2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (V) TRADE AND OTHER PAYABLES (W) INTEREST-BEARING LOANS AND BORROWINGS (X) BORROWING COSTS (Y) PROVISIONS (Z) LEASES (i) Operating Leases (ii)Finance Leases 67  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 Leases are classified at their inception as either operating or finance leases based on the economic substance of  the agreement so as to reflect the risks and benefits incidental to ownership. Provisions are measured at the present value of management’s best estimate of the expenditure required to  settle the present obligation at the reporting date. The discount rate used to determine the present value reflects  current market assessments of the time value of money and the risks specific to the liability. The increase in the  provision resulting from the passage of time is recognised in finance costs. Provisions are recognised when the Consolidated Entity has a present obligation (legal or constructive) as a  result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to  settle the obligation and a reliable estimate can be made of the amount of the obligation. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an  asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised  as part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs  consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowings are classified as current liabilities unless the Consolidated Entity has the unconditional right to defer  settlement of the liability for at least 12 months after the reporting date. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost  using the effective interest rate method. All loans and borrowings are initially recognised at the fair value of the consideration received less directly  attributable transaction costs. Trade payables and other payables are carried at amortised cost and due to their short-term nature they are not  discounted. They represent liabilities for goods and services provided to the Consolidated Entity prior to the end  of the financial year that are unpaid and arise when the Consolidated Entity becomes obliged to make future  payments in respect of the purchase of these goods and services. The amounts are unsecured and usually paid  within 30 days of recognition. The minimum lease payments of operating leases, where the lessor effectively retains substantially all of  the risks and benefits of ownership of the leased item, are recognised as an expense in the statement of  comprehensive income on a straight-line basis over the lease term. Contingent rentals are recognised as an expense in the financial year in which they are incurred. Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased  item to the Consolidated Entity are capitalised at the inception of the lease at the fair value of the leased  property or, if lower, at the present value of the minimum lease payments.