(b) Principles of Consolidation Note 1. Summary of Significant Accounting Policies  (continued) The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Karoon Gas Australia Ltd as at 30 June 2011 and the results of all subsidiaries for the financial year then ended. A subsidiary is any entity controlled by Karoon Gas Australia Ltd whereby it has the power to control the financial and operating  policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently  exercisable or convertible are considered when assessing whether the Group controls another entity. Interests in subsidiaries are set out in Note 21. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting  involves allocating the cost of the business combination to the fair value of the assets acquired, liabilities and contingent liabilities  assumed at the date of acquisition. Acquisition related costs are expensed as incurred and the associated cash flows are classified  as operating activities in the consolidated statement of cash flows. All subsidiaries have a financial year end of June, with the exception of: Karoon Petróleo & Gas SA; KEI (Peru 112) Pty Ltd,  Sucursal del Peru; and KEI (Peru Z38) Pty Ltd, Sucursal del Peru. These subsidiaries and branches have a financial year end of  December in accordance with relevant Brazilian and Peruvian tax and accounting regulations respectively. Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with the policies applied by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.  Unrealised losses are also eliminated, unless the transaction provides evidence of the impairment of the asset transferred. Where subsidiaries have entered or left the Group during the financial year, their operating results are included or excluded from  the date control was obtained or until the date control ceased respectively. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision  maker. The chief operating decision maker, who is responsible for assessing performance and in determining the allocation of resources of the operating segments, has been identified as the Executive Chairman and the Executive Director/Exploration  Director. Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that  economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria  must also be met before revenue is recognised: Dividend revenue is recognised when the right to receive a dividend has been established. Interest income is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent  in the relevant financial asset. Revenue from the sale of goods is recognised upon the delivery of goods to the buyer and all significant risks and rewards of  ownership are transferred. Revenue from the rendering of a service is recognised upon the delivery of the service. All revenue is  stated net of the amount of GST. (c) Segment Information (d) Revenue Sales Revenue Dividend Revenue Interest Income Karoon Gas Australia Ltd  Annual Report 2011 38 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011