USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

STATEMENT OF DIRECTORS

In the opinion of the directors, the consolidated financial statements of USG Boral Building Products Pte. Limited and its subsidiaries as set out on pages 4 to 68 are drawn up so as to give a true and fair view of the state of affairs of the group as at June 30, 2014 and of the results, changes in equity and cash flows of the group for the financial period from January 14, 2014 (date of incorporation) to June 30, 2014 and at the date of this statement, there are reasonable grounds to believe that the group will be able to pay its debts when they fall due.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

/s/ Matthew Franklin Hilzinger

Matthew Franklin Hilzinger

/s/ Jennifer Flynn Scanlon

Jennifer Flynn Scanlon

Date: February 10, 2015

1

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF

USG BORAL BUILDING PRODUCTS PTE. LIMITED

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of USG Boral Building Products Pte. Limited (the “company”) and its subsidiaries (the “group”), which comprise the consolidated statement of financial position of the group as of June 30, 2014, and the related consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows of the group for the period from January 14, 2014 (date of incorporation) to June 30, 2014, and the related notes to the consolidated financial statements.

Directors’ Responsibility for the Consolidated Financial Statements

The directors of the company are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the group’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

2

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF

USG BORAL BUILDING PRODUCTS PTE. LIMITED

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of USG Boral Building Products Pte. Limited and its subsidiaries as of June 30, 2014, and the results of their operations and their cash flows for the period from January 14, 2014 (date of incorporation) to June 30, 2014 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ DELOITTE

DELOITTE

AF 0080

Chartered Accountants

February 10, 2015

3

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

June 30, 2014

Note US$’000

ASSETS
Current assets
Cash and cash equivalents	6	117,077
Trade and other receivables	7	108,589
Prepayments		4,283
Tax recoverable		2,695
Derivative financial instruments	8	310
Inventories	9	51,494
Total current assets		284,448
Non-current assets
Other receivables	7	9,902
Property, plant and equipment	10	528,689
Intangible assets	11	112,136
Goodwill	12	444,613
Investment in associates	14	54,434
Deferred tax assets	15	11,818
Total non-current assets		1,161,592
Total assets		1,446,040
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables	16	145,295
Provisions	17	641
Loans and borrowings	18	23,149
Tax liabilities		8,030
Derivative financial instruments	8	115
Total current liabilities		177,230

(Forward)

4

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

June 30, 2014

Note US$’000

Non-current liabilities
Retirement benefit obligations	19	11,575
Provisions	17	42
Loans and borrowings	18	50,490
Deferred tax liabilities	15	28,425
Total non-current liabilities		90,532
Capital, reserves and non-controlling interests
Share capital	20	1,022,944
Reserves	21	49,768
Retained earnings		7,249
Equity attributable to owners of the company		1,079,961
Non-controlling interests		98,317
Total equity		1,178,278
Total liabilities and equity		1,446,040

See accompanying notes to the consolidated financial statements.

5

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND

OTHER COMPREHENSIVE INCOME

Period from January 14, 2014 (date of incorporation) to June 30, 2014

Note US$’000

Revenue	22	246,708
Cost of sales		(185,907)
Gross profit		60,801
Other income		377
Finance income		1,780
Distribution expenses		(11,092)
Administrative expenses		(34,284)
Finance costs	23	(2,664)
Share of loss of associates	14	(866)
Profit before income tax		14,052
Income tax expense	24	(4,869)
Profit for the financial period	25	9,183
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on pension		98
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations		15,294
Gains on cash flow hedges		377
Other comprehensive income for the financial period, net of tax		15,769
Total comprehensive income for the financial period		24,952

Profit attributable to:
Owners of the company	7,249
Non-controlling interests	1,934
	9,183
Total comprehensive income attributable to:
Owners of the company	22,826
Non-controlling interests	2,126
	24,952

See accompanying notes to the consolidated financial statements.

6

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Period from January 14, 2014 (date of incorporation) to June 30, 2014

Share capital	Other capital reserve	Translation reserve	Hedging reserve	Pension reserve	Retained earnings	Attributable to owners of the company	Non -controlling interests	Total
US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000

Balance at January 14, 2014 (date of incorporation)     (Note 20)	-	-	-	-	-	-	-	-	-
Issue of share capital (Notes 20 & 21)	1,022,944	34,191	-	-	-	-	1,057,135	-	1,057,135
Acquisition of subsidiaries	-	-	-	-	-	-	-	100,560	100,560
Profit for the financial period	-	-	-	-	-	7,249	7,249	1,934	9,183
Other comprehensive income for the financial period	-	-	15,102	377	98	-	15,577	192	15,769
Total	-	-	15,102	377	98	7,249	22,826	2,126	24,952
Dividends paid by a subsidiary (Note 26)	-	-	-	-	-	-	-	(4,369)	(4,369)
Balance at June 30, 2014	1,022,944	34,191	15,102	377	98	7,249	1,079,961	98,317	1,178,278

See accompanying notes to the consolidated financial statements.

7

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

Period from January 14, 2014 (date of incorporation) to June 30, 2014

Note US$’000

Operating activities
Profit for the financial period		9,183
Adjustments for:
Income tax expense recognised in profit or loss		4,869
Share of loss of associates		866
Depreciation of property, plant and equipment		6,619
Amortisation of intangible assets		3,192
Gain on disposal of property, plant and equipment		(21	)
Unrealised foreign exchange gain		(356	)
Allowance for doubtful debts		1,549
Allowance for doubtful debts no longer required		(387)
Finance costs		2,664
Retirement benefits expenses		1,924
Write-down of value in inventories		1,749
Finance income		(1,780	)
Operating cash flows before movements in working capital		30,071
Inventories		544
Trade and other receivables		(25,539	)
Prepayments		189
Provisions		568
Trade and other payables		35,736
Cash generated from operations		41,569
Income tax refunded		5,298
Retirement benefit obligations paid		(1,034	)
Net cash from operating activities		45,833
Investing activities
Interest received		1,780
Purchase of property, plant and equipment		(14,935	)
Additions of intangible assets		(31	)
Cash acquired from acquisition of subsidiaries	27	96,541
Proceeds from sale of property, plant and equipment		2,559
Net cash from investing activities		85,914

(Forward)

8

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

Period from January 14, 2014 (date of incorporation) to June 30, 2014

Note US$’000

Financing activities
Interest paid		(2,664)
Repayments of loans and borrowings		(24,527)
Proceeds from loans and borrowings		13,435
Dividend to a non-controlling interests		(4,369)
Net cash used in financing activities		(18,125)
Net increase in cash and cash equivalents		113,622
Cash and cash equivalents at January 14, 2014 (date of incorporation)		-
Effects of exchange rate changes on the balance of cash held in foreign currencies		3,455
Cash and cash equivalents at the end of financial period	6	117,077

See accompanying notes to the consolidated financial statements.

