthquake. It is expected that insurance proceeds will fall short of the costs of rebuilding and loss of inventories by $750,000.
AASB 134.8(e)
AASB 3 B64(q)
AASB3 B64(o)(i), (p)(i)
AASB 3.B64(e), (k)
AASB 3.22
AASB 3.B64(h)
AASB 3.B64(j) AASB 3.B67(c)
AASB 3.58 AASB 3.B64(g)
AASB 134.16(h)
Not Mandatory
188
Directors' declaration
In accordance with a resolution of the Directors of Endeavour (International) Limited, I state that: In the opinion of the Directors: (a) The financial statements and notes of Endeavour (International) Limited for the financial year ended 30 June 2011 are in accordance with the Corporations Act 2001, including: (i) (ii) Giving a true and fair view of financial position as at 30 June 2012 and performance Complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001
CA 303(1)(c)
CA 303(5)(a)
CA 303(4)(d)(ii)
CA 303(4)(d)(i)
(b)
There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
CA 303(4)(c)
On behalf of the board
M.P. Boiteau Director 29 July 2012
CA 303(5)(c)
CA 303(5)(b)
189
Independent auditors review report

To the members of Endeavour (International) Limited
Report on the condensed half-year financial report

We have reviewed the accompanying half-year financial report of Endeavour (International) Limited, which comprises the statement of financial position as at 30 June 2011 and statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, other selected explanatory notes and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.
Directors responsibility for the half-year financial report

