CSL Ltd Annual Report 2021

Note 2: Revenue and Expenses Recognition and measurement of revenue Revenue is recognised when the Group satisfies a performance obligation by transferring control of the promised good or service to a customer at an amount that reflects the consideration to which an entity expects to be entitled in exchange for the goods or services. Further information about each source of revenue from contracts with customers and the criteria for recognition follows. Sales: Revenue is earned (constrained by variable considerations, which include returns, discounts, rebates and allowances) from the sale of products and services. Sales are recognised when performance obligations are either satisfied over time or at a point in time. Generally the supply of product under a contract with a customer will represent the satisfaction of a performance obligation at a point in time, which is when control of the product passes to the customer, or generally upon shipment. Significant estimates on Seqirus sales returns is performed in respect of the influenza season expected to be subject to return. The estimate is performed with inputs including historical returns and customer sales data amongst other factors. For contracts where the customer controls the plasma (tolling contracts) and the Group provides fractionation services – the Group recognises revenue over time as the performance obligations are satisfied based upon a percentage of completion of our fractionation services. Royalties : Revenue from licensees of CSL intellectual property reflect a right to use the intellectual property as it exists at the point in time in which the licence is granted. Where consideration is based on sales of product by the licensee, it is recognised when the customer’s subsequent sales of product occurs. License revenue: Revenue from licensees of CSL intellectual property reflects the transfer of a right to use the intellectual property as it exists at the point in time in which the licence is transferred to the customer. Consideration is highly variable and estimated using the most likely amount method. Subsequently, the estimate is constrained until it is highly probable that a significant revenue reversal will not occur when the uncertainty is resolved. Revenue is recognised as or when the performance obligations are satisfied. Influenza pandemic facility reservation fees: Revenue from governments in return for access to influenza manufacturing facilities in the event of a pandemic. Contracts are time based and revenue is recognised progressively over the life of the relevant contract, which aligns to the performance obligations being satisfied. Revenue from contracts with customers includes amounts in total operating revenue except other income. Expenses 2021 US$m 2020 US$m Finance costs 158.7 142.4 Unrealised foreign currency losses on debt 12.1 8.4 Total finance costs 170.8 150.8 Depreciation and amortisation of fixed assets 399.4 347.3 Amortisation of intangibles 95.9 72.5 Impairment expenses 94.3 – Total depreciation, amortisation and impairment 589.6 419.8 Write-down of inventory to net realisable value 208.3 189.5 Employee benefits expense 2,781.6 2,528.1 Recognition and measurement of expenses Total finance costs: Includes interest expense & borrowing costs, including interest expense related to the AASB 16 lease liabilities, which have been disclosed separately in Note 11(d). Non-AASB 16 related interest expense and borrowing costs are recognised as an expense when incurred, except where finance costs are directly attributable to the acquisition or construction of a qualifying asset where they are capitalised as part of the cost of the asset. Capitalised interest for qualifying assets during the year ended 30 June 2021 was $7.3m (2020: $15.8m). Interest-bearing liabilities and borrowings are stated at amortised cost. Any difference between the borrowing proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the borrowing period using the effective interest method. Unrealised foreign currency losses on debt is related to the EUR350m and CHF400m of Senior Unsecured Notes in the US Private Placement market (see Note 11). The foreign currency risk related to this debt was partially hedged as a cash flow hedge in 2021 and 2020. Depreciation, amortisation and impairment: Depreciation and amortisation of fixed assets includes depreciation of fixed assets and right-of use assets, further details can be found in Note 8. Refer to Note 7 for full details on amortisation of intangible assets. The impairment expenses for the year ended 30 June 2021 were relating to the impairment of intangible assets and fixed assets, refer to Note 7 and Note 8 for details. Write-down of inventory to net realisable value: Included in Cost of Sales in the Statement of Comprehensive Income. Refer to Note 4 for details of inventories. Employee benefits expense: Refer to Note 5 for further details. Goods and Services Tax (GST) and other foreign equivalents: Revenues, expenses and assets are recognised net of GST, except where GST is not recoverable from a taxation authority, in which case it is recognised as part of an asset’s cost of acquisition or as part of the expense. CSL Limited Annual Report 2020/21 114 Notes to the Financial Statements