MHI
03/10/2013 08:37
GENERAL
REL: 0837 HRS Michael Hill International Limited
GENERAL: MHI: Change in functional and reporting currency to AUD.
Michael Hill International Limited (the Company) advises that it will begin
reporting in Australian dollars (AUD) rather than New Zealand dollars (NZD)
for the year ended 30 June 2014. This decision applies to both the Company's
and the Group's financial statements. It has been made after consideration of
International Financial Reporting Standard 21 (IAS 21) which relates to the
'presentation currency' of an entity and International Financial Reporting
Standard 8 (IAS 8) 'Accounting policies, changes in accounting estimates and
errors'. The trading up-date in October for the first quarter ending 30
September will be the first occasion on which the Company will report in AUD.
The reasons for, and implications of, this change in presentation currency
are set out in more detail below.
Reason for the change
The reason for the change is to ensure the Company complies with its
obligations to comply with generally accepted accounting practice, which in
this case are IAS21 and IAS 8.
IAS21 requires an entity to determine its functional currency, and measure
its results and financial position in that currency. IAS 21 defines
'functional currency' as the currency of the primary economic environment in
which the entity operates, and sets out a number of factors or indicators
that an entity should, or may need to, consider in determining its functional
currency.
The primary factors which need to be considered and will determine an
entity's functional currency are:
(a) the currency:
(i) that mainly influences sales prices for goods and services (which will
often be the currency in which sales prices for its goods and services are
denominated and settled); and
(ii) of the country whose competitive forces and regulations mainly determine
the sales prices of its goods and services.
(b) the currency that mainly influences labour, material and other costs of
providing goods or services (which will often be the currency in which such
costs are denominated and settled).
Under IAS 21, an entity is required to translate its results and financial
position from its functional currency into a presentation currency using the
method required for translating a foreign operation for inclusion in the
reporting entity's financial statements.
Under this method, assets and liabilities are translated at the closing rate,
and income and expenses are translated at the exchange rates at the dates of
the transactions (or at the average rate for the period when this is a
reasonable approximation).
The determination of a presentation currency is undertaken under the
principles of IAS 8, where it should result in the financial statements
providing reliable and relevant information about the effects of
transactions, other events or conditions on the entity's financial position,
financial performance or cash flows.
The Company is a New Zealand company and has historically reported in New
Zealand dollars as the presentation currency. Shareholders will be aware,
however, that some years ago the Company's administrative and executive
functions shifted to Australia in recognition of the increasing importance of
the Australian market to the Company's results. For similar reasons the Group
transferred its intellectual property from a New Zealand subsidiary to an
Australian subsidiary in 2008.
The relative importance of the Australian market has continued, and the
majority of the Group's revenues, profits and cash flows are generated in
Australian dollars. This is unlikely to change in the foreseeable future.
The directors accordingly consider that compliance with IAS21 and IAS 8
requires this change in presentation currency. The Company's auditors are
aware of and agree with the directors' decision.
Future and previous comparable periods
All financial reporting to the market and shareholders will now be made in
AUD. This includes the quarterly trading up-dates as well as the half year
and full year results.
Where announcements to the market and reports to shareholders include
comparable financial information from prior periods denominated in currencies
other than AUD, this comparable financial information will be re-stated in
AUD using the following procedures:
o Assets and liabilities denominated in currencies other than AUD will be
translated into AUD at the closing rates of exchange on the last day of the
relevant accounting period
o Revenues and expenses in currencies other than AUD will be translated into
AUD at the average rates of exchange over the relevant accounting period
o In each case the rates of exchange will be consistent with those used by
the Company in the relevant accounting period.
Future dividends
At this stage the Company does not anticipate any change to its current
practice of declaring dividends in NZD and attaching franking credits and New
Zealand withholding tax credits as appropriate. If, in the future, the
Company attached imputation credits to dividends these will be denominated
in NZD.
Sir Michael Hill
Chairman 3 October 2013.
End CA:00241944 For:MHI Type:GENERAL Time:2013-10-03 08:37:58