The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes: establishing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that it is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of Interim and Other Financial Reports Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entitys financial position as at 30 June 2012 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Endeavour (International) Limited and the entities it controlled during the half-year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
190
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written auditors independence declaration, a copy of which is included in the directors report.
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Endeavour (International) Limited is not in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of the consolidated entitys financial position as at 30 June 2012 and of its performance for the half-year ended on that date Complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001
(ii)
Ernst & Young
D.G. Brown Partner Sydney Date: 29 July 2012
191
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Appendix D Illustrative disclosure requirements of AASB 12 for interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities
1 The illustrative example below is based on information related to the operations of Endeavour (International) Limited with additional entities added in the structure to illustrate the disclosure requirements of AASB 12. The disclosures illustrated in this appendix are a supplement to the disclosures on subsidiaries, joint arrangements, associates and unconsolidated structured entities in Endeavour.
1.2
Changes in accounting policy and disclosures New and amended standards adopted by the Group The Group has early adopted the following standards, together with the consequential amendments as at 31 December 2011. AASB 10 AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and UIG-112 Consolidation Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. Consequential amendments were also made to other standards via AASB 2011-7 and amendments to AASB 127. AASB 11 AASB 11 replaces AASB 131 Interests in Joint Ventures and UIG-113 Jointlycontrolled Entities Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition it removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the parties a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the parties a right to the net assets is accounted for using the equity method. Consequential amendments were also made to other standards via AASB 2011-7 and amendments to AASB 128. AASB 12 AASB 12 includes all disclosures relating to an entitys interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about certain joint arrangements, associates and structured entities and subsidiaries with noncontrolling interests.
The group has applied the above standards retrospectively.1 The impact of the adoption of these standards are summarised below:
X
AASB 10 Fire equipment test lab continues to meet the definition of control and thus being regarded as a subsidiary. The adoption of AASB 10 did not result in a change in the financial position of the Group. However, additional qualitative and quantitative disclosure has been added with respect to subsidiaries with material non-controlling interest. Refer to Note 3.
193
Appendix D Illustrative disclosure requirements of AASB 12 for interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities (continued)
X
AASB 11 The adoption of AASB 11 has resulted in the Group having to revise its method of accounting for its joint arrangements. Investments in joint controlled entities had been proportionately consolidated. Under AASB 11, these joint arrangements are classified as joint ventures to be equity accounted. The Group has recognised an adjustment as at 1 January 2010 to reflect this change in accounting. The initial investment was measured as the aggregate of the carrying amounts of the assets and liabilities that the Group previously proportionately consolidated. The adoption of AASB 11 resulted in the following adjustment at 1 January 2010:
X X X X X
De-recognition of current assets of $2,454,000 De-recognition of non-current assets of $1,432,000 De-recognition of current liabilities of $112,000 De-recognition of non-current liabilities of $510,000 Recognition of equity accounted investment of $3,264,000
Overall, the net assets of the Group remains unchanged upon transition.
X
The adoption of AASB 12 has resulted in the Group disclosing the summarised financial information of investment in associates. Prior to adoption of AASB 12, Endeavour disclosed the Groups share of summarised financial information of investment in associate.
1.3
Summary of significant accounting policies (a) Consolidation [Extract] Subsidiaries are all those entities over which the Group has power over the investee such that the Group is able to direct the relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investors returns. (b) Joint arrangements [Extract] Joint arrangements are classified as either a joint operation or joint venture, based on the rights and obligations arising from the contractual obligations between the parties to the arrangement. To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the investment is accounting for using the equity method. To the extent the joint arrangement provides the Group with rights to the individual assets and obligations arising from the joint arrangements the Group recognises their share of the assets, liabilities, revenues and expenses of the operation.
AASB 10.7
Accounting estimates and judgements In the process of applying the Groups accounting policies, management has made significant judgements in relation to the following subsidiaries controlled by the Group: Firex Limited The Group is the single largest shareholder with a 49% equity interest. The remaining shareholders are widely dispersed with no one owning more than 5% equity interest. Based on these facts and circumstances, management determined that in substance the Group controls Firex Limited.
AASB 12.7
194
3 3.1 Interests in subsidiaries Interest in subsidiaries with material non- controlling interest (NCI) The group has the following subsidiaries with material non-controlling interest:2 FY 2011 Principal place of business Argentina Australia Profit/(loss) % held by non- allocated to controlling NCI interest $0003 51% 200 80% 100 Accumulated Dividends paid NCI to NCI $000 $000 1,200 100 1,500 80
AASB 12.10 AASB 12.12
AASB12.B10
Name of Entity Firex Limited Fire Equipment Test Lab Ltd FY 2010
Name of Entity Firex Limited
Principal place of business Argentina
Profit/(loss) % held by non- allocated to controlling NCI interest $000 51% 150
Accumulated Dividends paid NCI to NCI $000 $000 1,185 150
The country of incorporation is the same as the principal place of business, unless stated otherwise. 3.2 Significant restrictions The nature and extent of significant restrictions on the Groups ability to use or access assets and settle liabilities of subsidiaries with material non-controlling interests are: Cash and cash equivalents of $1,800,000 held in Argentina are subject to local exchange control regulations. These regulations places restriction on the amount of currency being exported, other than through dividends. 3.3 Summarised financial information about subsidiary with material NCI Summarised financial information including goodwill on acquisition and consolidation adjustments but before intercompany eliminations of subsidiaries with material non-controlling interests is as follows: Summarised statement of financial position Firex Limited As at 31 Dec As at 31 Dec 2011 2010 $000 $000 Current Assets Liabilities Net current assets Non current Assets Liabilities Net non current assets Net assets 12,899 (2,800) 10,099 3,500 (1,066) 2,434 12,533 10,075 (2,345) 7,730 4,687 (1,762) 2,925 10,655 Fire Equipment Test Lab As at 31 Dec As at 31 Dec 2011 2010 $000 $000 8,666 (1,564) 7,102 6,500* (1092) 5,408 12,510 9,893 (2,343) 7,550 4,000 (1,500) 2,500 10,050
