Lion -Beer, Spirits & Wine (NZ) Limited & its …reportingnz.org/wp-content/uploads/2018/07/72-Lion-Beer...Lion • Beer, Spirits & Wine (NZ) Limited & its controlled entities Annual

Lion - Beer, Spirits & Wine (NZ)

Limited & its controlled entities

Financial statements for the 15 month period ended

31 December 2017

Lion • Beer, Spirits & Wine (NZ) Limited & its controlled entities

Annual financial statements

for the 15 month period ended 31 December 2017

Directors' responsibility statement

Independent Auditor's report

Consolidated statement of profit or loss and other comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the financial statements

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Lion - Beer, Spirits & Wine (NZ) Limited & its controlled entities

Directors' Responsibility Statement

The Directors are responsible for the preparation, in accordance with New Zealand law and generally accepted accounting practice, of financial statements which give a true and fair view of the financial position of Lion - Beer, Spirits & Wine (NZ) Limited

(the 'Company') and its controlled entities (the 'Group') as at 31 December 2017 and the results of their operations for the 15

month period ended 31 December 2017.

The Directors consider that the financial statements of Lion - Beer, Spirits & Wine (NZ) Limited & its controlled entities have been

prepared using accounting policies appropriate to the Company's and Group's circumstances, consistently applied and supported by reasonable and prudent judgements and estimates, and that all applicable New Zealand Equivalents to International Financial

Reporting Standards have been followed.

The Directors have responsibility for ensuring that proper accounting records have been kept which enable, with reasonable

accuracy, the determination of the financial position of Lion - Beer, Spirits & Wine (NZ) Limited & its controlled entities enable

them to ensure that the financial statements comply with the Financial Reporting Act 2013.

The Directors have responsibility for the maintenance of a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting. The Directors consider that adequate steps have been taken to safeguard

the assets of Lion - Beer, Spirits & Wine (NZ) Limited & its controlled entities to prevent and detect fraud and other irregularities.

The Directors are pleased to present the financial statements of Lion - Beer, Spirits & Wine (NZ) Limited & its controlled entities

for the 15 month period ended 31 December 2017.

No disclosure has been made pursuant to Section 211(1)(a) and (e) to (i) of the Companies Act 1993 following a unanimous decision by the shareholders in accordance with Section 211 (3) of the Act.

This annual report and the financial statements are dated 30 April 2018 and are signed in accordance with a resolution of the

directors made pursuant to section 211(1)(k) of the Companies Act 1993.

Director

Dated: 30 April 2018 Dated: 30 April 2018

Page 2

Page 3 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Independent Auditor’s Report To the Shareholders of Lion – Beer, Spirits & Wine (NZ) Limited

Report on the financial statements

Opinion In our opinion, the accompanying consolidated financial statements of Lion - Beer, Spirits & Wine (NZ) Limited (the Group) on pages 5 to 34:

i. present fairly in all material respects the Group’sconsolidated financial position as at 31December 2017 and its consolidated financialperformance and cash flows for the 15 monthsended on that date; and

ii. comply with generally accepted accountingpractice in New Zealand and New ZealandEquivalents to International Financial ReportingStandards Reduced Disclosure Regime.

We have audited the accompanying consolidated financial statements which comprise:

— the consolidated statement of financial positionas at 31 December 2017;

— the consolidated statement of profit or loss andother comprehensive income, changes in equity and cash flows for the 15 months then ended; and

— notes, including a summary of significantaccounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

Our firm has also provided other services to the Group in relation to taxation services. Subject to certain restrictions, partners and employees of our firm may also deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. These matters have not impaired our independence as auditor of the Group. The firm has no other relationship with, or interest in, the Group.

Use of this independent auditor’s report

This independent auditor’s report is made solely to the Company's Shareholders as a body. Our audit work has been undertaken so that we might state to the Company's Shareholders those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company's Shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed.

Page 4

Responsibilities of the Directors for the consolidated financial statements The Directors, on behalf of the Group, are responsible for:

— the preparation and fair presentation of the consolidated financial statements in accordance with generallyaccepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards Reduced Disclosure Regime);

— implementing necessary internal control to enable the preparation of a set of consolidated financialstatements that is fairly presented and free from material misstatement, whether due to fraud or error; and

— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters relatedto going concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objective is:

— to obtain reasonable assurance about whether the consolidated financial statements as a whole are freefrom material misstatement, whether due to fraud or error; and

— to issue an independent auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs NZ will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of these financial statements is located at the External Reporting Board (XRB) website at:

http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-7/

This description forms part of our independent auditor’s report.

The engagement partner on the audit resulting in this independent auditor's report is Charmaine Hopkins.

For and on behalf of

KPMG Sydney

30 April 2018


Consolidated statement of profit or loss and other comprehensive income


Revenue

Cost of sales Gross Profit

Other income Other revenue Sa!es and marketing expenses Distribution expenses Administration costs Finance costs Other expenses Profit before income tax expense

Income tax expense Profit for the period/year

Other comprehensive Income, net of income tax

Items that will never be reclassified to profit or loss

Remeasurements of defined benefit liability

Items that may be reclassified subsequently into profit or loss Effective portion of changes in fair value of cash flow hedges

Total comprehensive income for the periodlyear

Notes to the financial statements are included on pages 9 to 34.

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Note

2

2 2

2

3

19

15 months to 12 months to

31 Dec 2017 30 Sep 2016 NZ$'000 NZ$'000

757,411 560,980 (492,442) (354,015) 264,969 206,965

12,721 12,166 26,891 23,851 (95,058) (77,531) (51,390) (41,985) (32,049) (40,724) (23,736) (22,751) (4,359) (638) 97,989 59,353

(22,341) (20,609) 75,648 38,744

(232)

1,956 (3,824) 77,604 34,688


Consolidated statement of financial position

as at 31 December 2017

Current assets

Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non-current assets Trade and other receivables Other financial assets Investments Property, plant and equipment Goodwill and other intangible assets Biological assets Other non-current assets Total non-current assets Total assets Current liabilities

Trade and other payables Borrowings

Current tax payables

Provisions Other financial liabilities Total current liabilities Non-current liabilities Borrowings Deferred tax liabilities Provisions Other financial liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Retained earnings Total equity


Page 6

Note

4 5 6

7 8

9 11 10

12 13

3(b) 14 17

15 3(c) 16 17

20

21

31 Dec 2017 30 Sep 2016 NZ$'000 NZ$'000

572 520 212,391 118,433 183,771 204,756

4,824 3,284 401,558 326,993

9,156 9,508 302,179 298,938

750 490,083 470,446 156,909 162,658

21,877 4,956

964,033 963,427 1,365,591 1,290,420

149,238 173,225 1,336 17,887

6,405 2,423

22,498 19,257 2,285

179,477 215,077

485,121 446,293 18,268 17,940 7,084 8,421 8,492 8,427

518,965 481,081 698,442 696,158 667,149 594,262

414,794 414,794 115,029 113,073 137,326 66,395 667,149 594,262


Consolidated statement of changes in equity


Share Capital Revaluation Hedging

Reserve Reserve NZ$'000 NZ$'000 NZ$'000

Balance at 1 October 2015 414,794 429 3,203

Other Comprehensive Income

Effective portion of changes in fair value of cash flow hedges (3,824) Actuarial gain /(loss) on defined benefit plans (232) Defined benefit reserves transfer 433