9

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

1 GENERAL

The company (Registration No. 201401466N) is incorporated in Singapore with its principal place of business and registered office at 8 Boon Lay Way, #08-14, Singapore 609964. The consolidated financial statements are expressed in United States Dollars, and all values are rounded to the nearest thousand (US$’000), unless otherwise indicated.

The principal activity of the company is that of an investment holding company.

On February 28, 2014, the group acquired all the subsidiaries as detailed in Note 13 to the consolidated financial statements as a result of the joint venture arrangements between USG Corporation, a company incorporated and listed in the United States of America, and Boral Limited, a company incorporated and listed in Australia.

The group is the leading multi-country plasterboard producer in Asia, with manufacturing sites in China, Thailand, Indonesia, South Korea, Vietnam, India, Malaysia, Philippines and Oman. In addition to plasterboard manufacturing plants, the group also has ceiling tile plants, metal roll forming lines and facilities for the production of jointing compounds and industrial plasters throughout the region, as well as a gypsum mine in Oman.

The principal activities of the subsidiaries are disclosed in Note 13 to the consolidated financial statements.

The consolidated financial statements of the group for the financial period from January 14, 2014 (date of incorporation) to June 30, 2014 were authorised for issue by the Board of Directors on February 10, 2015

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING - The consolidated financial statements have been prepared in accordance with the historical cost basis, except as disclosed in the accounting policies below, and are drawn up in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”).

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

10

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the group takes into account the characteristics of the asset or liability which market participants would take into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 Shared-based Payments, leasing transactions that are within the scope of IAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

ADOPTION OF NEW AND REVISED STANDARDS – On January 14, 2014 (date of incorporation), the group has adopted all applicable new and revised IFRSs and Interpretations issued by the IASB that are relevant to its operations and effective for since the date of incorporation

At the date of authorisation of these consolidated financial statements, the following IFRS and amendments to IFRS that are relevant to the group were issued but not effective:

IFRS 9        Financial Instruments⁵ 

IFRS 15        Revenue from Contracts with Customers⁴ 

Amendments to IFRS 10, IFRS 12        Investment Entities: Applying the Consolidation

and IAS 28        Exception³ 

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture³ 

Amendments to IFRS 11 Accounting for Acquisition of Interests in Joint Operations³ 

11

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Amendments to IAS 1 Disclosure Initiative³ 

Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation³ 

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants³ 

Amendments to IAS 19 Defined Benefit Plans: Employee Contributions¹ 

Amendments to IAS 27 Equity Method in Separate Financial Statements³ 

Amendments to IFRSs Annual Improvements to IFRSs 2010 – 2012 Cycle² 

Amendments to IFRSs Annual Improvements to IFRSs 2011 – 2013 Cycle¹ 

Amendments to IFRSs Annual Improvements to IFRSs 2012 – 2014 Cycle³ 

¹    Effective for annual periods beginning on or after July 1, 2014

²    Effective for annual periods beginning on or after July 1, 2014, with limited exceptions

³    Effective for annual periods beginning on or after January 1, 2016

⁴    Effective for annual periods beginning on or after January 1, 2017

⁵  Effective for annual periods beginning on or after January 1, 2018, with earlier application permitted

The directors anticipate that the adoption of the above IFRS and amendments to IFRS in future periods will not have a material impact on the financial statements of the group in the period of their adoption.

BASIS OF CONSOLIDATION - The consolidated financial statements incorporate the financial statements of the company and entities (including structured entities) controlled by the company and its subsidiaries. Control is achieved when the company:

• Has power over the investee;

• Is exposed, or has rights, to variable returns from its involvement with the investee; and

• Has the ability to use its power to affect its returns.

The company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The company considers all relevant facts and circumstances in assessing whether or not the company’s voting rights in an investee are sufficient to give it power, including:

• The size of the company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• Potential voting rights held by the company, other vote holders or other parties;

12

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

• Rights arising from other contractual arrangements; and

• Any additional facts and circumstances that indicate that the company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the company obtains control over the subsidiary and ceases when the company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the date the company gains control until the date when the company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the group’s accounting policies.

Changes in the group’s ownership interests in existing subsidiaries

Changes in the group’s ownership interests in subsidiaries that do not result in the group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the company.

When the group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

13

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Non-controlling interests in subsidiaries are identified separately from the group’s equity therein. The interest of non-controlling shareholders that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured (at date of original business combination) either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another standard. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the company.

BUSINESS COMBINATIONS - Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the group to the former owners of the acquiree, and equity interests issued by the group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39 Financial Instruments: Recognition and Measurement, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

14

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Where a business combination is achieved in stages, the group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under the IFRS are recognised at their fair value at the acquisition date, except that:

• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

• Liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment awards transactions with share-based payment awards transactions of the acquirer in accordance with the method in IFRS 2 Share-based Payment at the acquisition date; and

• Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year from acquisition date.

FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised on the group’s statement of financial position when the group becomes a party to the contractual provisions of the instrument.

15

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees and points paid or received that from an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective interest basis for debt instruments.

Financial assets

All financial assets are recognised and de-recognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value plus transaction costs, except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss”, “held-to-maturity investments”, “available-for-sale” financial assets and “loans and receivables”. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as “loans and receivables”. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate method, except for short-term receivables when the effect of discounting is immaterial.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract such as default or delinquency in interest or principal payments; or

16

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Derecognition of financial assets

The group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the group retains substantially all the risks and rewards of ownership of a transferred financial asset, the group continues to recognise the financial asset and also recognises a collateralized borrowing for the proceeds received.

17

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Financial liabilities and equity instruments

Classification as debt or equity

Financial liabilities and equity instruments issued by the group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.  Equity instruments are recorded at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities are classified as either financial liabilities “at fair value through profit or loss” or other financial liabilities.

Other financial liabilities

Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest rate method, with interest expense recognised on an effective yield basis.

Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs (see below).

Derecognition of financial liabilities

The group derecognises financial liabilities when, and only when, the group's obligations are discharged, cancelled or they expire.

18

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Derivative financial instruments and hedge accounting

The group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risk, including foreign exchange forward contracts. Further details of derivative financial instruments are disclosed in Note 8 to the financial statements.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The group designates certain derivatives as hedges of foreign currency risk of firm commitments (cash flow hedges).

A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Hedge accounting

The group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other gains and losses.

19

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Amounts recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the statement of profit or loss and other comprehensive income as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and when the forecast transaction is ultimately recognised in profit or loss, such gains and losses are recognised in profit or loss, or transferred from equity and included in the initial measurement of the cost of the asset or liability as described above. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was accumulated in equity is recognised immediately in profit or loss.

LEASES - Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee

Assets held under finance leases are recognised as assets of the group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the group’s general policy on borrowing costs (see below). Contingent rentals are recognised as expenses in the periods in which they are incurred.