AASB 12.B10 AASB 12.10 AASB 12.13
* Included in total assets is PPE of $4.5m majority of this relates to the construction of the facility which will generate future cash flows for the entity. The construction is expected to be completed in 2013 at a total cost of approximately $4.7m.
195
Summarised statement of comprehensive income Firex Limited As at 31 Dec As at 31 Dec 2011 2010 $000 $000 Revenue 20,555 19,882 Profit before income tax 5,493 6,332 Income tax expense (1,400) (1,521) Profit after tax continuing operations 4,093 4,811 Profit after tax discontinued operations 232 454 Other comprehensive income 5,043 4,547 Total comprehensive income Other summarised information Firex Limited As at 31 Dec 2011 $000 4,952 1,500 Fire Equipment Test Lab As at 31 Dec 2011 $000 3,980 4,500
AASB 12.18
Fire Equipment Test Lab As at 31 Dec As at 31 Dec 2011 2010 $000 $000 10,663 14,980 4,523 4,675 (1,560) (1,304) 2,963 3,371 596 3,559 453 3,824
Net cash flows from operations Acquisition of significant Property, plant and equipment 3.4 3.4.1
Changes in group ownership interests in a subsidiary without loss of control Disposal of ownership interest in subsidiary, without loss of control On 13 June 2011, the Group disposed of a 15% equity interest of Extinguishers Limited. Following the disposal, the Group still controls Extinguishers Limited retaining an 80% of the ownership interests. The transaction has been accounted for as an equity transaction with non-controlling interests, resulting in: 2011 $000 550 500 50 (250) (100) 400 50
Proceeds from sale of 15% ownership interest Net assets attributable to NCI Increase in equity attributable to parent Represented by: Decrease in foreign currency translation reserve Decrease in asset revaluation reserve Other reserves Increase in equity attributable to parent entity 3.4.2
Acquisition of ownership interest in subsidiary On 1 October 2011, the Group acquired an additional 7.4% interest in the voting shares of Lightbulbs Limited, increasing its ownership interest to 87.4%. 2011 $000 Purchase consideration for the acquisition of 7.4% ownership interest 325 135 Carrying value of additional interest acquired Increase in equity attributable to parent 190 Represented by: Decrease in asset revaluation reserve 150 40 Other reserves 190 Increase in equity attributable to parent entity
AASB 12.18
196
4 Interests in joint arrangements4 Investment in joint ventures Dec 2011 $000 2,423 3,705 219 6,347 Dec 2010 $000 1,835 3,670 210 5,715
AASB 12.20
Showers Limited G Inc Other joint ventures
Movement in investment in joint ventures during the year Balance at beginning of the year Share of total comprehensive income Dividends received Exchange and other adjustments Balance at end of the year Profit or loss after tax from continuing operations Showers Limited G Inc Other joint ventures
AASB 12.21(c) AASB 12.B16
5,715 633 (49) 48 6,347
5,191 597 (57) (16) 5,715
588 34 7 629
557 28 11 596
Other comprehensive income Showers Limited G Inc Other joint ventures
2 2 4
(1) 2 1
Total comprehensive income Showers Limited G Inc Other joint ventures
588 36 9 633
557 27 13 597
AASB 12.22(b)
All operations are continuing. The financial statements of all joint ventures have the same reporting date as the Group. Showers Limited The Group has a 50% interest in the ownership and voting rights of Showers Limited which is held by a subsidiary, K Limited. Showers Limiteds principal place of operations and country of incorporation is Australia. The Group is one of two partners in a strategic venture to build fire prevention equipment. The Group jointly controls the venture with the other partner under the contractual agreement and requires unanimous consent for all major decisions over the relevant activities.5 Showers Limited is restricted by regulatory requirements from paying dividends greater than 50% of the annual profit. Dividends of $30,000 (2010: $40,000) were received from Showers Limited G Inc The Group has a 35% interest in the ownership and voting rights of G Inc which is held directly by the parent. G Incs principal place of operations is the USA but it is incorporated in UK. The Group is one of four partners in a venture which undertakes the production of the fire prevention equipment in State of New Jersey which is strategic to the Groups business given the similarity in business lines. Dividends of $15,000 (2010: $15,000) were received from G Inc.
AASB 12.21
AASB 12.22(a)
AASB 12.22(a)
197
Summarised financial information Summarised financial information in respect of Showers Limited and G Inc is as follows: Summarised statement of financial position
AASB 12.21(b)
Cash and cash equivalents Other current assets Total current assets Non-current assets excluding goodwill Total assets Current financial liabilities (excluding trade, other payables and provisions) Other current liabilities Total current liabilities Non-current financial liabilities (excluding trade, other payables and provisions) Other non-current liabilities Total non-current liabilities Total liabilities
2011 Showers Limited $000 1,600 1,626 3,226 1,864 5,090
2011 G Inc $000 200 200 400 5,400 8,346
2010 Showers Limited $000 1,850 958 2,808 1,964 4,772
2010 G Inc $000 250 150 400 5,222 8,168
100 124 224
100 350 450
480 622 430
120 300 320
1,000 20 1,020 1,244
2,000 40 2,040 2,490
950 50 1,000 2,102
2,050 40 2,090 2,410
Net assets excluding goodwill Summarised statement of comprehensive income Revenue Depreciation and amortisation Interest income Interest expense Profit before tax Income tax expense Profit after tax Other comprehensive income Total comprehensive income
3,846
3,310
2,670
3,212
60,694 500 25 204 2,764 (1,588) 1,176 1,176
750 100 60 75 130 (33) 98 5 103
58.876 480 20 200 2,670 (1,556) 1,114 1,114
650 110 55 85 110 (28) 83 (4) 79
198
The summarised financial information presented is the amounts included in the financial statements of the joint ventures adjusted for fair value adjustments made at the time of acquisition and for difference in accounting policies. The fair value adjustments in both Showers Limited and G Inc principally relate to intangible assets which are being amortised over eight years. All operations are continuing. A reconciliation of the summarised financial information to the carrying amounts of Showers Limited and G Inc is as follows: Showers Limited 2011 $000 Group share of 50% of net assets excluding goodwill of $3,846,000 (2010: $2,670,000) Goodwill on acquisition less cumulative impairment 1,923 500 2,423 2010 $000 1,335 500 1,835
G Inc Group share of 35% of net assets excluding goodwill of $3,310,000 (2010: $3,212,000) Goodwill on acquisition less cumulative impairment Interest in a joint operation (a)
1,159 2,546 3,705
1,124 2,546 3,670
A subsidiary has entered into a joint arrangement for a 50% interest in a jointly controlled asset that produces electronic components used in the manufacturing process. The Group is entitled to up to 40% of its output and a further 10% of revenue which is sold to third parties. The Groups interests in the assets are included in the consolidated statement of financial position as plant and equipment.
(b) Commitments relating to the jointly controlled asset 2011 $000 810 (c) Contingent liabilities relating to the jointly controlled asset
AASB 131.54(c)
2010 $000 630