Total other comprehensive income (665) (3,824)

Profit for the year Total comprehensive income for

the year (665) (3,824)

Balance at 1 October 2016 414,794 (236) (621)Change in Accounting Policy

1

Adjusted balance as at 1 October

2016 414,794 (236) (621)

Effective portion of changes in fair value of cash flow hedges 1,956

Total other comprehensive income 1,956

Profit for the period Total comprehensive income for

the period 1,956

Balance at 31 December 2017 414,794 (236) 1,335


Capital Retained Total

Reserve Earnings NZ$'000 NZ$'000 NZ$'000

113,930 27,218 559,574

(3,824)

(232) 433

433 (4,056)

38,744 38,744

39,177 34,688

113,930 66,395 594,262 4,717 4,717

113,930 61,678 589,545

1,956

1,956

75,648 75,648

75,648 77,604

113,930 137,326 667,149

1 On adoption of Amendments to NZ IAS 16 and NZ !AS 41, grapevine assets are reclassified to property, plant and equipment and subjectto depreciation. Changes to the net market value of harvested grapes net of picking costs, is recognized in profit or loss during the period of harvest.

Page 7


Consolidated statement of cash flows

For the 15 month period ended 31 December 2017

Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Income tax paid Net cash from operating activities

Cash flows from investing activities Payment for acquisition of investments in associates Amounts advanced to related parties Payment for property, plant and equipment Payment for intangible assets Net cash used in investing activities

Cash flows from financing activities Proceeds from borrowings Net cash from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period

Page 8

Note

28(b)

28(a)

15 months to 12 months to 31 Dec 2017 30 Sep 2016

NZ$'000 NZ$'000

800,031 662,256 (760,517) (565,740)

12,816 3,994 (17,000) (15,170)

35,330 85,340

(750) (3,270) (20,359)

(32,659) (43,948) (23,248)

(36,679) (87,555)

1,401 2,324 1,401 2,324

52 109

520 411 572 520




1. Significant accounting policies

Reporting entity

Lion - Beer, Spirits & Wine (NZ) Umited (the "Company") is a profit�orientated entity incorporated and domiciled in New Zealand and registered under the Companies Act 1993. Its prindpal products and services relate to the alcoholic beverage industry within New Zealand. The Company and Group is a reporting entity for the purposes of the Financial Reporting Act 2013 and its financial statements comply with this Act.

Statement of compliance and basis of preparation

The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand {"NZ GAAP"). They comply with the New Zealand equivalents to International Financial Reporting Standards - Reduced Disclosure Regime ("NZ IFRS RDR"), as a Tier 2 for-profit entity in accordance with XRB A1 Accounting Standards Framework (For-Profit Entities Update), and other applicable Financial Reporting Standards for profit-orientated Tier 2 entities.

These are the Group's first financial statements prepared in accordance with NZ IFRS RDR and NZ IFRS 1 First Time Adoption of New Zealand Equivalents to International Financial Reporting Standards have been applied. There are no material changes to the recognition and measurements of the Group's accounting policies as a result of the transition to NZ lFRS RDR, or impact on comprehensive income.

The Group has elected to report in accordance with Tier 2 for-profit Accounting Standards on the basis that it does not have public accountability and is not a large for-profit public sector entity.

The financial statements were authorised for issue by the Directors on 29 March 2018.

Basis of measurement

The Financial Report has been prepared on a historical cost basis, except for derivative financial instruments measured at fair value, biological assets measured at fair value less costs to sell (net market value) and the defined benefit asset measured as the net total of the plan assets, plus unrecognised past service cost and unrecognised actuarial losses, less unrecognised actuarial gains and the present value of the defined benefit obligation.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events ls reported.

Functional and presentation currency These consolidated financial statements are presented in New Zealand dollars, which is the Group's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

Use of estimates and judgements The preparation of financial statements in conformity with NZ IFRS RDR requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Judgements made by management in the application of NZ lFRS RDR requirements are disclosed, where applicable, in the relevant notes to the financial statements.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period In which the estimates are revised and in any future periods affected.

Change of year end

Lion Ply Ltd ("Lion") and its wholly owned subsidiaries ("Relevant Lion Companies") have obtained an order from the Australian Securities and Investments Commission ('ASIC") under section 340(1) of the Corporations Act 2001 (Cth) ("Corporations Act") to the effect that the Relevant Lion Companies do not have to comply with subsection 323D{2)(b) of the Corporations Act in respect of the financial period commencing 1 October 2016. This means for the Group, being Relevant Lion Companies is a 15 month financial period running from 1 October 2016 to 31 December 2017. Each following financial year is expected to run from 1 January to 31 December.

The conditions of the ASIC order are that: the Relevant Lion Companies must comply with Parts 2M.2, 2M.3 and 2M.4 of the Corporations Act in respect of the period from

October 2016 to 31 December 2017 ("Relevant Financial Year'') as if that period was their financial year; and

the Relevant Lion Companies must include a statement about the relief provided by the order in their financial report for the Relevant Financial Year.

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1. Significant accounting policies (cont'd)

Change of year end (cont'd) The Group as Lion's foreign incorporated wholly owned subsidiary has transitioned to a 31 December 15 month period end during this time period.

(a) Basis of consolidation

(i) Business combinations

The Group has applied the purchase method for the business combination undertaken during the 15 month period.

For every business combination, the Group identifies the acquirer, which is the combining entity that obtains control of the other combining

entities or businesses. Control is the power to govern the financial and operating policies of an entity or business so as to obtain benefits from its activities. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.

Measuring goodwill

The Group initially measures goodwill at the acquisition date as: - the fair value of the consideration transferred; plus - the recognised amount of any non-controlling interest in the acquiree; plus - if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less

- the fair value of the identifiable assets acquired and liabilities assumed.

After initial recognition, the acquirer measures goodwill at cost less any accumulated impairment losses. The cost of the business combination is the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree.

Transaction costs Directly attributable transaction costs that the Group incurs in connection with a business combination, such as legal fees and other professional and consulting fees are expensed as incurred.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial

statements from the date that control commences until the date that control ceases.

(iii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the reporting date.

Foreign currency differences arising on retranslation are recognised in profit or loss except for differences arising on the retranslation of a financial liability designated as a hedge of the net Investment in a foreign operation or qualifying cash flow hedges which are recognised in

other comprehensive income.

Page 10

Lion. Beer, Spirits & Wine (NZ) Limited & its controlled entities




(c) Financial instruments

(i) Financial assets and investments Recognition and initial investment

From 1 October 2016, the group classifies its financial assets in the following measurement categories:

- those to be measured subsequently at fair value through other comprehensive income (FVTOC!) or fair value through profit or loss (FVTPL); and - those to be measured at amortised cost

The classmcation depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.

Trade receivables are initially recognised at amortised cost.

A financial asset or financial liability (unless it is a trade receivable without a significant financing element) is initially measured at fair value, plus, for an item not measured at FVTPL, transaction costs Iha! are directly attributable to its acquisition or issue. A trade receivable without a significant financing element is initially measured at the transaction price.

Subsequent measurement

Classification Subsequent measurement

Financial assets at FVTPL Subsequently measured at fair value. Net gains and losses, Including any dividend, interest or dividend income are recognised in nrofit or loss.

