NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to and forming part of the Consolidated Financial Statements For the period from incorporation to 26 June 2004 This general purpose financial report has been  prepared in accordance with Accounting Standards,  other pronouncements of the Australian Accounting  Standards Board, Urgent Issues Group Consensus  Views and the Corporations Act 2001. This financial report covers the consolidated  entity of Super Cheap Auto Group Limited and  its controlled entities, and Super Cheap Auto  Group Limited as an individual parent entity. Super Cheap Auto Group Limited is a public  company that listed on the Australian Stock  Exchange subsequent to the period’s end and is  incorporated and domiciled in Australia. This financial report is prepared on an accruals  basis in accordance with the historical cost  convention which, except for certain assets, as  noted, are at valuation.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 01 The consolidated financial statements incorporate the assets and liabilities of all  entities controlled by Super Cheap Auto Group  Limited (the “Company” or “parent entity”) as at  26 June 2004 and the results of its controlled  entities for the period then ended. Super Cheap  Auto Group Limited and its controlled entities  comprise the “consolidated entity”. The effects  of all transactions between entities in the  consolidated entity are fully eliminated. A list  of controlled entities is contained in Note 37 to  the financial statements. Where control of an entity is acquired during a  financial period its results are included in the  consolidated statement of financial performance  from the date on which control commences. Where  control of an entity ceases during a financial  year its results are included for that part of  the period during which control existed.  The Company adopts the liability method of tax- effect accounting whereby the income tax expense  is based on the operating profit adjusted for any  permanent differences.  Timing differences, which arise due to the  different accounting periods in which items  of revenue and expense are included in the  determination of accounting profit and taxable  income, are brought to account as either a  provision for deferred income tax or as a future income tax benefit at the rate of income tax applicable to the period in which the benefit  will be received or the liability will become  payable. When anticipated purchase or sale transactions  have been hedged, actual purchases and sales  which occur during the designated forward  exchange contract period are accounted for as  having been hedged until the amounts of those  transactions in the designated period are fully  allocated against the amounts of the forward  exchange contracts. 55  SUPER CHEAP AUTO GROUP LIMITED ANNUAL REPORT 2004 Foreign currency forward exchange contracts are  undertaken in order to avoid or minimise the  possible adverse financial effects of movements  in exchange rates. Gains and losses arising  upon entry into a foreign exchange contract  intended to hedge the purchase or sale of  goods or services, together with the subsequent  exchange gains and losses resulting from those  transactions are deferred in the statement  of financial position from the inception of  the forward exchange contract up to the date  of the purchase or sale and included in the  measurement of the purchase or sale. The net  amounts receivable or payable under the forward  exchange contract are also recorded in the  statement of financial position. Any gains or  losses arising on the forward exchange contract  after the recognition of the hedged purchase or  sale are included in the statement of financial  performance. Foreign currency transactions are initially  translated into Australian dollars at the rate  of exchange at the date of the transaction. At  balance date amounts payable and receivable in  foreign currencies are translated to Australian  dollars at rates current at that date. Resulting  exchange differences are recognised in  determining the profit or loss for the year. The amount of benefits brought to account or  which may be realised in the future is based on  the assumption that no adverse change will occur  in income tax legislation, and the anticipation  that the Company will derive sufficient future  assessable income to enable the benefit to  be realised and comply with the conditions of  deductibility imposed by the law. Future income tax benefits are not brought  to account unless realisation of the asset is  assured beyond any reasonable doubt. Future  income tax benefits in relation to tax losses are  not brought to account unless there is virtual  certainty of realisation of the benefit. (c) Foreign currency translation  (i) Transactions  (a) Principles of consolidation  (ii) Specific commitments  (b) Income tax 