AASB 131.55(a)
Guarantee to an unrelated party of the jointly controlled assets performance of a contract
100
Investment in associates Material investments in associates are summarised below: 2011 $000 764 2,600 175 3,539 2010 $000 681 2,570 123 3,374
AASB 12.20
Power Works Limited E Inc Other associates
199
Movement in investment in associates during the year Balance at beginning of the year Share of total comprehensive income Dividends received Exchange and other adjustments Balance at end of the year Analysis of total comprehensive income Profit after tax from continuing operations Power Works Limited E Inc Other associates Other comprehensive income Power Works Limited E Inc Other associates Total comprehensive income Power Works Limited E Inc Other associates 2011 $000 3,436 140 (41) 4 3,539 2010 $000 3,264 127 (32) 15 3,374
AASB 12.21(c) AASB 12.B16
83 45 8 136 3 1 4 83 48 9 140
81 36 10 127 (1) 1 81 35 11 127

AASB 12.22(b) AASB 12.21
The financial statements of all associates have the same reporting date as the group. Power Works Limited The Group has a 25% interest in the ownership and voting rights of Power Works Limited which is held by a subsidiary, H Limited. Power Works Limiteds principal place of operations and country of incorporation is Australia. The principal activity is the manufacture of fire prevention equipment for power stations. E Inc The Group has a 30% ownership interest in E Inc with an interest in 25% of the voting rights. E Inc is directly held by the parent. E Incs principal place of operations is the USA but is incorporated in UK. The principal activity of E Inc is to fire safety equipment which are leased on a long-term basis to tenants, which is strategic to the Groups business given the similarity in business lines. The fair value of the Groups investment in E Inc is $2,800,000 (2010: $2,558,000), which is the quoted market price. Dividends of $10,000 (2010: $10,000) were received from E Inc.
AASB 12.22(a)
200
Summarised financial information of Power Works Limited and E Inc Summarised statement of financial position 2011 Power Works Limited $000 6,524 12,864 19,388 4,488 12,644 17.132 2,256 2010 Power Works Limited $000 6,324 12,028 18,352 3,904 12,524 16,428 1,924 2010
AASB 12.21(b)
Current assets Non-current assets excluding goodwill
E Inc $000 600 2,500 4,965 400 250 650 2,450
E Inc $000 400 2,401 4,666 200 250 450 2,351
Current liabilities Non-current liabilities
Net assets excluding goodwill Summarised statement of comprehensive income Revenue Profit after tax from continuing operations Other comprehensive income Total comprehensive income
33,292 332 332
500 150 10 160
32,640 324 364
600 120 (5) 115