Financial assets at amortised Subsequently measured at amortised cost, using effecli\.-e interest cost method. The amortised cost is reduced by impairment losses,

interest income, foreign exchange gains or losses, and impairment are recognised in profit or loss. Any gain or loss on derecognition is recoonised in orofit or loss.

Equity in\.-estments at Subsequently measured at fair value. Dividends are recognised as FVTOCI income in profit or loss unless the dividend clearly represents a

reco\.-ery of part of the cost of the in\.-estment. Other net gains and losses are recognised in OCI and are ne\.-er reclassified in profit or loss.

Impairment

The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVTOC!. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the company applies the simplified approach permitted by NZ IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of the ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

(ii) Financial liabilities Classification, subsequent measurement and gains and losses of financial liabilities

From 1 October 2016, financial liabilities are classified as measured at amortised costs or FVTPL. A financial liability is classified at FVTPL if it ls classified as held-for-trading, it is a derivative or ii is designated as such on initial recognition. Financial liabllities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

Page 11

Lion - Beer, Spirits & Wine (NZ) Limited & its controlled entities Notes to the financial statements for the 15 month period ended 31 December 2017


(ii) Financial liabilities (cont'd) The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. On derecognition of a financial liability, the difference between the carrying amount extingulshed and the consideration paid (Including any on-cash assets transferred or liabilities assumed) is recognised in profit or loss.

Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends to settle them on a net basis or to realise the asset and settle the liability simultaneously.

(iii) Derivatives and hedging activities

The Group holds derivative financial instruments to hedge its foreign currency, interest rate and commodity risk exposures. Derivatives are initially measured at fair value. Subsequent to their initial recognition, derivatives are measured at falr value, and changes therein are generally recognised in profit or loss.

At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.

Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in profit or loss.

When the hedged item is a non-financial asset, the amount recognised in equity is included in the carrying amount of the asset when the asset is recognised. In other cases the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting ls discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified to profit or loss.

(iv) Share capital

Ordinary shares Ordinary shares are classified as equity. Incremental costs dlrectly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Dividends on ordinary shares are recognised as a liability in the period in which they are declared.

(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and where applicable, the costs of dismantling and removing the items and restoring the slle on which they are located, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net in profit or loss. When revalued assets are sold, any related amount included in the revaluation reserve is transferred to retained earnings.

In the event that settlement of al! or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future lo their present value as at the date of the acquisition.

The cost of replacing a part of an !tern of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably.

Page 12





(d) Property, plant and equipment (cont'd)

(ii) Depreciation

Depreciation is calculated over the depreciable amount which is the cost of an asset less its residual value. Depreciation is recognised in

profit or loss on a straight line basis over the estimated useful life of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtaln

ownership by the end of the lease term. Leasehold Improvements are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

Buildings:

Plant and equipment:

Leasehold improvements:

Grapevines:

40 - 50 years

3 - 30 years

3- 10years

20 years

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

(e) Intangible assets

Research and development costs

Expenditure on research activities, undertaken with the prospect of gaining new scienUfic or technical knowledge and understanding, is

recognised in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use

or sell the asset.

Capitallsed development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition

of an intangible asset and their fair value can be measured reliably.

Trademarks/Brands/Licences

Separately acquired trademarks, brands and licences with an indefinite economic life are stated at cost less impairment. Cost includes purchase price and any expenditure that is directly attributable to the cost of preparing the asset for its intended use.

Licences and brands with a finite life are recorded at cost less accumulated amortisation and lmpairment. Internally generated brands are not recognised as intangible assets.

Other intangible assets other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and

accumulated impairment losses.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.

Amorlisafion Amortisation is based on the cost of an asset less its residual value. Amortisation fs recognised in profit or loss on a straight line basis over

the estimated useful lives or term of contract of intangible assets, other than goodwill, from the date that they are available for use. The

estimated useful lives for the current and comparative periods are as follows:

Trademarks, brands/licences:

Computer software: Other contractual arrangements:

over the term of the contract, or to a maximum 5 years for finite brands

3 - 5 years over the term of the contract

Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

(f) Biological assets

Biological assets are measured at fair value less costs to sell, with any changes therein recognised in profit or loss. Costs to sell include all costs that would be necessary to sell the assets, including transportation costs.

Page 13





(f) Biological assets (cont'd) Changes to the net market value of harvested grapes net of picking costs, is recognised in profit or loss during the period of harvest. Vineyard operating costs incurred in maintaining the vines as well as any operating lease payments are expensed as incurred.

(g) Leased assets

Leases are classified as finance leases when the Group takes on substantially al! the risks and rewards associated with ownership of theasset. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of theminimum lease payments. Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.

All other !eases are classified as operating leases and these are not accounted for on the Group's statement of financial position. Vineyard operating costs incurred in maintaining the vines as well as any operating lease payments are expensed as incurred.

(h) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in, first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. !n the case of manufactured inventories and work in progress, cost includes materials, a portion of direct labour, and an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business !ess the estimated costs of completion and selling expenses.

The cost of harvested grapes transferred from grapevines is the fair value less costs to sell at the date of harvest.

(i) Impairment of assets

Non-financial assets The carrying amount of the Group's non-financial assets other than biological assets, inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. lf any such indication exists, then the assets recoverable amount is estimated. Goodwill and intangible assets are reviewed annually for impairment.

The recoverable amount of an asset or cash-generating unit ("CGU") is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated post-tax future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The fair value less costs to sell is calculated with reference to the realisable market value of operating assets under their highest and best use, in an arm's length transaction between knowledgeable, willing parties.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGU). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGU's to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reportingpurposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

The Group's corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the asset belongs.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGU's are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amount of the other assets in the unit on a pro rata basis, but not below the other assets' recoverable amount.

Any previous impairment loss in respect of goodwill cannot be reversed. Any previous impairment loss in respect of other non-monetary assets may be reversed in profit or loss only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no Impairment loss had been recognised.

Page 14





(i) Employee benefits

(i) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(ii) Defined benefit plan

A defined benefit plan is a post-employment benefit p!an other than a defined contribution plan. The fund provides benefits based on length of service or membership and salary of the member at or near retirement. The Group recognises all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive income and all expenses related to defined benefit plans in employee benefits in profit or loss. The defined benefit plan was wound up during the current period.

(iii) Termination benefits

Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to present value.

(iv) Other long-term employee benefits

The Group's net obligation in respect of long-term employee benefits other than defined benefit plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs. Where appropriate that benefit is discounted to determine its present value.

(v) Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonuses if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(k) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated

reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Non-current provisions are determined by discounting the expected future cash flows al a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

Restructuring

A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring p!an and the restructuring either has commenced or has been announced publicly. Future operaUng losses are not provided for.

(I) Revenue

Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured al the fair value of the conslderation received or receivable, net of returns, trade discounts and volume rebates.

Revenue is stated exclusive of both indirect taxes (on beer, wines and spirits) and Goods and Services Tax {GST).

Revenue is measured based on the consideration specified in a contract with the customer and excludes amounts collected on behalf of third parties. Revenue is recognised when it transfers control over a product or service to a customer.

Page 15





(I) Revenue (cont'd)

Interest revenue

Interest revenue is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

(m) Lease payments

Payments made under operating leases are recognised in profit or loss on a straight line basis over the term of the lease. Lease incentives are recognised on a straight line basis over the term of the lease as a reduction in rental expenses.