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

20

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

INVENTORIES - Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Mineral reserves are depreciated by the unit of productions over the estimated production from mining. Depreciation of other property, plant and equipment is charged so as to write off the cost of assets, other than properties under construction, over their estimated useful lives, using the straight-line method on the following bases:

Leasehold land        50 - 60 years

Buildings        20 - 50 years

Machinery        5 - 25 years

Office equipment, fixtures and fittings        5 - 7 years

Office renovation        10 years

Vehicles        3 - 10 years

The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

21

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

GOODWILL - Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

If, after reassessment, the group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary or the relevant cash generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

INTANGIBLE ASSETS - Intangible assets acquired separately are reported at cost less accumulated amortisation (where they have finite useful lives) and accumulated impairment losses. Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives are not amortised. Each period, the useful lives of such assets are reviewed to determine whether events and circumstances continue to support an indefinite useful life assessment for the asset.

IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS EXCLUDING GOODWILL - At the end of each reporting period, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

22

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

ASSOCIATES - An associate is an entity over which the group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the group’s interest in that associate (which includes any long-term interests that, in substance, form part of the group’s net investment in the associate) are not recognised, unless the group has incurred legal or constructive obligations or made payments on behalf of the associate.

Investments in associates are accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investments in associates, any excess of the cost of the investment over the group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

23

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

The requirements of FRS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the group’s investments in associates. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with FRS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with FRS 36 to the extent that the recoverable amount of the investment subsequently increases.

Any excess of the cost of acquisition over the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the group, profits and losses are eliminated to the extent of the group’s interest in the relevant associate.

PROVISIONS - Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

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 reimbursement will be received and the amount of the receivable can be measured reliably.

A restructuring provision is recognised when the group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

24

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

REVENUE RECOGNITION - Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Sale of goods

Revenue from the sale of goods is recognised when all the following conditions are satisfied:

• The group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• The group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• The amount of revenue can be measured reliably;

• It is probable that the economic benefits associated with the transaction will flow to the entity; and

• The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

BORROWING COSTS - Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

RETIREMENT BENEFIT COSTS - Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes in various countries, are dealt with as payments to defined contribution plans where the group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

25

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. Remeasuement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:

• Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);

• Net interest expense or income; and

• Remeasurement.

The group presents the first two components of defined benefit costs in profit or loss. Curtailment gains and losses are accounted for as past service costs.

The retirement benefit obligations recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service cost.  Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plan.

A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.

EMPLOYEE LEAVE ENTITLEMENT - Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.

INCOME TAX - Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the statement of profit and loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the company and subsidiaries operate by the end of the reporting period.

26

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such 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.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity, respectively), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.

27

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - The individual financial statements of each group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the group are presented in United States Dollars, which is the functional currency of the company and the presentation currency for the group’s consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rate of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income.

Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.

Exchange differences on transactions entered into in order to hedge certain foreign currency risks are described in the hedge accounting policies above.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the group’s foreign operations are expressed in United States Dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of translation reserve.

28

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

On the disposal of a foreign operation (i.e. a disposal of the group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the group are reclassified to profit or loss. Any exchange differences that have previously been attributed to non-controlling interests are derecognised, but they are not reclassified to profit or loss.

In the case of a partial disposal (i.e. no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. of associates or jointly controlled entities that do not result in the group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

CASH AND CASH EQUIVALENTS IN THE STATEMENT OF CASH FLOWS - Cash and cash equivalents in the statement of cash flows comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the group’s accounting policies, which are described in Note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

29

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the group’s accounting policies

The directors are of the opinion that there are no instances of application of judgments which are expected to have a significant effect on the amounts recognised in the consolidated financial statements.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Depreciation of property, plant and equipment

The cost of property, plant and equipment except for freehold land and capital work-in-progress, is depreciated on a straight-line basis over the assets’ useful lives. The group reviews the remaining useful lives of property, plant and equipment at the end of each reporting period and ensures consistency with previous estimates and patterns of consumption of the economic benefits that embodies the items in these assets. Changes in useful lives of property, plant and equipment may result in revision of future depreciation charges.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The carrying amount of the group’s goodwill amounted to US$444,613,000. Further details are disclosed in Note 12.

Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Significant directors’ judgement is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future tax planning strategies. As of June 30, 2014, the unused tax losses and of the group is disclosed in Note 15.

30

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)

Impairment of trade receivables

The group assesses at the end of each reporting period whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the group considers factors such as the probability of insolvency or significant difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. While the estimation process includes historical data and analysis, there is a significant amount of judgement applied in selecting inputs and analysing the results produced to determine the impairment allowances. The carrying amounts of the group’s trade receivables at the end of the reporting period are disclosed in Note 7.

Allowance for inventories obsolescence

The group's policy for allowance for inventories obsolescence is based on the aging analysis of inventories and on management's judgement on the realisability of the inventories. At the end of each reporting period, management is of the opinion that the allowance for inventories obsolescence is adequate and not excessive. The carrying amount of group's inventories at June 30, 2014 were approximately US$51,494,000, net of allowance for inventories of US$3,972,000.

Employee benefits

The group’s defined benefit plan is determined based on actuarial valuation. The actuarial valuation involves making assumptions regarding the discount rate, future salary increases and attrition rates. Due to the long term nature of the defined benefit plan, such estimates are subject to significant uncertainty. Information on the actuarial technique and assumptions used are disclosed in Note 19.

31

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

(a) Categories of financial instruments

The following table sets out the financial instruments as at the end of the reporting period:

	US$’000
Financial assets
Loans and receivables:
Trade and other receivables (Note 7)	118,491
Cash and cash equivalents	117,077
Derivative instruments in designated hedge accounting	310

Financial liabilities
Other financial liabilities:
Trade and other payables	145,295
Loans and borrowings	73,639
Derivative instruments in designated hedge accounting	115

(b)    Financial risk management policies and objectives (cont’d)

The operations of the group are subject to various financial risks which include credit risk, foreign currency risk, interest rate risk, liquidity risk and market price risk. The group has taken measures to minimise their exposure to risks and/or costs associated with the financing, investing and operating activities of the group.

The group seeks to minimise the effects of these risks by using derivative financial instruments to hedge risk exposure. The use of financial derivatives is governed by the group’s policies approved by the Board of Directors. Compliance with policies and exposure limits is monitored on an ongoing basis to mitigate risk exposures.

(i)    Foreign exchange risk management

The group transacts business in various foreign currencies. The group’s foreign exchange exposures arise mainly from the exchange rate movement of these foreign currencies against the respective entity’s functional currency.

32

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

At the end of the reporting period, the significant carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective entity’s functional currency are as follows:

	Assets	Liabilities
	US$’000	US$’000
United States Dollar	7,187	16,005

Foreign currency sensitivity

The following table details the sensitivity analysis of a 10% increase and decrease in the relevant foreign currencies against the functional currency of each group entity. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents the directors’ assessment of the reasonably possible change in foreign exchange rates.

