NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONT 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n) Borrowings For the three months ended 31 March 2013 Borrowings are included as non-current liabilities except for those with maturities less than 12 months from the reporting date, which are classified  as current liabilities� We recognise borrowings initially on the trade date, which is the date we become a party to the contractual provisions of the instrument� We  derecognise borrowings when our contractual obligations are discharged or cancelled or expire� All borrowings are initially recognised at fair value plus any transaction costs that are directly attributable to the issue of the instruments and are  subsequently measured at amortised cost� Any difference between the final amount paid to discharge the borrowing and the initial borrowing  proceeds (including transaction costs) is recognised in the income statement over the borrowing period using the effective interest method�  Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the  effective interest rate� The effective interest rate amortisation is included in finance costs in the income statement� 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 we incur in connection with the borrowing of funds� We recognise provisions when: When we expect some or all of a provision to be reimbursed the reimbursement is recognised as a separate asset but only when the reimbursement  is virtually certain� The expense relating to any provision is presented in the income statement net of any reimbursement� We accrue liabilities for wages and salaries, including non-monetary benefits and annual leave in respect of employees’ services up to the reporting  date�  Annual leave liabilities expected to be settled within 12 months of the reporting date are measured using the remuneration rates that are expected  to be paid when the obligation is settled and are accounted for as a short-term employee benefit� Where the liability is not expected to be settled  within 12 months of the reporting date it is accounted for as a long-term employee benefit and the future liability is first estimated and then  discounted to present value� We calculate present value using rates based on government bonds with similar due dates to the estimated future  cash outflows�  Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable�  We accrue and measure the liability for long service leave as the present value of expected future payments to be made in respect of services  provided by employees up to the reporting date using the projected unit credit method� We give consideration to the expected future wage and  salary levels, experience of employee departures, and periods of service� Expected future payments are discounted using market yields at the  reporting date on national government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows�  We provide benefits to our employees (including key management personnel) in the form of share based payments, whereby employees render  services in exchange for shares or rights over shares (equity settled transactions)�  We recognise an expense for all share based remuneration determined with reference to the fair value at the grant date of the equity instruments� We calculate the fair value using the Black Scholes model or other applicable models� The fair value is charged to the income statement over the  relevant vesting periods, adjusted to reflect actual and expected levels of vesting� In valuing equity-settled transactions, no account is taken of any  performance conditions, other than conditions linked to the price of the shares of Australian Agricultural Company Limited (market conditions)� (o) Provisions  Employee benefits (i) Wages, salaries, annual leave and sick leave (ii) Long service leave (p) Share-based payment transactions Equity settled transactions we have 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�  64 Australian Agricultural Company Limited