(n) Income tax

Income tax expense comprises current and deferred lax. Current and deferred lax is recognised as an expense or income in profit or lossexcept when it relates to a business combination, or items recognised dlreclly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustments to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilitles in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for al! taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the consolidated entity is able to control the reversal of the temporary differences and it is probable thal the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving

rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

(o) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax ("GST'), except where the amount of GSTincurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of anasset or as part of an item of expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as a current asset or liability in the balance sheet.

(p) Finance costs

Finance costs comprise interest expense on borrowings.

(q) Reserves

Revaluation reserve

The properties revaluation reserve arises on the revaluation of land and buildings. When revalued land or buildings are sold, the portion of

the properties revaluation reserve that relates to that asset is transferred directly to retained earnings. Items of other comprehensive income included in the properties revaluation reserve will not be reclassified subsequently to profit or loss.

Page 16




1. Significant accounting policies (cont'd}

(q) Reserves (cont'd) Hedging reserve

The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are recognised and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the Group's accounting policy.

Capital reserve

The capital reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. There is no policy of regular transfer. As the capital reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the capita! reserve reserve will not be reclassified subsequently to profit or loss.

(r) Application of new and revised accounting standards

The Group has applied the following Standards and Amendments relevant to the Group and effective for the current 15 month period:

Annual improvements 2014-2016 cycle: Amendments to NZ IFRS 12 Accounting for Acquisitions of Interests in Joint Operations - Amendments to NZ IFRS 11 Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to NZ IAS 12 Disclosure Initiative - Amendments to NZ IAS 1 Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to NZ IAS 16 and NZ IAS 38 Equity method in separate financial statements - Amendments to NZ IAS 27 Agriculture: Bearer Plants - Amendments to NZ IAS 16 and NZ IAS 41.

The adoption of these amendments, apart from Amendments to NZ IAS 16 and NZ !AS 41 did not have any impact on the current period or any prior period and is not likely to affect future periods.

As a result of the adoption of Amendments to NZ IAS 16 and NZ IAS 41, grapevines were reclassified from biological assets to property, plant and equipment and subject to depreciation. The produce from grapevines (grapes} is not within scope of this amendment and will continue to be fair valued at each reporting date. The impact of adopting this amendment was not material to the Group.

The Group has early adopted the following new accounting standards: NZ IFRS 9 Financial Instruments NZ IFRS 15 Revenue from Contracts with Customers

(i) Agriculture: Bearer Plants -Amendments to NZ IAS 16 and NZ IAS 41

Under Amendments to NZ IAS 16 and NZ IAS 41, grapevines were reclassified from biological assets, plant and equipment and subject to depreciation. The effect on the income statement in the financial year ending 30 September 2016 will be reflected through current period retained earnings.

Adjusted Reported Reclassification balance as balance as at to property, Recognised at 1 30 September plant and in retained October

NZ$ '000 2016 equinment earninus 2016

Bio lo a ical assets 21 877 118,841 I 13,036) -

Prop ertv, p I ant and eauinment 774 685 18,841 - 793,526

(ii) NZ \FRS 9 Financial Instruments

The Group has early adopted NZ IFRS 9 Financial lnstrumentswith initial application date of 1 October 2016. The requirements of NZ IFRS 9 represent a significant change from NZ lAS 39 Financial Instruments: Recognition and Measurement.

Page 17





(r) Application of new and revised accounting standards (cont'd)

(ii) NZ IFRS 9 Financial Instruments (cont'd)

The key changes to the Group's accounting policies resulting from adoption of NZ IFRS 9 are summarised below:

Classification of Financial Assets and Liabilities NZ IFRS 9 contains three principal categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVTOCI) and fair value through profit or loss {FVTPL). The classification of financial assets under NZ IFRS 9 is generally based on the business model in which a financial asset is measured and its contractual cash flow characteristics, replacing previous categories of held to maturity, loans and receivables and available for sale under NZ IAS 39. The adoption of NZ lFRS 9 did not have a significant impact on the Group's accounting pollcies for financial liabilities.

Impairment of financial assets

NZ IFRS 9 replaces the 'incurred loss' model in NZ lAS 39 with an 'expected credit toss' (EGL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVTOCI, but not to investments in equity instruments. Under NZ IFRS 9, credit losses are recognised earlier than under NZ !AS 39.

Hedge accounting

Under the requirements of NZ !FRS 9, the Group ensures that hedge accounting relationships are aligned with its risk management objectives and strategy and to apply a more qualitative and forward�look!ng approach to assessing hedge effectiveness. The Group only designates the fair value of the spot element of the forward exchange contract as the hedging instrument in cash flow hedging relationships. The effective portion of changes in fair value of hedging instruments is accumulated in a cash flow hedge reserve as a separate component of equity.

Transition Changes in accounting policies resulting from the adoption of NZ IFRS 9(2014) have been applied retrospectively, except for the following:

- The Group assessed that there were no material differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of NZ IFRS 9 and accordingly, no adjustments were recognised in opening retained earnings.

- The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application: • The determination of the business model within which a financial asset is held • The designation and revocation of previous designations of certain financial assets and financial liabilities as

measured under FVTPL • The designation of certain investments in equity instruments not held for trading as at FVfOCI.

- All hedging relationships designated under NZ lAS 39 as at 30 September 2016 met the criteria for hedge accounting under NZ IAS 39 at 1 October 2016 and are therefore regarded as continuing hedge relationships.

The following table shows the original measurement categories under NZ IFRS 9 and the new measurement categories under NZ IFRS 9 for the classes of financial assets which are affected by the change in accounting standard as at 1 October 2016. There were no changes to the classes of financial liabilities on adoption of NZ IFRS 9.

Original classification under NZ Financial asset IFRS 39 New classification under NZ IFRS 9

Fair value through Other Eauitv instruments Available for sale Comprehensive Income

(iii) NZ IFRS 15 RevenueNZ IFRS15 was issued as a new standard for the recognition of revenue. This will replace NZ IAS 18 Revenue and introduces a single, principles based five-step model to be applied to all contracts with customers. The underlying principle is that an entity will recognise revenueto depict the transfer of goods and seivices to the customer in an amount that reflect the consideration to which the company expects to beentitled in exchange for services.

Accounting for costs ta fulfil a contract

All contract acquisition costs under the new accounting standard are capitalised if the entity is expected to recover these costs. Given that beer rights historically guarantee the Group a minimum amount of volume which is to be purchased by the customer over the term of the contract, and continue lo do so under NZ IFRS 15, they are expected to be recovered. Retrospectively, beer rights therefore were capitalised as costs to fulfil a contract following the adoption of NZ IFRS 15 and included in contract assets on the balance sheet at 31 December 2017. The Group re-classified the presentation of beer rights in the statement of financial position from intangible assets to other non-current assets. The amortisation expense associated with beer rights will now be recorded as a reduction in revenue.

Page 18





(iii) NZ IFRS 15 Revenue (cont'd)

In summary, the following adjustments were made to the amounts recognise in the balance sheet at the date of initial application (1 October 2016).