If the relevant foreign currency strengthens/weakens by 10% against the functional currency of each group entity, profit or loss will increase/decrease by:

	Profit or loss		Profit or loss
	Increase (decrease)		Increase (decrease)
	+10	%	– 10%
	US$’000		US$’000
United States Dollar	(882)		882

(ii)    Interest rate risk management

The group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates.

The group adopts a practice to continuously seek alternative banking facilities which provide competitive interest rates to finance and/or refinance its working capital requirement.

33

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents the directors’ assessment of the reasonably possible change in interest rates.

If interest rates had been 100 basis points higher or lower and all other variables were held constant, the group’s profit for the financial period would decrease/increase by US$110,000. This is mainly attributable to the group's exposure to interest rates on its variable rate borrowings.    

(iii)    Credit risk management

Credit risk is the risk of a financial loss to the group if a counterparty to a financial instrument fails to meet its contractual obligations. The group’s exposure to credit risk arises principally from its receivables from customers.

Directors have a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the consolidated statement of financial position.

(iv)    Liquidity risk management

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the directors to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

34

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

Liquidity and interest risk analysis

Non-derivative financial liabilities

The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the group can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial liability on the consolidated statement of financial position.

	Weighted average effective interest rate	On demand or within 1 year	Within 2 to 5 years	After 5 years	Adjustment	Total
	%	US$’000	US$’000	US$’000	US$’000	US$’000
Non-   interest   bearing	-	145,295	-	-	-	145,295
Variable   interest   rate	1.75-11.00	27,374	37,313	-	(7,612)	57,075
Fixed   interest   rate	7.00-9.38	1,411	7,730	8,852	(1,429)	16,564
		174,080	45,043	8,852	(9,041)	218,934

35

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

Derivative financial liabilities

The following table details the liquidity analysis for derivative financial instruments. The table has been drawn up based on the undiscounted net cash inflows/(outflows) on the derivative instrument that settle on a net basis and the undiscounted gross inflows and (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the end of the reporting period.

	On demand or within 1 year	Within 2 to 5 years	After 5 years
	US$’000	US$’000	US$’000
Gross settled:
Foreign exchange     forward contracts	115	-	-

36

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(v)    Fair value

The group determines fair values of various financial assets and financial liabilities in the following manner

Fair value of financial asset and financial liability that re-measured at fair value on a recurring basis

Financial assets/liabilities	Fair value as at June 30, 2014		Fair value hierarchy	Valuation technique(s) and key input(s)	Significant unobservable input	Relationship of unobservable inputs to fair value
	Assets US$’000	Liabilities US$’000
Foreign currency   forward   contracts	310	115	Level 2	Discounted cash flow.   Future cash flows are estimated   based on forward exchange   rates (from observable forward   exchange rates at the end of   the reporting period) and   contract forward rates,   discounted at a rate that   reflects the credit risk of   various counterparties.	N/A	N/A

There were no transfers between level 1 and level 2 during the financial period.

37

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

Fair value of the group’s financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required)

The carrying amounts of the financial assets and financial liabilities recognised at amortised cost approximate their fair values due to relatively short-term nature or immediate maturity of these financial instruments other than as stated below:

• Term Loans: As the term loans were obtained from local licensed financial institutions at the prevailing market rate, the carrying value of these financial liabilities approximates its fair value.

(c) Capital risk management policies and objectives

The group’s objectives when managing capital is to maintain a strong capital base and safeguard the group’s ability to continue as a going concern, so as to maintain investor and creditor confidence and to sustain future development of the business. The directors monitor and are determined to maintain an optimal debt-to-equity ratio that complies with debt covenants.

5 RELATED COMPANY TRANSACTIONS

Compensation of key management personnel

The remuneration of other members of key management during the financial period was as follows:

US$’000

Salaries and short-term benefits	1,445
Contribution to defined contribution plans	64
	1,509

38

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

6 CASH AND CASH EQUIVALENTS

	US$’000
Cash at bank	47,961
Deposits placed with licensed banks	69,116
Cash and cash equivalents in the consolidated statement of cash flows	117,077

The average effective interest rate and maturity of deposits at the end of the financial period were as follows:

Effective interest rate	2.50	%
Maturity days	40

7 TRADE AND OTHER RECEIVABLES

	US$’000
Current:
Trade receivables	91,761
Less: Allowance for doubtful debts	(1,255)
	90,506
Other receivables and refundable deposits	18,083
	108,589

Non-current:
Long-term loans to employees	3,581
Refundable deposits	3,087
Amount due from associate	539
Club membership	472
Others	2,223
	9,902

Long-term loans to employees bear interest at rates ranging from 2.0% to 6.9% per annum and are repayable within the next 2 to 20 years.

39

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

7 TRADE AND OTHER RECEIVABLES (cont’d)

Amount due from associate, which arose mainly from payments on behalf, is interest-free and repayable after the next 12 months.

The average credit period on sales of goods is 30 days. No interest is charged on the outstanding trade receivables.

Trade receivables disclosed above include amounts that are past due at the end of the reporting period for which the group has not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. The group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the group to the counterparty.

The table below is an analysis of trade receivables as at June 30, 2014:

	US$’000
Not past due and not impaired	51,057
Past due and not impaired	39,449
	90,506

The ageing of these trade receivables are as follows:

	US$’000
Not past due	51,057
Past due 1 - 30 days	19,481
Past due 31 - 90 days	11,737
Past due more than 90 days	8,231
	90,506

Movement in the allowance for doubtful debts

US$’000

At January 14, 2014 (date of incorporation)	-
Additions (Note 25)	1,549
Allowance no longer required (Note 25)	(387)
Effect of foreign currency exchange differences	93
At June 30, 2014	1,255

40

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

7 TRADE AND OTHER RECEIVABLES (cont’d)

Impaired trade receivables are all past due more than 90 days.

In determining the recoverability of a trade receivable, the group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting date. The directors believe that no further credit provision is required.

8 DERIVATIVE FINANCIAL INSTRUMENTS

	US$’000
Derivative financial assets:
Foreign currency forward contract	310
Derivative financial liabilities:
Foreign currency forward contract	115

The group utilises currency derivatives to hedge significant future transactions and cash flows. The group is party to a variety of forward foreign exchange contracts and options in the management of its exchange rate exposures. The instruments purchased are primarily denominated in the currencies of the group’s principal markets.

At the end of the reporting period, the total notional amount of outstanding forward foreign exchange contracts to which the group is committed are as follows.

	Group
	US$’000
Forward foreign exchange contracts:
- Buy United States Dollar	4,358
- Sell United States Dollar	33,050
- Sell Singapore Dollar	1,500

In addition, the group had options to purchase United States Dollar equivalent to an amount of approximately US$4.36 million and sell United States Dollar equivalent to an amount of approximately US$33.05 million as a hedge against exchange losses on future purchases of goods and proceeds from settlement of intercompany loan by the subsidiaries within the group.

