2. MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) The standard is not expected to have an impact on the recognition or measurement of assets, liabilities, income or expenses. However, it will result in changes to the presentation of the statement of profit or loss and other comprehensive income, including the introduction of defined categories for income and expenses (operating, investing, financing, income taxes and discontinued operations). The standard introduces two mandatory sub-totals in the statement: ‘Operating profit’ and ‘Profit before financing and income taxes’. The standard also introduces new disclosure requirements for ‘management-defined performance measures’ and provides enhanced guidance on the aggregation and disaggregation of information in the financial statements. The consolidated entity will adopt this standard from 1 January 2027 and it is expected that there will be a significant change to the layout of the statement of profit or loss and other comprehensive income. Amendments to IFRS 9 and IFRS 7 – Amendments to the Classification and Measurement of Financial Instruments The amendments are effective for annual reporting periods beginning on or after 1 January 2026, with early adoption permitted. The amendments to IFRS 9 clarify that a financial liability may be derecognised before the settlement date when it is settled using an electronic payment system, provided certain criteria are met. This exception does not apply to derecognition of financial assets settled via an electronic transfer, as it was clarified that financial assets are derecognised only when contractual rights to the cash flows from the financial assets expire, which is when cash is received. The amendments also provide clarification on how contractual cash flows characteristics of financial assets with environmental, social and corporate governance (ESG) and similar features should be assessed for classification purposes. In additions, the amendments modify the disclosure requirements in IFRS 7 relating to investments in equity instruments designated at fair value through other comprehensive income and introduce new disclosure requirements for financial instruments with contractual terms that may change the timing or amount of contractual cash flows on contingent events. The consolidated entity does not expect a material impact on the recognition or measurement of financial instruments, however, additional disclosures may be required upon adoption. Comparatives Where deemed necessary, the comparatives have been reclassified to achieve consistency with the current financial year. This includes prior year prepayments of $0.4 million which have been reclassified as other current assets. Principles of Consolidation Subsidiaries Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies. Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). At 31 December 2025, the presentation currency of the Group is Australian dollars and the functional currency is US dollars. Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at financial year-end exchange rates are recognised in profit or loss. Foreign operations/translation to presentation currency The results and financial position of operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows: – assets and liabilities are translated using the closing rate at the reporting date – revenues and expenses are translated using the average exchange rates, which approximate the rates at the dates of the transactions, for the period – all resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Neuren Pharmaceuticals Limited Annual Report 2025 37
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