(e) Foreign Currency Transactions and Balances Functional and Presentation Currency Transactions and Balances Group Companies (f) Income Taxes and Other Taxes Current Tax Deferred Tax Items included in the financial statements of each of the Group’s subsidiaries are measured using the currency of the primary  economic environment in which the subsidiary or branch operates (the ‘functional currency’). The financial statements are  presented in Australian dollars, which is the Company’s functional and presentation currency. Foreign currency transactions are translated into the functional currency using the foreign exchange rates prevailing at the dates  of the transactions. Foreign currency gains and losses resulting from the settlement of such transactions and from the translation  at financial year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the  consolidated statement of comprehensive income. Non-monetary items measured at historical cost continue to be carried at the foreign exchange rate at the date of transaction.  Foreign exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that  the gain or loss is directly recognised in equity, otherwise foreign exchange differences are recognised in the consolidated  statement of comprehensive income. The results and financial position of foreign subsidiaries that have a functional currency different from the presentation currency  are translated into the presentation currency as follows: On consolidation, foreign exchange differences arising on translation of foreign subsidiary financial statements are transferred  directly to the foreign currency translation reserve in the consolidated statement of financial position. The relevant differences are  recognised in the consolidated statement of comprehensive income during the financial period when the investment in a foreign  subsidiary is disposed. Current income tax expense is calculated by reference to the amount of income taxes payable or recoverable in respect of the  taxable profit or loss for the financial period. It is calculated using tax rates that have been enacted or are substantively enacted  by the end of each reporting period. Current tax for current and prior financial periods is recognised as a liability (or asset) to the  extent that it is unpaid or (refundable). Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising  between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The tax base of an  asset or liability is the amount attributed to that asset or liability for income taxation purposes. No deferred tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where  there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the financial period when the asset is realised or liability  is settled. Deferred tax is credited in the consolidated statement of comprehensive income except where it relates to items that  may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Karoon Gas Australia Ltd  Annual Report 2011 39 • assets and liabilities are translated at end of reporting period foreign exchange rates prevailing at the end of each reporting period; • income and expenses are translated at average foreign exchange rates for the financial period; and • all resulting foreign exchange differences are recognised in other comprehensive income.