These arrangements are designed to address significant exchange exposures and are renewed on a revolving basis as required.

The fair value of currency derivatives that are designated and effective as cash flow hedges amounting to US$377,000 has been recognised in other comprehensive income.

41

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

8 DERIVATIVE FINANCIAL INSTRUMENTS (cont’d)

The following table details the forward foreign currency contracts outstanding as at the end of the reporting period.

Outstanding contracts	Average exchange rate	Foreign currency	Contract value	Fair value
Group	US$’000	’000	US$’000	US$’000
Sell United States Dollar
Less than 3 months
- Thai Baht	32.10	43,498	1,350	(1,341)
3 to 7 months
- Thai Baht	32.77	56,763	1,700	(1,750)
- Korean Won	1,017.80	30,936,000	30,000	(30,497)
Buy United States Dollar
Less than 3 months
- Korean Won	1,033.23	2,587,547	2,480	2,551
- Australian Dollar	0.93	1,484	1,373	1,395
3 to 7 months
- Korean Won	1,029.47	528,488	505	521
Sell Singapore Dollar
Less than 3 months
- Thai Baht	25.61	17,982	700	(692)
3 to 7 months
- Thai Baht	25.84	20,760	800	(799)
				(30,612)

42

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

9    INVENTORIES

	US$’000
Raw materials	20,988
Work-in-progress	694
Finished goods	26,355
Spare parts and other supplies	7,429
	55,466
Less: Allowance for inventories obsolescence	(3,972)
	51,494

Recognised in profit or loss:
Inventories recognised as cost of sales	140,285

43

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

10 PROPERTY, PLANT AND EQUIPMENT

Mineral reserves and leasehold land	Buildings	Machinery, office equipment, vehicles, fixtures and fittings	Properties underconstruction	Total
US$’000	US$’000	US$’000	US$’000	US$’000

Cost
At January 14, 2014 (date of incorporation)	-	-	-	-	-
Acquired on acquisition of   subsidiaries	120,949	115,392	266,998	13,963	517,302
Additions	-	559	6,038	8,338	14,935
Disposals	-	(33)	(7,790)	-	(7,823)
Reclassification	-	540	-	(540)	-
Transferred to intangible assets	-	-	-	(31)	(31)
Transferred to other receivables	-	-	-	(75)	(75)
Effect of foreign currency exchange   differences	1,570	2,021	7,726	(275)	11,042
At June 30, 2014	122,519	118,479	272,972	21,380	535,350

44

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

10 PROPERTY, PLANT AND EQUIPMENT (cont’d)

Mineral reserves and leasehold land	Buildings	Machinery, office equipment, vehicles, fixtures and fittings	Properties underconstruction	Total
US$’000	US$’000	US$’000	US$’000	US$’000

Accumulated depreciation
At January 14, 2014 (date of incorporation)	-	-	-	-	-
Depreciation charge for the period	290	1,820	4,509	-	6,619
Disposals	-	(2)	(5,283)	-	(5,285)
Effect of foreign currency exchange   differences	(21)	1,318	4,030	-	5,327
At June 30, 2014	269	3,136	3,256	-	6,661

Carrying Amount
At June 30, 2014	122,250	115,343	269,716	21,380	528,689

As at June 30, 2014, net book value of the group’s property, plant and equipment held under finance lease arrangements totaled US$698,000.

45

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

11 INTANGIBLE ASSETS

	Software	Other intangible assets		Total
	US$’000	US$’000		US$’000
Cost
At January 14, 2014 (date of incorporation)	-		-		-
Acquired on acquisition of subsidiaries	1,005		114,360		115,365
Additions	31		-		31
Transferred from property, plant and   equipment	-		31		31
Effect of foreign currency exchange   differences	190		(96)		94
At June 30, 2014	1,226		114,295		115,521

Accumulated amortization
At January 14, 2014 (date of incorporation)	-	-	-
Amortisation for the period (Note 25)	114	3,078	3,192
Effect of foreign currency exchange   differences	294	(101)	193
At June 30, 2014	408	2,977	3,385

Carrying amount
At June 30, 2014	818	111,318	112,136

The other intangible assets included above have indefinite and finite useful lives. The intangible assets that have finite useful lives, over which the assets are amortised, have an average amortisation period of eight years.

The group’s other intangible assets are mainly consist of technology intellectual property and distribution network and customer relationships. Technology intellectual property is licensed patents and trade secrets used by the group to manufacture and sell plasterboard, joint compound, ceiling tile, ceiling grid, and other products.

The carrying amount of technology intellectual property at June 30, 2014 is US$53,200,000. The average remaining amortisation period is 11 years. Distribution network and customer relationships are network distributors through which the group indirectly sells to the end customers by geographical region. The carrying amount of distribution network and customer relationships at June 30, 2014 is US$25,500,000. The average remaining amortisation period is 7 years.

46

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

12 GOODWILL

	US$’000
At January 14, 2014 (date of incorporation)	-
Arising on acquisition of subsidiaries	442,637
Effect of foreign currency exchange differences	1,976
At June 30, 2014	444,613

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated as follows:

	US$’000
Korea	162,631
Thailand	112,417
Indonesia	21,771
China	76,674
India	5,089
Malaysia/Singapore	45,235
The Philippines	1,333
UAE	1,408
Vietnam	13,452
Associates	4,603
	444,613

The group will test goodwill for impairment annually or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the cash generating units (CGUs) are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. No impairment loss has been recognised for the group based on the above basis.

47

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

12 GOODWILL (cont’d)

The group prepares cash flow forecasts derived from the most recent financial budgets approved by directors for the next five years based on an estimated growth rate of 9.2%.

The average rate used to discount the forecast cash flows from the group is 10%.