Reported Reclassification Recognised

Adjusted

NZ$'OOO balance as at

to non�current in retained balance as at

30 September a=ts earnings

1 October

2016 2016

Intangibles 162,658 (2,047) - 160,611

Other non-current assets - 2,047 - 2,047

Financing components

The group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the group does not adjust any of the transaction prices for the time

value of money.

(s) Accounting p olicies not yet adopted by the Group

NZ IFRS 16 Leases

NZ IFRS 16 replaces existing !eases guidance, which previously recognised leases which had been previously been classified as' operating leases' under the principles of NZ IAS 17 leases. The standard is effective for annual periods beginning on or after 1 January 2019. The Company has no plans to adopt NZ I FRS 16 before its effective date.

NZ IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing

its right to use the underlying asset and a lease liability representing its obligation to make !ease payments. There are recognition exemptions for short-term leases and leases of [ow-value items. Lessor accounting remains similar to the current standard - i.e. lessors continue to

classify leases as finance or operating leases.

The Group has completed an initial assessment of the potential impact on Its consolidated financial statements but has not yet completed its detailed assessment. The actual impact of applying NZ !FRS 16 on the financial statements in the period of initial application will depend on future economic conditions, including the Group's borrowing rate at 1 January 2019, the composition of the Group's tease portfolio at that date, the Group's latest assessment of whether it will exercise any lease renewal options and the extent to which the Group chooses to use practical expedients and recognition exemptions.

So far, the most significant impact identified is that the Group will recognise new assets and liabilities for its operating leases. In addition, the nature of expenses related to those leases will now change as NZ IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. No significant impact is expected for the Group's finance leases.

Page 19




2. Profit from operations

Revenue Revenue from operations consisted of the following items:

Revenue from contracts with customers

Profit before income tax Profit before income tax has been arrived at after crediting the following significant gains and losses from operations:

Other income:

Gain on disposal of property, plant and equipment Gain on revaluafon of biological assets and harvested grapes Net foreign exchange gains Other income

Other revenue:

Interest income Sale of by products Beer system sales other

Profit before income tax has been arrived at after charging the following expenses:

Finance costs:

Interest on loans Other interest expense Tota\ interest expense

Depreciation of non-current assets (refer note 9)

Amortisation of non"current assets

Operating /ease rental expenses:

Lease payments

Employee benefit expense:

Defined contribution plan Other employee benefits

15 months to 31 Dec 2017

NZ$'000

757,411 757,411

50

1,500 1,236 9,935

12,721

15,611 1,082 3,925 6,273

26,891

(23,163)

(573) (23,736)

(31,810)

(3,996)

{8,336)

(1,827) (100,837) (102,664)

12 months to 30 Sep 2016

NZ$'000

560,980 560,980

946 3,850 1,018 6,352

12,166

15,556 979

2,589 4,727

23,851

(22,725) (26)

{22,751)

{22,029)

(3,726)

(6,303)

(1,474) (74,488) {75,962)

As a result of the Group's early adoption of NZ !FRS 15, contract assets are recognised for the Group's beer rights with unwinding of !he contract asset reducing revenue on a straight-line basis. The Group has no contract liabilities meeting the definllion within NZ IFRS 15.

Contract assets Asset recognised from costs incurred to fulfill a contract Unwinding of costs incurred to fulfill a contract Net contract assets recorded in other current assets

Page 20

31 Dec 2017 NZ$'000

3,341 (1,294) 2,047

30 Sep 2016 NZ$'000

Lion - Beer, Spirits & Wine {NZ) Limited & its controlled entities



3. Income taxes

(a) Income tax recognised in the statement of profit or loss and other comprehensive income

Tax expense comprises:

Current tax expense

Adjustments recognised in the current period in relation to the current tax of prior years

Deferred tax expense relating to the origination and reversal of temporary differences

Tota\ tax expense

The prima facie income tax expense on pre-tax accounting profit from operations reconciles lo the income tax expense in the financial statements as follows:

Profit from operations

Income tax expense calculated al 28% Non-deductible expenses

Non-assessable income

Other items

(Over)/under provision of income lax in previous year

(b) Current tax assets and liabilities

Current tax payable:

Income tax payable

(c) Deferred tax balances

Deferred tax liabilities comprise:

Temporary differences

Movements in deferred tax assets:

Opening balance at 1 October

Under/(over) provision of income lax in previous year

Debitedl(Credited) to hedging rese1Ve

(Charged)/credited to the statement of profit & loss and other comprehensive income

Closing balance at 31 December

Movements in deferred tax liabilities:

Opening balance at 1 October

Under provision of income tax in previous year

(Debiled)/credited to hedging reserve

(Charged)/credited to the statement of profit & loss and other comprehensive income

Closing balance at 31 December

Net closing balance at 31 December

Page 21

15months to

31 Dec 2017

NZ$'000

28,626

(4,953)

(1,332)

22,341

97,989

27,437

585

(372)

(356)

(4,953)

22,341

31 Dec 2017

NZ$'000

6,405

6,405

31 Dec 2017

NZ$'000

(18,268)

(18,268)

10,970

679

{286)

(2,719)

8,644

28,910

2,170

(117)

(4,051)

26,912

(18,268)

12 months to

30 Sep 2016

NZ$'000

17,750

3,020

(161)

20,609

59,353

16,619

767

203

3,020

20,609

30 Sep 2016

NZ$'000

2,423

2,423

30 Sep 2016

NZ$'000

(17,940)

(17,940)

11,914

(4,291)

883

2,464

10,970

26,150

1,068

(611)

2,303

28,910

(17,940)




3. Income taxes (cont'd)

(d) Imputation credit account balances

Balance at beginning of the period

Taxation paid

Balance al end of \he period

31 Dec2017

NZ$'000 103,911

17,000 120,911

Lion - Beer, Spirits & Wine (NZ) Limited forms an imputation group for which it is the nominated company. The imputation group consists of the following enlllies:

- Lion - Beer, Spirits & Wine (NZ) Limited - lion Liquor Retail Limited - Lion Finance (New Zealand) Limited - The Emerson Brewing Company Limited - Panhead Custom Ales Limited

The New Zealand imputation credit account has a year end of 31 December 2017.

4, Current trade and other receivables

Thlrd Party trade receivables

Allowance for doubtful debts

Trade receivables from related parties (refer note 24)

Other receivables

31 Dec 2017

NZ$'000

206,519

(146) 206,373

5,112 906

212,391

30 Sep 2016

NZ$'000 88,741

15,170 103,911

30 Sep 2016

NZ$'000

106,792

(293) 106,499

6,793

5,141 118,433

The allowance for doubtful debts in relation to trade receivables is provided for based on estimated irrecoverable amounts determined by reference to current customer circumstances and past default experience. ln determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date the credit was initially granted up to the reporting date.

In the prior year, the impairment of trade receivables was assessed based on the incurred loss model. Individual receivables which were known lo be uncol!ectible were written off by reducing the carrying amount directly. The other receivables were assessed collectively, to determine whether there was objective evidence that an impairment had been incurred but not yet been identified. For these receivables, the estimated impairment losses were recognised in a separate provision for impairment. The group considered that there was evidence of impairment if any of the following indicators presented in Note 1(i). The Group has assessed that on adoption of the new IFRS NZ 9 standard, there was no material impact to the allowance for doubtful debts.

Other financial assets at amortised cost include loans to related parties and other receivables. The Group has assessed no impact to these as a result of the adoption of NZ IFRS 9.

