Notes to the Consolidated Financial Statements  Cardno Limited and its Controlled Entities for the year ended 30 June 2010 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED  (f) Revenue Recognition continued  Sale of goods  Consulting revenue  Interest revenue  Dividends  (g) Leases  (h) Net Financing Costs  (i) Income Tax  Page 33 of 80  Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively  enacted at the reporting date, and any adjustment to tax payable in respect of previous years.  Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the  extent that it relates to items recognised directly in equity, in which case it is recognised in equity.  Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which  take a substantial period of time to get ready for their intended use or sale. Where funds are borrowed specifically for the  acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is the amount  incurred in relation to that borrowing, net of any interest earned on those borrowings. Where funds are borrowed  generally, borrowing costs are capitalised using a weighted average capitalisation rate.  Borrowing costs are calculated using the effective interest method and include interest, amortisation of discounts or  premiums relating to borrowings and amortisation of ancillary costs incurred in connection with arrangement of  borrowings and foreign exchange differences arising from foreign currency borrowings to the extent that they are  regarded as an adjustment to interest costs.  Interest income is recognised in the profit and loss as it accrues, using the effective interest method.  Other leases are operating leases and are not recognised in the Group’s statement of financial position. Payments made  under operating leases which are subject to fixed annual increments are recognised in the income statement on a  straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an  integral part of the total lease expense and are spread over the lease term.  Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as  finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value  and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in  accordance with the accounting policy applicable to that asset. The corresponding rental obligations, net of finance  charges, are included in current and non-current interest-bearing loans and borrowings. Minimum lease payments are  apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to  each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the  liability.  Revenue from dividends is recognised by the consolidated entity when dividends are received.  Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.  Revenue from consulting services which are provided on a time and material basis is recognised at the contractual  hourly rates as labour hours are delivered and direct expenses are incurred. For long term contracts, revenue and  expenses are recognised in accordance with the percentage of completion method. Where a loss is expected to arise  from a contract, the loss is recognised immediately as an expense. The percentage of completion is determined by costs  to date versus estimated total project costs. Revenue from the sale of goods is recognised (net of rebates, discounts and other allowances) upon the delivery of  goods to the customer. 