Notes 1-5

1. Changes in accounting policies

The International Accounting Standards Board has issued a number of standards, amendments and interpretations which are not yet effective. The group has not applied these in preparing these financial statements and while the application of these standards, amendments and interpretations would require further disclosures, they are not expected to have a material impact on the group’s results.

There have been no other changes in accounting policy in the year ended 30 June 2009, however certain comparatives were restated to conform with the current year’s presentation.

Back to top 2. Acquisitions

During the 2009 year the Group acquired minor subsidiaries to the value of $3 million.

Companies acquired during the 2008 year were Formica Corporation group on 2 July 2007, Fair Dinkum Homes and Sheds on 3 August 2007, Cameron Quarries on 5 October 2007, DVS on 1 February 2008, and Morinda Australia (trading as Garage World and Shed Boss) on 1 May 2008. All acquisitions were for 100 percent of the companies.

A formal fair value exercise was undertaken for these acquisitions, which resulted in the fair value of the assets and liabilities described in the statement of cashflows. Goodwill on acquisition represents the value in the companies attributable to their expected profitability and the significant cost synergies to be achieved.

Back to top3. Operating earnings

Operating earnings

3 Fees paid to the auditors during the year for other services are mainly with respect to the half year review, other assurance services and tax compliance work.

Back to top4. Unusual items – restructurings and impairments

The unusual expense consists of the following:

1 During the year ended 30 June 2009 the group implemented plans to rationalise business operations and reduce operating costs. The labour force employed by the group fell by 2,500, to 16,500, and redundancy costs have been incurred across all the divisions.
Actions undertaken also include the closure of Plyco doors for $5 million, 3 branch closures in the steel rollforming and coated business for $1 million and rationalisation of distribution centres for Stramit in Melbourne costing $6 million.
Furthermore the group has undertaken a number of capacity reduction initiatives. The Laminex particleboard plant at Kumeu, Auckland, and the medium density fibreboard plant at Welshpool, Perth, were closed with redundancies and restructuring costs incurred of $42 million. This cost is separate from the writedown of the fixed assets as described in note (3) below.
Corporate incurred a cost of $7 million in regard to a project integrating Formica and Laminex which included a review of the companies' manufacturing operations, product profi tability and customer cost-to-serve and identified opportunities to streamline the product portfolio and reduce distribution costs. See notes (3) and (4) below.
2 During the year ended 30 June 2009 the group wrote-off all the goodwill recognised in Formica Europe of $29 million, Formica North America of $27 million and $5 million of the goodwill recognised on acquisition of The O’Brien Group Limited. This is the result of the annual impairment review undertaken by the group. The review indicated that the value of the assets has been adversely impacted due to the deterioration in current market conditions and a more cautious outlook of the companies sustainable mid-cycle earnings.
3 During the year ended 30 June 2009 the group wrote-off $33 million from the value of Distribution’s IT assets, arising from the decision to suspend the implementation of a new retail management information system. Should the project recommence and be successfully implemented the group will assess the value created and may reverse some of the amount written-off.
The group has written-off $17 million of fi xed assets in regard to the closure of the Laminex particleboard plant at Kumeu and the medium density fibreboard plant at Welshpool during the year.
As part of the project reviewing Formica and Laminex’s manufacturing operations, the group decided during the year ended 30 June 2009 to downsize the operations at Formica’s plant at Bilbao, Spain. Accordingly $24 million has been written-off fi xed assets.
During the year ended 30 June 2009 the group decided to write-off $92 million of fi xed assets for Formica Europe. This is the result of the annual impairment review undertaken by the group. The review indicated that the value of the assets has been adversely impacted due to the deterioration in current market conditions and a more cautious outlook of the companies' sustainable mid-cycle earnings.
4 As part of the project simplifying Formica and Laminex’s product range, the group decided during the year ended 30 June 2009 to write-off $47 million of stock held by Formica. This arose from the review of Formica’s manufacturing operations, product profi tability and customer cost-to-serve and aligned their stock with the revised product suite and service model.
5 During the year ended 30 June 2009 the group wrote-off $8 million of the investment in Dongwha Pattina NZ Limited held by Laminex. This is the result of the annual impairment review undertaken by the group. The review indicated that the value of the asset has been adversely impacted due to the deterioration in current market conditions and a more cautious outlook of the company’s sustainable mid-cycle earnings.
6 During the year ended 30 June 2009 the group wrote-off $60 million of tax losses recognised in Formica. See note 25.

Back to top5. Discontinued operations

There were no discontinued operations in either the current or the comparative year.