13 SUBSIDIARIES

Details of the subsidiaries are as follows:

Name of subsidiary	Country of incorporation	Proportion of ownership interest and voting power held	Principal activities
USG Boral Building Products Sdn. Bhd.	Malaysia	100%	Investment holding
BGA Holdings Limited	Labuan, Malaysia	100%	Investment holding
South Korean Plasterboard Corporation 1	Labuan, Malaysia	100%	Investment holding
Siamsum Corporation 1	Labuan, Malaysia	100%	Investment holding
Boral Plasterboard System Co. Ltd. 2	South Korea	100%	Manufacturing and trading of building materials
Boral Gypsum   Korea Co. Ltd. 2	South Korea	100%	Manufacturing and trading of building materials
China Plasterboard Corporation 1	British Virgin Islands	100%	Investment holding
Boral Gypsum (Shanghai)   Co. Ltd. 2	China	100%	Manufacturing and trading of building materials
Boral Gypsum (Chongqing)   Co. Ltd. 2	China	100%	Manufacturing and trading of building materials
Boral Gypsum (Chengdu)   Co. Ltd. 2	China	100%	Manufacturing and trading of building materials
Boral Plasterboard (Shanghai) Co. Ltd. 2	China	96.80%	Manufacturing and trading of building materials

(Forward)

48

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

13 SUBSIDIARIES (cont’d)

Name of subsidiary	Country of incorporation	Proportion of ownership interest and voting power held	Principal activities
Boral Gypsum (Shandong)   Co. Ltd. 2	China	100%	Manufacturing and trading of building materials
Boral Management Services Shanghai Co. Ltd.5	China	100%	Management services
USG Boral Building   Products India Pvt. Ltd.   (formerly known as Boral   India Private Ltd.).5	India	100%	Manufacturing and trading of building materials
PT Petrojaya Boral Plasterboard 2	Indonesia	100%	Manufacturing and trading of building materials
Boral Plasterboard (Malaysia) Sdn. Bhd.	Malaysia	100%	Manufacturing and trading of building materials
Boral Plasterboard (Marketing) Sdn. Bhd.	Malaysia	100%	Trading of building materials
Boral Building Materials (Malaysia) Sdn. Bhd. 5	Malaysia	N/A	Currently under member’s voluntary deregistration
Boral Plasterboard Philippines Inc. 2	Philippines	100%	Trading of building materials
Boonyavajara Mining Co.,   Ltd. 2	Thailand	100%	Mining and trading of building materials
Boral Prestia Co. Ltd. 2	Thailand	100%	Manufacturing and trading of building materials
The Siam Gypsum Industry Co. Ltd. 2	Thailand	71%	Investment holding
The Siam Gypsum Industry (Saraburi) Co. Ltd. 2	Thailand	71%	Manufacturing and trading of building materials
The Siam Gypsum Industry (Songkla) Co. Ltd. 2	Thailand	71%	Manufacturing and trading of building materials

(Forward)

49

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

13 SUBSIDIARIES (cont’d)

Name of subsidiary	Country of incorporation	Proportion of ownership interest and voting power held	Principal activities
SGI Development Co.Ltd. 2	Thailand	71%	Trading of building materials
Gypsum Business Limited 3	Thailand	100%	Dormant
Boral Middle East FZE 2	UAE	100%	Trading of building materials
Boral Middle East (Dubai) L.L.C. 2, 4	UAE	49%	Trading of building materials
USG Boral Gypsum   Vietnam Co., Ltd.   (formerly known as Boral   Gypsum Vietnam Co.   Ltd.) 2	Vietnam	100%	Manufacturing and trading of building materials
USG Cayman Holdings Ltd 5	Cayman Islands	100%	Investment holding
USG Asia Pacific Holdings Pte Ltd 5	Singapore	100%	Investment holding
USG ChinaLux S.a.r.l 5	Luxembourg	100%	Investment holding
USG Manufacturing Worldwide Ltd 5	Cayman Islands	100%	Investment holding
USG Interiors (Far East) Sdn Bhd 5	Malaysia	100%	Manufacturing and trading of building materials
USG Interiors (Malaysia) Sdn Bhd 5	Malaysia	100%	Trading of building materials
USG India Private Limited 5	India	100%	Manufacturing and trading of building materials
Pacific Interiors Supply Pte Ltd 5	Singapore	100%	Trading of building materials
International Resources Ltd 5	UAE	100%	Investment holding
Zawawi Gypsum LLC 5	Oman	55%	Mining and trading of building materials
Zawawi Drywall LLC 5	Oman	50%	Manufacturing and trading of building materials

¹  Not required to be audited pursuant to the relevant regulations of the place of incorporation and are not material to the group.

²  The financial statements of these subsidiaries are audited by a member firm of auditors of the company.

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USG BORAL BUILDING PRODUCTS PTE. LIMITED

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

13 SUBSIDIARIES (cont’d)

³  The financial statements of these subsidiaries are audited by auditors other than auditors of the company.

⁴  Although the company owns less than half of the voting rights of Boral Middle East (Dubai) L.L.C., it has the power to appoint and remove the majority of the board of directors and control of this entity is by their board. Consequently, the entity is controlled by the company and is consolidated in these consolidated financial statements.

⁵  Consolidated based on management accounts.

Details of non-wholly owned subsidiaries that have non-controlling interests

The table below shows details of non-wholly owned subsidiaries of the group that have non-controlling interests:

Name of subsidiaries	Place of incorporation and principal place of business	Proportion of ownership interests and voting rights held by non-controlling interests	Profit (loss) allocated to non-controlling interests	Accumulated non-controlling interests
			US$’000	US$’000
The Siam Gypsum   Industry Co. Ltd. and   its subsidiaries	Thailand	29%	2,446	86,983
Individually immaterial   subsidiaries with non-   controlling interests	N/A	N/A	(512)	11,334
			1,934	98,317

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USG BORAL BUILDING PRODUCTS PTE. LIMITED

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

13 SUBSIDIARIES (cont’d)

Summarised financial information in respect of the group’s subsidiaries that have material non-controlling interests is set out below. The summarised financial information below represents amounts before intragroup eliminations.

	US$’000
Current assets	51,723
Non-current assets	86,662
Current liabilities	(41,389)
Non-current liabilities	(3,882)
Equity attributable to owners of the company	66,111
Non-controlling interests	27,003

Revenue	47,478
Profit for the financial period	22,670
Total comprehensive income for the financial period, net of tax	22,975
Dividends paid to non-controlling interests	4,369
Net cash inflow from operating activities	15,402
Net cash inflow from investing activities	15,865
Net cash outflow from financing activities	(30,911)
Net cash inflow	356

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USG BORAL BUILDING PRODUCTS PTE. LIMITED

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

14 INVESTMENT IN ASSOCIATES

	US$’000
Cost of investment in associates	55,300
Share of post-acquisition loss	(866)
	54,434

Details of the associates are as follows:

Name of associate	Place of incorporation and operation	Proportion of ownership interest and voting power held	Principal activities
Star-USG Building   Materials Co. Ltd 1	China	50%	Trading of building materials
USG Middle East Ltd 1	Saudi Arabia	45%	Manufacturing

¹  Equity accounted based on management accounts.