Page 22

Lion - Beer, Spirits & Wine (NZ) Limited & its controlled entities Notes to the financial statements


5. Current inventories

Raw materials and packaging

Work in progress

Finished goods

Provision for obsolete inventory

Current inventory expected to be realised Within 12 months

Current inventory expected to be realised in greater than 12 months

Amounts recognised in profit of loss

31 Dec 2017 30 Sep 2016

NZ$'000 NZ$'000

18,763 15,253

59,854 71,462

109,307 124,703

(4,153) (6,662)

183,771 204,756

150,168 164,622

33,603 40,134

183,771 204,756

During the current period, NZ$2.1m was recognised in profit or loss from write-down of inventory lo net realisable value {2016: NZ$1.5m).

6. other current assets

31 Dec 2017 30 Sep 2016

N2$'000 NZ$'000

Prepayments 4,485 3,278

Derivative contracts 339 6

4,824 3,284

7. Non-current trade and other receivables

31 Dec 2017 30 Sep 2016 NZ$'000 NZ$'000

Trade advances 9,156 9,508

9,156 9,508

8. Other non-current financial assets

31 Dec 2017 30 Sep 2016 NZ$'000 NZ$'000

Other related parties {refer note 24) 302,043 298,929

Derivative contracts 136 9

302,179 298,938

Page 23




9, Property, plant and equipment

Gross carrying amount Balance as at 1 October 2016 Transfer from biological assets 1

Adjusted balance as at 1 October 2016 Addillons Category transfers Disposals Transfers to other asset classes Balance as at 31 December 2017

Accumulated depreciation and impairment Balance as at 1 October 2016 Disposals Depreciation expense Category transfers Balance as at 31 December 2017

Net book value As at 30 September 2016 As at 31 December 2017

Land and

Buildings

NZ$'000 202,424

202,424

32,527 (3,178) (1,563)

230,210

22,927

(1,333) 4,042

(3,150) 22,486

179,497 207,724

Plant and Capital Work

Equipment in Progress Total

NZ$'000 NZ$'000 NZ$'000 498,058 74,203 774,685

18,841 18,841 516,899 74,203 793,526

32,659 32,659 25,730 (58,257)

(51,727) (54,905) (55,047) (348) {sa,sssl435,855 48,257 714,322

281,312 304,239 (53,572) (54,905) 27,768 31,810

{53,755) (56,905) 201,753 224,239

216,746 74,203 470,446 234,102 48,257 490,083

1 On adoption of Amendments to NZ lAS 16 and NZ IAS 41, grapevine assets are reclassified to property, plant and equipment and subject to depreciation. Changes to the net market value of harvested grapes net of picking costs, is recognized in profit or loss during the period of harvest.

10. Biological Assets

Gross carrying amount� Vines

Balance at 1 October 2016 Additions Gain arising from changes in fair value less estimated point of sale costs

Change in Accounting Policy1

Transfers to property, plant and equipment Balance at 31 December 2017

31 Dec 2017 NZ$'000

21,877

(3,036) (18,841)

30 Sep 2016 NZ$'000

18,713 128

3,036

21,877

1 On adoption of Amendments to NZ IAS 16 and NZ !AS 41, grapevine assets are reclassified to property, plant and equipment and subject to depreciation. Changes to the net market value of harvested grapes net of picking costs, is recognized in profit or loss during the period of harvest.

Page 24




11. Goodwill and other intangible assets

Distribution Goodwill Brands Beer Rights Software Total

Rights

NZ$'000 N2$'000 N2$'000 NZ$'000 NZ$'000 NZ$'000 Gross carrying amount Balance as at 1 October 2016 877 20,886 488,033 3,341 34,573 547,710 Additions 348 348 Disposals (15,160) (15,160) Transfers (54) (54) Reclassification of beer rights to non-current 3,341) 3,341) Balance as at 31 December 2017 877 20,886 488,033 19,707 529,503

Accumulated amortisation and

impairment Balance as at 1 October 2016 877 355,703 1,294 27,178 385,052 Amortisation expense 3,996 3,996 Disposals (15,160) (15,160) Reclassification of beer rights to non-current 1,294) 1,294) Balance as at 31 December 2017 877 355,703 16,014 372,594 Net book value As at 30 September 2016 20,886 132,330 2,047 7,395 162,658

As at 31 December 2017 20,886 132,330 3,693 156,909

Page 25




12. Current trade and other payables

Trade payables

Trade payables due to: Third parties

Other related parties (refer note 24) Other payables and accruals

31 Dec 2017

NZ$'000

54,279

1,951

93,008 149,238

30 Sep 2016

NZ$'000

51,788

30,723 90,714

173,225

No interest is charged on the trade payables unless the amounts payable fall overdue, at the discretion of the vendor. The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

13. Current borrowings

31 Dec 2017 30 Sep 2016

NZ$'000 NZ$'000

Unsecured

Bank loans 868

Other short term debt 1,336 3,155

Loans from:

Related parties (refer note 24) 13,864 1,336 17,887

14. Current provisions

31 Dec 2017 30 Sep 2016

NZ$'000 NZ$'000

Employee benefits 18,372 13,687 Restructuring and termination costs (refer note 18) 2,609 3,195 Make good provision 362 1,219

other 1 155 1,156 22,498 19,257

Page 26

Lion• Beer, Spirits & Wine (NZ) Limited & its controlled entities



15. Non-current borrowings

Unsecured

Loans from: Related parties {refer note 24)

16. Non-current provisions

Employee benefits

Lease incentive liability

17. Other financial liabilities

Current other financial liabilities - related parties

Non-current Third party other financial liabilities Other financial liabilities - related parties

18. Provision for restructuring

Balance at 1 October 2015 Additional provisions recognised Reductions arising from payments Balance at 1 October 2016 Additional provisions recognised Reductions arising from payments Balance at 31 December 2017

Current (refer note 14)

31 Dec 2017

NZ$'000

485.121 485.121

31 Dec 2017

NZ$'000

807

6,277 7.084

31 Dec 2017

NZ$'000

8.492

8,492

30 Sep 2016

NZ$'000

446.293 446.293

30 Sep 2016

NZ$"000

801

7.620 8,421

30 Sep 2016

N2$'000

2,285

7.841 586

10,712

Restructuring

and termination

costs (i)

NZ$'000

3,869 1,000

(1,674) 3,195 1.300

(1.886) 2,609

2.609 2.609

(i) The provision for restructuring and termination costs represents the present value of the management's best estimate of the costsdirectly and necessarily caused by the restructuring that are not associated with the ongoing activities of the entity, includingtermination benefits.

Page 27



For the 15 month period ended 31 December2017

19. Defined benefit superannuation plans

The information contained below is applicable to both the Company and the Consolidated group.

Superannuation plan Lion - Beer, Spirits & Wine (NZ) limited contributed to a defined benefit superannuation plan for qualifying employees. The fund provides benefits based on length of service or membership and salary of the member at or near retirement.

The defined benefit plan was wound up during the current period.

The following sets out details in respect of the defined benefit fund.

Employer Contributions Employer contributions have currently ceased because the fund was wound up during the current period.

The defined contribution plan expense recognised for the period ending 31 December 2017 was nil (2016: $0.45m). The defined benefit plan was wound up during the current period. The defined benefit plan service cost recognised for the period ending 31 December 2017 was nil (2016: $0.Sm).

