66 Consolidated  Notes to the  Financial  Statements Note 1 – Summary of significant accounting policies  (continued) (g) Segment reporting (i) Jointly controlled operations and assets (j) Foreign currency (h) Investments in associates and jointly controlled entities Foreign operations Foreign currency transactions and balances (k) Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash  equivalents consist of cash and cash equivalents as defined above,  net of outstanding bank overdrafts. Cash and cash equivalents comprise cash at bank and on hand and  short-term deposits with an original maturity of three months or  less that are readily convertible to known amounts of cash and  which are subject to an insignificant risk of changes in value. Any excess of the cost of acquisition over the consolidated entity’s  share of the net fair value of the identifiable assets, liabilities and  contingent liabilities of the associate or jointly controlled entity  recognised at the date of acquisition is recognised as goodwill. The  goodwill is included within the carrying amount of the investment  and is assessed for impairment as part of that investment.  When the consolidated entity’s share of losses in an associate or  jointly controlled entity equals or exceeds its interest in that  associate or jointly controlled entity, including any unsecured  long-term receivables and loans, the consolidated entity does not  recognise further losses, unless it has incurred legal or constructive  obligations or made payments on behalf of the associate or the  jointly controlled entity. The consolidated entity’s share of its associates’ and jointly  controlled entities’ post-acquisition profits or losses is recognised in  the income statement and its share of post-acquisition movement  in reserves is recognised in reserves. The cumulative  post-acquisition movements are adjusted against the carrying  amount of the investment. On consolidation, the assets and liabilities of the consolidated  entity’s foreign operations are translated into Australian dollars at  exchange rates ruling at the end of the reporting period. Income  and expense items are translated at the average exchange rates for  the period. Exchange differences arising on translation are  recognised directly in equity in the foreign currency translation  reserve. Such exchange differences are reclassified to profit or loss  in the period in which the foreign operation is disposed. Foreign exchange differences arising on translation are recognised  in the income statement in the period in which they arise except for  exchange differences on transactions entered into in order to  hedge certain foreign currency risks (refer to Note 1(ab)). Under the equity method, investments in associates and jointly  controlled entities are carried in the consolidated statement of  financial position at cost as adjusted for post-acquisition changes in  the consolidated entity’s share of the net assets of the associates  and jointly controlled entities, less any impairment in the value of  individual investments. Non-monetary items carried at fair value that are denominated in  foreign currencies are retranslated at the exchange rates ruling at  the date when the fair value was determined. Non-monetary items  that are measured in terms of historical cost in a foreign currency  are not retranslated. Transactions in foreign currencies are initially recorded in the  functional currency by applying the exchange rates ruling at the  date of the transaction. Monetary assets and liabilities  denominated in foreign currencies are retranslated at the exchange  rate ruling at the end of the reporting period. In the consolidated financial statements, investments in associates  and jointly controlled entities are accounted for using the equity  method, except when the investment is classified as held for sale,  in which case it is accounted for in accordance with AASB 5  Non-current Assets Held for Sale and Discontinued Operations . Associates are those entities in which the consolidated entity has  significant influence, but not control, over the financial and  operating policies. Significant influence generally exists when the  consolidated entity holds between 20% and 50% of the voting  power of another entity. Jointly controlled entities are those  entities over whose activities the consolidated entity has joint  control, established by contractual agreement and requiring  unanimous consent for strategic financial and operating decisions. Functional and presentation currency The functional and presentation currency of AGL Energy Limited  and its Australian subsidiaries is Australian dollars. The interests of the consolidated entity in unincorporated joint  ventures are brought to account by recognising in the financial  statements under the appropriate categories, the consolidated  entity’s proportionate share of joint venture revenues, expenses,  assets and liabilities. The consolidated entity has certain contractual arrangements with  other venturers to engage in joint venture activities that do not  give rise to a jointly controlled entity. These arrangements involve  the joint ownership of assets dedicated to the purposes of the joint  venture. The assets are used to derive benefits for the venturers. An operating segment is a component of the consolidated entity  that engages in business activities from which it may earn revenues  and incur expenses, including revenues and expenses relating to  transactions with other components of the consolidated entity.  Operating segments are identified on the basis of internal reports  about components of the consolidated entity that are regularly  reviewed by the chief operating decision maker in order to allocate  resources to the segment and to assess its performance. The chief  operating decision maker has been identified as the Board of  Directors. Identifiable assets acquired and liabilities and contingent liabilities  assumed in a business combination are, with limited exceptions,  measured initially at their fair values at the acquisition date. On an  acquisition-by-acquisition basis, the consolidated entity recognises  any non-controlling interest in the acquiree either at fair value or at  the non-controlling interest’s proportionate share of the acquiree’s  net identifiable assets. Any excess of the consolidated entity’s share of the net fair value of  the identifiable assets, liabilities and contingent liabilities over the  cost of acquisition, after reassessment, is recognised immediately in  profit or loss. Unrealised gains on transactions between the consolidated entity  and an associate or a jointly controlled entity are eliminated to the  extent of the consolidated entity’s interest in the associate or  jointly controlled entity. Unrealised losses are also eliminated, but  only to the extent that there is no evidence of an impairment.