AASB 12.B14
The summarised financial information presented is the amounts included in the IFRS financial statements of the associates adjusted for fair value adjustments made at the time of acquisition and for differences in accounting policies. The fair value adjustments in both Power Works Limited and E Inc principally relate to intangible assets which are being amortised over ten years and the revaluation of property, plant and equipment to fair value. All operations are continuing. A reconciliation of the summarised financial information to the carrying amounts of Power Works Limited and E Inc is as follows: 2011 $000 564 200 764 2010 $000 481 200 681
Power Works Limited Group share of 25% of net assets excluding goodwill of $2,256,000 (2010: $1,924,000) Goodwill on acquisition less cumulative impairment E Inc Group share of 30% of net assets excluding goodwill of $2,450,000 (2010: $2,351,000) Goodwill on acquisition less cumulative impairment
735 1,865 2,600
705 1,865 2,570
201
5 5.1 Interests in unconsolidated structured entities Disclosure of the nature of interests in unconsolidated structured entities The Group has sponsored a number of unconsolidated structured entities to dispose of its interests in collateralised mortgage obligations, collateralised mortgage back securities and credit card receivables. In respect of these entities in which the group no longer has an interest at the reporting date details of income received and the carrying amounts of financial assets transferred to these entities are as follows:
AASB 12.27
Income from unconsolidated structured entities in which no interest is held at 31 December 2011 31 Dec 2011 31 Dec 2010 $000 $000 Fee income 1,000 2,000 Gains on re-measurement of assets transferred to structured 400 1,500 entities 2,400 2,500 Split by: Collateralised debt obligation Commercial mortgage backed securities Credit card receivables
AASB 12.28
1,700 800 2,500
900 1,500 2,400
Carrying amounts of assets transferred to unconsolidated structured entities in the reporting period as at date of transfer Transferred Transferred in 2011 in 2010 $000 $000 Collateralised debt obligation 15,000 Commercial mortgage backed securities 4,000 3,000 10,000 Credit card receivables 13,000 19,000 5.2 Disclosure of the nature of risks of unconsolidated structured entities The Group has a number of interests in unconsolidated structured entities. These are summarised as follows: Maximum Maximum Carrying loss Carrying loss Summarised financial amount exposure amount exposure information Note 2011 2011 2010 2010 $000 $ $000 $ Senior loan notes (a) 3,300 3,200 3,200 3,300 Junior loan notes (b) 6,000 6,000 6,100 6,100 Interest rate swap (c) (asset) ** 200 ** 500 Credit default swap (d) (liability) 2,000 157,000 1,800 141,000 1,000 1,500 1,500 1,000 Lease receivables (e)
** Maximum loss exposure not disclosed as it is deemed to be potentially unlimited and not quantifiable.
AASB 12.29
The senior loan notes are included in the statement of financial position in the line item assets available-for-sale (AFS). The maximum loss exposure represents the fair value at the reporting date.
202
The junior loan notes are included in the statement of financial position in the line item loans and receivables. The maximum loss exposure represents the amortised cost at the reporting date. The lease receivables are included in the statement of financial position in the line item other receivables. The maximum loss exposure represents the carrying amount of the receivable. The interest rate swap is included in the statement of financial position in the line item derivative assets and is measured at fair value through profit or loss. The 10 year swap pays a floating rate of interest which is uncapped and therefore the maximum loss exposure is potentially unlimited and not quantifiable. If LIBOR was to increase by 1,000 basis points for the entire life of the swap, an event which the directors consider is extremely remote, it would cause a loss of $5,000. The credit default swap is included in the statement of financial position in the line item derivative liabilities and is measured at fair value through profit and loss. The maximum loss exposure assumes the 100% default of all principal and interest payments on the loan portfolio of the structured entity to which the credit default swap has been issued. The probability of this occurring is extremely remote. The lease receivables are included in the statement of financial position in the line item other receivables. The maximum loss exposure represents the carrying amount of the receivable. 5.3 Provision of financial support no contractual obligation During the reporting period the parent provided financial support in the form of assets with a fair value of $12,000,000 (2010: $nil) and credit rating of AAA to Exting Limited, in exchange for assets with an equivalent fair value. There was no contractual obligation to exchange these assets. The transaction was initiated because the assets held by Exting Limited has a credit rating of less than AA and a further ratings downgrade could potentially trigger calls on loan note issued by Exting Limited. The parent did not suffer a loss on the transaction. Provision of financial support contractual obligation The parent company has given a contractual commitment to SPE Limited, whereby if the assets held as collateral by SPE Limited for its issued loan notes fall below a credit rating of AAA then the parent will substitute assets of an equivalent fair value with an AAA rating. The maximum fair value of assets to be substituted is $10,000. The parent is not expecting to suffer a loss on any transaction arising from this commitment but will receive assets with a lower credit rating from those substituted.
AASB 12.30
5.4
AASB 12.31
Commentary
Retrospective application 1. AASB 108.22 requires an entity to present a third balance sheet for the earliest prior period presented. For the purposes of this example, the third balance sheet as at 1 January 2010 has not been presented. Subsidiaries with material NCI 2. The subsidiaries listed in the example has been considered as having material NCI, based on the accumulated NCI, from the subsidiaries disclosed under Note 28 in Endeavour. For the purposes of this illustration, Firex Limited has been added as a subsidiary to reflect the Group having control of an entity by virtue of being the single largest shareholder. Disclosure of interests of non controlling interests AASB 12.B10 3. The disclosure of summarised income statement, statement of financial position and net cash flows, the acquisition of significant property, plant and equipment has been considered to be useful as for the purposes of decision making. The construction of the facility, which is disclosed as acquisition of PPE will generate future cash flows for the entity.
203
Commentary
Interest in joint arrangements 4. For illustrative purposes, G Inc and other joint ventures have been added in the structure to reflect the disclosure requirement. The other joint ventures comprises of several investment in entities which is not material to the Group. 5. The classification of a joint arrangement as either a joint venture or joint operation is dependent on the legal form of the arrangement, contractual terms and conditions and other facts and circumstances. Investment in Showers Limited, G Inc has been assessed as joint ventures based on the terms and conditions of the contractual arrangement mentioned.
204
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Appendix E Australian reporting requirements