Amounts recognised in the statement of comprehensive income

Amounts recognised in income in respect of these defined benefit plans are as follows: Net actuarial losses Current service cost Interest cost on benefit obligation Net benefit expense

20. Share capital

15,239,900 fully paid ordinary shares (2016: 15,239,900)

31 Dec 2017 NZ$'000

31 Dec 2017 NZ$'000

414,794

30 Sep 2016 NZ$'000

(232) 466 211 445

30 Sep 2016 NZ$'000

414,794

Changes to the Companies Act in 1993 abolished the authorised capital and par value concept in relation to share capital from 1 July 2004. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value.

21. Retained earnings

Balance at beginning of the period Prior period adjustment as a result of change in accounting policy Net profit attributable to members of the parent entity Defined benefit reserves transfer Balance at end of the period

22. Commitments for expenditure

Capital expenditure commitments: Plant and equipment

Page 28

31 Dec 2017 NZ$'000

66,395 (4,717) 75,648

137,326

31 Dec 2017 N2$'000

30,825 30,825

30 Sep 2016 NZ$'000

27,218

38,744 433

66,395

30 Sep 2016 NZ$'000

29,786 29,786




23. Leases

Company as a lessee

Operating leases

Non-cancellable operating tease paymentsNot longer than 1 year Longer than 1 year and not longer than 5 years longer than 5 years

31 Dec 2017 N2$'000

9,915 24,311

5,074

39,300

30 Sep 2016 NZ$'000

13,849 23,824

5,728

43,401

Operating !eases relate to vineyards, warehouses, office space and plant and equipment. Some leases include terms providing an option to renew the !ease. These leases generally contain market review clauses to adjust terms and conditions upon renewal. There are no options to purchase the relevant assets on expiry of the !ease.

24. Related party disclosures

(a) Parent entity

The immediate parent of Lion - Beer, Spirits & Wine (NZ) Limited is Lion Nathan Pty Limited.

The ultimate parent of Lion - Beer, Spirits & Wine (NZ) Limited is Kirin Holdings Company, Limited.

(b) Transactions with related parties

Transactions involving the parent entity

All transactions between Lion - Beer, Spirits & Wine (NZ) and its parent entity were entered into on an arm's length basis. As al 31 December 2017, a net receivable balance of $8,973,595 related to the recharges of corporate costs incurred by Lion - Beer, Spirits & Wine (NZ) recharged to the parent entity (2016: $679,790).

Other transactions involving related parties

Transactions with entities under common control include: purchase and sale of inventory, payment of management fees and royalties, borrowing of funds and payment of interest, lease of premises and payment of rent and the distribution of profits. All transactions with related parties were entered into on an arm's length basis.

Lion Nathan Ply Limited has a 50% interest in the Associated Bottlers Company limited. Lion - Beer, Spirits & Wine (NZ) Limited purchased $10,936,494 of raw materials from the Associated Bottlers Company Limited (2016: $8,033,015) on normal trading terms, resulting in a payable of $nil (2016: $nil) at period end. Lion - Beer, Spirits & Wine {NZ) also received funding from the Associated Bottlers Company Limited, on which interest expense of $34,671 {2016: $36,207) was charged and a payable of $1,150,000 (2016: $1,150,000) resulted at period-end.

Lion- Beer, Spirits & Wine (NZ) Limited paid $7,405 in royalties to Kirin Holdings Company Limited during 2017 (2016: $9,877).

Four Roses Distillery LLC ("Four Roses") is a wholly-owned subsidiary of Kirin Holdings Company Limited. During the 15 month period ended, Lion - BSW (NZ) purchased $3,383,059 (2016: $2,959,291} of bourbon from Four Roses resumng in a payable $nil (2016: $393,500) at period-end.

Lion - Beer, Spirits & Wine (NZ) Limited purchased $1,625,813 (2016: $455,815) of beer from Little Creatures {a wholly owned subsidiary of Lion Pty Ltd) during 2017, resulting in a payable of $8,676 (2016: $96,432) at period-end.

Lion - Beer, Spirits & Wine (NZ) Limited sold $43,317,200 of beer to Lion Liquor Retail (a who!ly owned subsidiary of Lion Pty Ltd) during 2017 {2016: $33,827,322), resulting in a receivable of $5,677,363 {2016: $5,475,655) at year-end. Lion - Beer, Spirits & Wine {NZ) Limited sold $2,068,070 (2016: $8,474,448) of beer to wholly owned subsidiaries of Lion Pty Ltd during 2017, resulting in a receivable of$nil (2016: $1,249,264) at period-end.

Lion - Beer, Spirits & Wine (NZ) Limited paid rent to Great Northern Developments Limited for use of its land and also provided administrative services to Great Northern Developments. During the 2017 financial year, Lion - Beer, Spirits & Wine (NZ) had a payable of $nil {2016: $30,151,141) at period-end.

Mercian Corporation ("Mercian") is a wholly-owned subsidiary of Kirin. Lion - Beer, Spirits & Wine {NZ) sells wine to Mercian on normal trading terms. In 2017, these sales amounted to $409,106 (2016: $229,358), resulting in a receivable from Mercian of $22,797 (2016: $nil) at period-end.

Page 29




24. Related party disclosures (cont'd)

Balances outstanding with related parties as at 31 December 2017 include:

Due from related parties Trade receivables from immediate parent company Trade receivables due from other related parties

Current assets Non-current assets Total due from related parties

Due to related parties Loans to immediate parent company Trade payables to other related parties Loans to other related parties Other financial liabilities to related parties

Current llabilities Non-current liabilities Total due to related parties

31 Dec 2017 30 Sep 2016 NZ$'000 NZ$'000

5,112 6,793

302,043 298,929

307 155 305 722

5,112 6,793

302,043 298,929

307 155 305 722

4

1,951 30,723

485,121 460,153

2,871 487072 493 751

1,951 46,872 485,121 446,879 487,072 493,751

Details of related party balances disclosed within current trade and other receivables; other non current financial assets; current trade and other payables; and current borrowings at year end are:

Terms/price under which related party transactions were entered into

Trade amounts owing between related parties are payable under normal commercial terms. No related party debts have been written off or forgiven during the year.

Interest is charged annually on the outstanding lntercompany loan balances with related parties at an average interest rate of 3.80% for 2017 (2016: 4.70%). During the financial year, Lion - Beer, Spirits & Wine (NZ) limited received interest of $10, 986

(2016: $15,522,133) from loans to related parties, and paid interest of $7,944,752 (2016: $22,725,018) to related parties.

25. Subsequent events

There have been no material subsequent events since 31 December 2017.

26. Financial Instruments

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition and the basis of measurement applied in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

Page 30




26. Financial Instruments (cont'd)

(a) Capital risk management framework

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders though the optimisation of the debt and equity balance.

The capital structure consists of debt which includes the borrowings disclosed in notes 13 and 15, issued capital disclosed in note 20 and retained earnings disclosed in note 21.

The Group has a commitment to disciplined capital management. The capital management program allows the Group to maintain appropriate gearing levels and capital structure, and is consistent with its operating cash flow profile and investment grade rating.