Summarised financial information in respect of the group’s associates is set out below:

	US$’000
Total assets	105,957
Total liabilities	(53,643)
Net assets	52,314
Revenue	29,384
Loss for the financial period	(1,513)

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USG BORAL BUILDING PRODUCTS PTE. LIMITED

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

15 DEFERRED TAX ASSETS/(LIABILITIES)

	US$’000
At January 14, 2014 (date of incorporation)	-
Assumed at acquisition of subsidiaries (Charge)/Credit to profit or loss for the period:	(18,283)
Property, plant and equipment	1,967
Retirement benefit obligations	(71)
Others	397
	2,293
Effects of foreign currency exchange differences	(617)
At June 30, 2014	(16,607)

Certain deferred tax assets and liabilities have been offset in accordance with the group’s accounting policy. The following is the analysis of the deferred tax balances (after offset) for consolidated statement of financial position purposes:

	US$’000
Deferred tax liabilities	(28,425)
Deferred tax assets	11,818
	(16,607)

Subject to the agreement by the tax authorities, at the end of the reporting period, the group has unutilised tax losses of US$54,329,000 available for offset against future profits. No deferred tax assets have been recognised due to unpredictability of future profit streams.

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USG BORAL BUILDING PRODUCTS PTE. LIMITED

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

15 DEFERRED TAX ASSETS/(LIABILITIES) (cont’d)

The deferred tax assets/(liabilities) provided in the consolidated financial statements are in respect of the tax effects on the following:

	US$’000
Deferred tax assets (before offsetting):
Temporary differences arising from:
Property, plant and equipment	10,205
Provisions and retirement benefit obligations	4,077
	14,282
Offsetting	(2,464)
Deferred tax assets (after offsetting)	11,818
Deferred tax liabilities (before offsetting):
Temporary differences arising from:
Property, plant and equipment	(30,241)
Others	(648)
	(30,889)
Offsetting	2,464
Deferred tax liabilities (after offsetting)	(28,425)

16 TRADE AND OTHER PAYABLES

	US$’000
Trade payables	93,019
Other payables and accrued expenses	52,276
	145,295

The average credit period for trade purchases ranges from 30 to 60 days. No interest is

charged on the outstanding balances.

55

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

17. PROVISIONS

	Non-Current Provision		Current Provision
	Site Restoration	Total	Restructuring	Litigations	Total
	US$’000	US$’000	US$’000	US$’000	US$’000
At January 14, 2014 (date of incorporation)	-	-	-	-	-
Assumed on acquisition   of subsidiaries	50	50	24	41	65
Additional provision during the period	-	-	536	45	581
Utilisation of   provisions	(9)	(9)	-	-	-
Exchange differences on translating foreign operations	1	1	(4)	(1)	(5)
At June 30, 2014	42	42	556	85	641

56

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

18 LOANS AND BORROWINGS

US$’000

Current
Unsecured:   - Term loans   - Revolving credits   - Bank overdrafts	2,630 8,601 11,618
Secured:   - Finance lease payables	300
	23,149

Non-Current
Unsecured:
	27,949
Secured: -Term loans -Finance lease payables	22,068 473
	50,490
	73,639

The remaining maturities of the loans and borrowings at June 30, 2014 are as follows:

US$’000

More than 1 year and less than 2 years	6,231
More than 2 years and less than 5 years	36,108
More than 5 years	8,151
	50,490

Bank overdrafts are repayable on demand.

57

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

18 LOANS AND BORROWINGS (cont’d)

The weighted average interest rates per annum for loans and borrowings at June 30, 2014 are as follows:

% p.a.

Term loans Revolving credits Bank overdrafts (Note 6)	6.30-9.80 1.75-6.80 1.77-11.00
Finance lease payables	9.20

The secured term loans, revolving credits and bank overdrafts are backed by the corporate guarantees given by the company and the shareholders.

	Minimum lease payments	Present value of minimum lease payments
	US$’000	US$’000
Amounts payable under finance leases:
Within one year	355	300
In the second to fifth years inclusive	518	473
	873	773
Less: future finance charges	(100)	-
Present value of lease obligations	773	773

The Group leased certain motor vehicles under finance leases. The average lease term is 5 years. For the period ended 30 June 2014, the average effective borrowing rate was 9.2%. The Group has option to purchase the equipment for a nominal amount at the end of the lease terms.

58

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

19 RETIREMENT BENEFIT OBLIGATIONS

The defined benefit plan typically exposes the group to actuarial risks such as longevity risk and salary risk.

Type	Risk
Longevity risk	The present value of the defined benefits plan liability is calculated by reference to the best estimate of the mortality of plan participants during their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
Salary risk	The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out by external actuaries in the respective countries. The present value of the defined benefit obligation and the related current service cost and past service cost, were measured using projected unit credit method.

The principal assumptions used for the purpose of the actuarial valuations were as follows:

	% p.a.
Discount rate	1.84 - 5.75
Future salary increase	4.50 - 10.00
Employee provident fund	2.00 - 12.00

Movement in the liability recognised in the consolidated statement of financial position:

	US$’000
At January 14, 2014 (date of incorporation)	-
Assumed on acquisition of subsidiaries	10,794
Expense recognised in profit or loss	1,924
Benefits paid	(1,034)
Effect of exchange differences	(109)
At June 30, 2014	11,575

59

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

19 RETIREMENT BENEFIT OBLIGATIONS (cont’d)

The amount recognised in the consolidated statement of financial position are analysed as follows:

US$’000

Present value of unfunded obligation	17,085
Fair value of plan assets	(5,510)
Net liability arising from retirement benefit obligations	11,575

Reconciliation of the present value of unfunded obligation are as follows:

US$’000

At January 14, 2014 (date of incorporation)	-
Assumed on acquisition of subsidiaries	15,129
Benefits paid	(1,034)
Current service cost	1,745
Interest on obligation	536
Effect of foreign currency exchange differences	709
At June 30, 2014	17,085

The amounts recognised in profit or loss are as follows:

US$’000

Current service cost	1,745
Interest on obligation	179
	1,924

60

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

19    RETIREMENT BENEFIT OBLIGATIONS (cont’d)

Reconciliation in the fair value plan assets are as follows:

	Group
	US$’000
At January 14, 2014 (date of incorporation)	-
Assumed on acquisition of subsidiaries	4,335
Interest income	357
Effect of foreign currency exchange differences	818
At June 30, 2014	5,510

20    SHARE CAPITAL

No. of shares ‘000 US$’000

Issued and fully paid:
Ordinary shares:
At January 14, 2014 (date of incorporation)	-	-
Issued during the financial period	1,022,944	1,022,944
At June 30, 2014	1,022,944	1,022,944

Fully paid ordinary shares, which have no par value, carry one vote per share and a right to dividends as and when declared by the company.

The company was incorporated on January 14, 2014 with an issued and paid-up share capital of US$2, comprising 2 ordinary shares.

As approved by the directors via an ordinary resolution on February 28, 2014, the issued and paid-up share capital of the company was increased from US$2, comprising 2 ordinary shares, to US$1,022,944,002, comprising 1,022,944,002 ordinary shares, by way of issuance of 1,022,944,000 new ordinary shares amounting to US$1,022,944,000 to acquire the subsidiaries as disclosed in Note 27.