The table below provides a summary of reporting requirements for different types of entities. Type of entity General purpose report Listed company Listed registered scheme Financial reporting Special purpose report Complying with reporting requirements Chapter 2M of Corporations Not Act 2001 ASX listing required s292(1) rules
Other
9 9
9 9
9 9 9
Investment and Financial Services Association (IFSA) Standards may be applicable
Disclosing entity* Public company
9 9
If a reporting entity
9 9
If not a reporting entity
Unlisted registered scheme
9
9
9
IFSA Standards may be applicable
Large proprietary company#
9
9
Small proprietary company (unless CA 292(2)(b), 293(1), 294(1) apply) Small proprietary company to which CA 292(2)(b) applies (controlled by a foreign company for all or part of the year and not consolidated in financial statements lodged with ASIC) Small proprietary (5% shareholder request under CA 293(1))
9
9
9
To the extent requested by shareholders
If shareholders If shareholders request a general request a special purpose report purpose report
Small proprietary company (ASIC Request under CA 294(1))
9
If ASIC directs
If ASIC requests a If ASIC requests a general purpose special purpose report report
* #
For unlisted disclosing entities, be aware of continuous reporting requirements under the Corporations Act 2001. Please note that Part 2M.3 only applies to disclosing entities incorporated or formed in Australia (footnote to CA 292(1)). The Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 has amended the criteria for a large proprietary company in the Corporations Act 2001. A proprietary company is large for a financial year if it satisfies at least two of the following: The consolidated revenue for the financial year of the company and the entities it controls is $25 million or more. The value of the consolidated gross assets at the end of the financial year of the company and the entities it controls is $12.5 million or more. The company and the entities it controls have 50 or more employees at the end of the financial year.
205
Appendix E Australian reporting requirements (continued)

