IGO Interactive Annual Report 2018

Notes to the consolidated financial statements 30 June 2018 (continued) 31 Summary of significant accounting policies (continued) (b) New standards and interpretations not yet adopted (continued) AASB 16 (issued February 2016) Leases AASB 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It instead requires an entity to bring most leases into its statement of financial position in a similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its statement of financial position for most leases. There are some optional exemptions for leases with a period of 12 months or less and for low value leases. Lessor accounting remains largely unchanged from AASB 117. To the extent that the entity, as lessee, has significant leases outstanding at the date of initial application, 1 July 2019, right-of-use assets will be recognised for the amount of the unamortised portion of the useful life, and lease liabilities will be recognised at the present value of the outstanding lease payments. Thereafter, earnings before interest, depreciation, amortisation and tax (EBITDA) will increase because lease expenses currently included in EBITDA will be recognised instead as amortisation of the right-of-use asset, and interest expense on the lease liability. However, there will be an overall reduction in net profit before tax in the early years of a lease because the amortisation and interest charges will exceed the current straight-line expense incurred under AASB 117 Leases. This trend will reverse in the later years. Operating cash flow and free cash flow will likely increase due to the lease repayments being classified as finance cash flows. There will be no change to the accounting treatment for short-term leases less than 12 months and leases of low value items, which will continue to be expensed on a straight-line basis. The Group is currently assessing the potential impact of the adoption of this standard. Work undertaken to date in preparedness for compliance with the new standard has commenced and includes the identification and analysis of the many potential contracts that are likely to contain a lease (as newly defined). The range of relevant contracts will potentially include mining services, drill rig hire, logistics, power generation and property leases. Mandatory for financial years commencing on or after 1 January 2019, but available for early adoption Expected date of adoption by the group: 1 January 2019. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Independence Group NL 60 124 — IGO ANNUAL REPORT 2018 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2018