61

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

21 RESERVES

Other capital reserve

Other capital reserve comprises the fair value reserve amounting to US$34,191,000, which resulted from the difference between the fair value of assets contributed by Boral Limited and the USG Corporation against the total amount of shares issued to the shareholders.

Translation reserve

The translation reserve comprises foreign currency differences arising from the translation of the financial statements of the group entities to US$.

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedges related to hedged transactions that have not yet occurred.

Pension reserve

The pension reserve comprised the actuarial gains and losses on pension provision.

22 REVENUE

Revenue of the group relates to sales of plasterboard, ceiling tile, metal stud, compound and plaster, and other products.

23 FINANCE COSTS

	US$’000
Interest on bank overdrafts and loans	2,568
Other finance cost	96
	2,664

62

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

24 INCOME TAX EXPENSE

	US$’000
Current tax:
Singapore	96
Foreign	7,066
Deferred tax (Note 15)	(2,293)
	4,869

Domestic income tax is calculated at 17% of the estimated assessable profit for the period. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

The total charge for the period can be reconciled to the accounting profit as follows:

	US$’000
Profit before tax	14,052
Income tax expense calculated at 17%	2,389
Effects of different tax jurisdiction rates	1,363
Effects of:   Tax holidays and incentives	(1,126)
Expenses not deductible for tax purposes	531
Deferred tax asset not recognised	(18)
Withholding tax	1,730
	4,869

63

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

25    PROFIT FOR THE FINANCIAL PERIOD

Profit for the financial period has been arrived after charging/(crediting) the following:

	US$’000
After charging:
Directors’ remuneration	1,159
Other employee benefits	27,625
Contribution to defined benefit plans	293
Defined contribution plan expense	1,924
Depreciation of property, plant and equipment (Note 10)	6,619
Amortisation of intangible assets (Note 11)	3,192
Allowance on doubtful debts (Note 7)	1,549
Write-down of value in inventories	1,749
After crediting:
Interest income	1,553
Allowance for doubtful debts no longer required (Note 7)	387
Net foreign exchange gains	356
Gains on disposal of property, plant and equipment	21

26 DIVIDEND PAID

On March 25, 2014, a subsidiary paid a dividend amounting to USD4,369,000 to non-controlling interests.

27 ACQUISITION OF SUBSIDIARIES

On February 28, 2014, the group acquired all the subsidiaries as detailed in Note 13 as a result of the joint venture arrangements between USG Corporation, a company incorporated and listed in the United States of America, and Boral Limited, a company incorporated and listed in Australia. This transaction has been accounted for by the acquisition method of accounting.

64

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

27 ACQUISITION OF SUBSIDIARIES (cont’d)

Assets acquired and liabilities assumed at the date of acquisition of subsidiaries are as follows:

US$’000

ASSETS
Current assets
Cash and cash equivalents	96,541
Trade and other receivables	80,049
Prepayments	4,472
Tax recoverable	15,857
Derivative financial instruments	312
Inventories	53,787
Total current assets	251,018
Non-current assets
Property, plant and equipment	517,302
Intangible assets	115,365
Investment in associates	55,300
Deferred tax assets	11,471
Other receivables	7,786
Total non-current assets	707,224
Total assets	958,242
LIABILITIES
Current liabilities
Trade and other payables	109,374
Provisions	65
Loans and borrowings	40,687
Income tax payable	7,530
Derivative financial instruments	687
Total current liabilities	158,343

(Forward)

65

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

27 ACQUISITION OF SUBSIDIARIES (cont’d)

US$’000

Non-current liabilities
Retirement benefit obligations	10,794
Provisions	50
Loans and borrowings	44,044
Deferred tax liabilities	29,754
Derivative financial liabilities	199
Total non-current liabilities	84,841
Total liabilities	243,184
Net assets acquired and liabilities assumed	715,058

The non-controlling interest in The Siam Gypsum Industry Co. Ltd. and its subsidiaries (29%), Boral Plasterboard (Shanghai) Co., Ltd. (3%), Zawawi Gypsum LLC (45%) and Zawawi Drywall LLC (50%) recognised at the acquisition date were measured by reference to the fair value of the non-controlling interests and amounted to US$88,700,000, US$800,000, US$32,200,000 and (US$21,140,000) respectively. The fair values were estimated by applying an income approach. The following were the key model inputs used in determining the fair values:

• Assumed discount rate range of 10% to 11%;

• Assumed long-term sustainable growth rates up to 9.2%; and

• Assumed adjustments because of the lack of control or lack of marketability that market participants would consider when estimating the fair values of the non-controlling interests.

Goodwill arising on acquisition:    

US$’000

Consideration transferred	1,057,135
Plus: Non-controlling interests	100,560
Less: Fair value of identifiable net assets acquired	(715,058)
Goodwill arising on acquisition	442,637

66

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

27 ACQUISITION OF SUBSIDIARIES (cont’d)

It is not practical to disclose the information of the revenue and profit or loss of the subsidiaries for the current reporting period as though the acquisition date for the business combination that occurred during the period had been as of the date of incorporation as the completion of the business combination occurred later than the date of incorporation. Also, it is not practical to obtain the consolidation information of those subsidiaries acquired before the completion of the business combination.

Net cash inflow in acquisition of subsidiaries mainly arose from cash and cash equivalents acquired as below:

	Group
	US$’000
Cash and cash equivalents	96,541

Goodwill arose in the acquisition of subsidiaries because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of the subsidiaries. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets

None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes.

28    OPERATING LEASE COMMITMENTS

	US$’000
Minimum lease payments under operating leases included in the consolidated   statement of profit or loss and other comprehensive income	756

At the end of the reporting period, the group has outstanding commitments under non-cancellable operating leases, which fall due as follows:

	US$’000
Within 1 year	3,207
Within 2 to 5 years	11,088
	14,295

67

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014

28    OPERATING LEASE COMMITMENTS (cont’d)

Operating lease payments represent rentals payable by the group for its office premises.  Leases are negotiated for an average term of 5 years and rentals are fixed for an average of 3 years.

29    CAPITAL COMMITMENTS

	Group
	US$’000
Commitments for the acquisition of property, plant and equipment	16,880

30    COMPARATIVES

The consolidated financial statements cover the period from the date of incorporation on January 14, 2014 to June 30, 2014 or for a period 5½ months. This being the first set of consolidated financial statements, there are no comparative figures.

.

68

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

C O N T E N T S

	PAGE
Statement of directors	1
Independent auditors' report	2 - 3
Consolidated statement of financial position	4 - 5
Consolidated statement of profit or loss and other comprehensive income	6
Consolidated statement of changes in equity	7
Consolidated statement of cash flows	8 - 9
Notes to the consolidated financial statements	10 - 68

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

(Registration No. 201401466N)

CONSOLIDATED FINANCIAL STATEMENTS

PERIOD FROM JANUARY 14, 2014

(DATE OF INCORPORATION)

TO JUNE 30, 2014