Disclosing entities
Issue annual report to members CA 315, 294
Earlier of 21 days before the AGM, or 4 months after the end of the financial year If AGM is held 31 May 11 31 Dec 11: 30 Apr 12 If AGM is held 30 Nov 12 30 Jun 12: 31 Oct 12
Entity type/ reference
Notice of AGM*# CA 249H, 249HA

At least 28 days before the AGM 31 Dec 11: 3 May 12 30 Jun 12: 2 Nov 12
Date of AGM CA 250N

Within 5 months after the end of the financial year 31 Dec 11: 31 May 12 30 Jun 12: 30 Nov 12
Lodge reports with ASX ASX 4.2A, 4.2B, 4.2C, 4.3A, 4.3B, 4.3C, 4.5
Lodge Annual report when it is lodged with ASIC. In any event within 3 months after the end of the financial year
Lodge reports with ASIC CA 319, 320

ASX is agent for ASIC, therefore lodgement with ASX represents lodgement with ASIC Annual report within 3 months after the end of the financial year 31 Dec 11: 31 Mar 12 30 Jun 12: 30 Sep 12 Half-year report within 75 days after the end of the half-year 31 Dec 12: 15 Mar 12 30 Jun 12: 13 Sep 12
Listed company
Lodge Appendix 4E immediately it becomes available and no later than when the annual report is lodged with ASIC. In any event within 2 months after the end of the financial year 31 Dec 11: 28 Feb 12 30 Jun 12: 31 Aug 12
Lodge Half-year report and Appendix 4D immediately they become available and no later than when the half-year report is lodged with ASIC. In any event within 2 months after the end of the halfyear 31 Dec 11: 28 Feb 12 30 Jun 12: 31 Aug 12 Listed registered scheme Within 3 months after the end of the financial year 31 Dec 12: 31 Mar 12 30 Jun 12: 30 Sep 12 Earlier of 21 days before the AGM, or 4 months after the end of the financial year If AGM is held 31 May 12 31 Dec 11: 30 Apr 12 If AGM is held 30 Nov 12 30 Jun 11: 31 Oct 11 Unlisted registered scheme Within 3 months after the end of the financial year 31 Dec 10: 31 Mar 11 30 Jun 11: 30 Sep 11 Same requirements as listed company Same requirements as listed company
Unlisted public company
Annual report within 3 months after the end of the financial year 31 Dec 11: 31 Mar 12 30 Jun 12: 30 Sep 12 Half-year report within 75 days after the end of the half-year 31 Dec 11: 15 Mar 12 30 Jun 12: 13 Sep 12
Annual report within 3 months after the end of the financial year 31 Dec 11: 31 Mar 12 30 Jun 12: 30 Sep 12 Half-year report within 75 days after the end of the half-year 31 Dec 11: 15 Mar 12 30 Jun 12: 13 Sep 12
If a company has a constitution, it may specify a longer minimum period of notice. An unlisted company may also call an AGM upon shorter notice, provided all members entitled to attend agree in advance, and no resolution will be moved to remove a director under CA CA 203D, appoint a director as a replacement of another under that same section, or remove an auditor under CA CA 329. For a listed company 28 28 days notice is required for all members meetings unless a longer period is specified in the companys constitution. A public company that has only one member is not required to hold an AGM (CA CA 250N(4)).
206
Appendix E Australian reporting requirements (continued)