(b) Categories of financial assets and liabilities

As at 30 September 2016 Assets Cash and cash equivalents Trade receivables Derivative financial instruments Other financial assets Total financial assets Non-financial assets Total assets

Liabilities Cash and cash equivalents Trade and other payables Borrowings Finance lease liability Total financial liabilities Non-financial liabilities Total liabilities

As at 31 December 2017 Assets Cash and cash equivalents Trade receivables Derivative financial instruments other financial assets Total financial assets Non-financial assets Total assets

Liabilities Cash and cash equivalents Trade and other payables Borrowings Other financial liabilities Total financial liabilities Non-financial liabilities Total liabilities

Loans and receivables

NZ$'000

520 127,941

298,938 427,399

Loans and receivables

NZ$'000

572 221,547

302,179 524,298

Derivatives designated as cash

flow hedging Financial liabilities

instruments at amortised cost NZ$'000 NZ$'000

15

15

Derivatives

designated as cash

868 173,225 463,312

10,712 648,117

flow hedging Financial liabilities instruments at amortised cost

NZ$'000 NZ$'000

475

475

1,120 149,238 485,337

8,492 644,187

Page 31

Total NZ$'000

520 127,941

15 298,938 427,414 863,006

1,290,420

868 173,225 463,312

10,712 648,117 48,041

696,158

Total NZ$'000

572 221,547

475 302,179 524,773 840,818

1,365,591

1,120 149,238 485,337

8,492 644,187

54,255 698,442




{c) Risk management

The Group is exposed to variety of financial risks in the normal course of its business activities which includes foreign currency risk, commodity price risk and interest rate risk. The Group is party to derivative instruments that are used to mitigate or reduce the exposure to these risks. Risk management is predominately controlled by a central treasury department under policies approved by the Board of Directors. The central treasury department identifies, evaluates and hedges financial risks in close co-operation with the group's operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. The effective portion of the change in the fair value of the hedging instrument is deferred into the cash flow hedge reserve through OCI and will be recognised in profit or loss when the hedged item affects profit or loss. This will effectively result in recognising inventory at the fixed foreign currency rate for the hedged purchases.

(i) Currency risk

The Group is party to a variety of foreign currency risk management instruments, such as currency swaps and forward foreign exchange contracts. These instruments are used to hedge firm commitments or highly probable forecast transactions such as foreign currency denominated receipts resulting from revenue denominated in foreign currencies, proceeds on anticipated asset sales, payments for raw materials and finished goods, capital equipment, liabilities and assets.

The group treasury's risk management policy is to hedge between 60% and 100% of forecast foreign currency cash flows for inventory purchases up to three years in the relevant currency, subject to a review of the cost of implementing each hedge. For the year ended 31 December 2017, approximately 80% of forecast inventory purchases were hedged in respect of foreign currency risk for 2018. At 31 December 2017, 100% of forecasted US$ inventory purchases during 2018 qualified as 'highly probable' forecast transactions for hedge accounting purposes.

The Group uses foreign exchange forward contracts to hedge its exposure to foreign currency risk. Under the Group's policy the critical terms of the forward exchange contracts must align with the hedged items. The Group designates the spot and forward components of forward contracts as the hedging instrument. The changes in the forward element of the foreign exchange forward contracts are deferred in the costs of hedging reserve and recognised against the related hedged transaction when it occurs.

The spot component of forward contracts is determined with reference to relevant spot market exchange rates. The differential between the contracted forward rate and the spot market exchange rate is defined as the forward points.

(ii) Interest rate risk

The objective of the interest rate risk management policy is to obtain lower overall interest costs and to achieve a more stable and predictable interest rate. The Group's policy is to manage any exposure to fixed borrowings from external lenders. At reporting date the Group did not hold any fixed interest rate borrowings.

(iii) Commodity price risk

The Group has exposure to global aluminium and sugar commodity prices which are quoted in United States Dollars. Commodity swaps have been used to mitigate or reduce the Group's exposure to adverse movements in the global spot prices for these commodities. At the reporting date, no aluminium derivative instruments of this nature were held as the terms of agreement with suppliers have been amended to have certain quantities of aluminium fixed at a local currency price to reduce the Group's risk to fluctuating commodity and foreign currency prices.

(iV) Hedging gains/losses recognised in profit or loss

There were no reclassifications from the cash flow hedge reserve to profit or loss during the period in relation to the foreign exchange forward contracts.

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method is to assess effectiveness.

Page 32




26. Financial Instruments (cont'd)

(c) Risk management (cont'd)

(iv) Hedging gains/losses recognised in profit or loss (cont'd)

The effects of the foreign exchange forward contracts on the Group's financial position and performance are as follows:

Carrying amount (liability) Hedge Ratio Change in discounted spot value of outstanding hedging instruments since 1 October Change in value of hedged item used to determine hedge effectiveness

27. Investment in subsidiaries and equity accounted investments

Subsidiaries owned as at 31 December 2017:

Name

Emerson Brewing Company Limited Panhead Custom Ales Limited

Equity accounted investment: Goodbuzz Beverage Co. Limited

28. Notes to the statement of cash flows

Percentage holding at year end

31 Dec 2017 30 Sep 2016 100% 100% 100% 100%

25%

Principal Activity

Profit-orientated Entity Profit-orientated Entity

Manufacturer

Company 31 Dec 2017 30 Sep 2016

NZ$'000 NZ$'000 475.0 15.0

1 :1

460.0 (460.0)

Balance Date

31 Dec 31-Dec

31-Mar

1 :1

(3,153.0) 3,153.0

Country of Incorporation

New Zealand New Zealand

New Zealand

(a) Reconciliation of cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks and investments inmoney market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial period asshown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:

Cash and cash equivalents

{b) Reconciliation of profit for the period to net cash flows from operating activities Profit for the period Add/(deduct) non-cash items: Depreciation and amortisation of non-current assets (Notes 9 & 11) Gain on revaluation of biological assets and harvested grapes {Note 2) Gain on disposal of property, plant and equipment

Changes in net assets and liabilities during the financial period: Increase in current receivables Decrease/(increase) in current inventories (lncrease)/decrease in other current assets (Decrease)/increase in payables Increase in current tax liabilities Increase in deferred tax liabilities Decrease/(increase) in provisions Net cash from operating activities

Page 33

31 Dec 2017 NZ$'000

572

31 Dec 2017 NZ$'000

75,648

35,806 (1,500)

(50)

(93,606) 19,485 (1,336) (5,331) 3,982

328 1,904

35,330

30 Sep 2016 NZ$'000

520

30 Sep 2016 NZ$'000

38,744

25,755 (3,850)

(946)

(5,968) (6,809) 3,582

31,339 549

3,704 (760)

85,340

Lion • Beer, Spirits & Wine (NZ) Limited & its controlled entities



29. Auditors Remuneration

The auditor of Lion - Beer, Spirits & Wine Limited is KPMG, Sydney. Fees for services tendered to the Company by the auditors for the year are borne by Lion Pty Limited, the ultimate Australian parent entity.

30. Corporate Directory

Company Number: WN33986

Registered Office

27 Napier Street, Freemans BayAucklandTelephone (+64) 800 835 554

Holding Company: Lion Nathan Pty Limited

Ultimate Holding Company:

Kirin Holdings Company Limited

Auditors:KPMG, Sydney

Solicitors:Russell McVeagh

Bankers: Westpac Banking Corporation

Page 34

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