Non-disclosing entities
Issue annual report to members CA 315, 294 Within 3 months after the end of the financial year 31 Dec 11: 31 Mar 12 30 Jun 12: 30 Sep 12 Lodge reports with ASIC CA 319, 320 Within 3 months after the end of the financial year 31 Dec 11: 31 Mar 12 30 Jun 12: 30 Sep 12 Within 4 months after the end of the financial year 31 Dec 12: 30 Apr 12 30 Jun 12: 31 Oct 12 In accordance with the terms of the request
Entity type/ reference Registered scheme
Notice of AGM CA 249H, 249HA -
Date of AGM CA 250N -
Large proprietary company or small proprietary company foreign controlled under CA 292(2)(b) Small proprietary company - ASIC request under CA 294(1) Small proprietary company - 5% shareholders' request under CA 293(1)
Within 4 months after the end of the financial year 31 Dec 11: 30 Apr 12 30 Jun 12: 31 Oct 12
In accordance with the terms of the request
If shareholder direction is given after the end of the financial year the company must report to the members by the later of 2 months after the date of the direction and 4 months after the end of the financial year If 4 months after the end of the financial year 31 Dec 11: 30 Apr 12 30 Jun 12: 31 Oct 12
Unlisted public company (Small companies limited by guarantee have no obligation to prepare an annual report, unless 5% members request under CA 294A)
Earlier of 21 days before the AGM, or 4 months after the end of the financial year If AGM is held 31 May 12 31 Dec 11: 30 Apr 12 If AGM is held 30 Nov 12 30 Jun 12: 31 Oct 12
Within 4 months after the end of the financial year 31 Dec 11: 30 Apr 12 30 Jun 12: 31 Oct 12
207
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M1123674

Endeavour Financial Year 31 Dec 2011

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Endeavour (International) Limited

Financial year 31 December 2011

Endeavour (International) Limited

Endeavour (International) Limited

Endeavour (International) Limited

Whats new in this update?

Endeavour (International) Limited

Amendment to AASB 124 Related Party Transactions

Amendment to AASB 132 Financial Instruments: Presentation Classification of Rights Issues

Note 2.4 Changes in accounting policies and disclosures

Amendment to AASB Int 14 Prepayments of a Minimum Funding Requirement

Accounting policy Note 2

The Group illustrates the adoption of these amendments in Note 2

Endeavour (International) Limited

Impairment disclosures in the 2011 edition

Australian Accounting Standards

Endeavour (International) Limited

Endeavour (International) Limited

Financial review by management

Endeavour (International) Limited

Abbreviations and key

Endeavour (International) Limited

Endeavour (International) Limited

Contents to financial report

28. 29. 30. 31. 32. 33.

Endeavour (International) Limited

ASX 4.10.11 AASB 101.138(a)

Endeavour (International) Limited

* Denotes current directorship

* Denotes current directorship

DE Manufacturing Ltd appointed 31 December 2001; resigned 30 June 2010

Endeavour (International) Limited

Directors' report (continued)

Endeavour (International) Limited

Directors' report (continued)

Operating and financial review

CA 299(1)(a) CA 299A(1) ASX 4.10.17

Endeavour (International) Limited

Directors' report (continued)

Endeavour (International) Limited

Directors' report (continued)

Endeavour (International) Limited

Directors' report (continued)

Endeavour (International) Limited

Directors' report (continued)

83 966 1,411 2,460

905 3,374 13,799 18,078 2,778 19,140 20,856

943 3,154 15,462 19,559 2,644 17,567 22,203

Endeavour (International) Limited

Directors' report (continued)

Significant changes in the state of affairs

Significant events after the balance date

Endeavour (International) Limited

Directors' report (continued)

Environmental regulation and performance

Indemnification and insurance of directors and officers

Endeavour (International) Limited

Directors' report (continued)

Endeavour (International) Limited

Directors' report (continued)

Auditor's independence declaration to the directors of Endeavour (International) Limited

Ernst & Young

D.G. Brown Partner Sydney 25 February 2012