INTEGRATED RESEARCH LIMITED

Rule 4.3A

Appendix 4E Preliminary final report

Name of entity

ABN 76 003 588 449	Reporting period (year ended) 30 June 2012	Previous corresponding period(year ended)
76 003 588 449	30 June 2012	30 June 2011

For announcement to the market

Extracts from this report for announcement to the market

For announcement to the market Extracts from this report for announcement to the market
			A$000
Revenue	up	9% to	$48,608
Profit before tax attributable to members	up	19% to	$11,568
Profit after tax attributable to members	up	21% to	$9,035
Net profit for the period attributable to members	up	21% to	$9,035

Dividends (distributions)	Amount per security Franked amount per security	Amount per security Franked amount per security
Final dividend Previous corresponding period	3.0¢ 70% 2.5¢ 75%
Record date for determining entitlements to the dividend Date the dividend is payable Net Tangible Assets per Security:
	30 August 2012

	14 September 2012

	2012	2011
Net tangible assetsper security	9.18¢	8.12¢

Brief explanation of directional and percentage changes to profit:

Refer accompanying Market Release.

Audit

This report is based on accounts that are in the process of being audited, and are unlikely to be subject to dispute or qualification.

==> picture [109 x 36] intentionally omitted <==

Financial Statements

Contents	Page
Consolidated statement of comprehensive income	2
Consolidated statement of financial position	3
Consolidated statement of changes in equity	4
Consolidated statement of cash flows	5
Notes to the financial statements	6
1. Significant accounting policies	6
2. Segment reporting	14
3. Finance income	16
4. Expenses	16
5. Auditors‟ remuneration	16
6. Income tax expense	17
7. Earnings per share	18
8. Cash and cash equivalents	18
9. Trade and other receivables	19
10. Other current assets	20
11. Other financial assets	20
12. Property, plant and equipment	20
13. Deferred tax assets and liabilities	21
14. Intangible assets	23
15. Trade and other payables	24
16. Employee benefits	24
17. Provisions	26
18. Other liabilities	27
19. Capital and reserves	27
20. Financial instruments	29
21. Operating leases	32
22. Consolidated entities	32
23. Reconciliation of cash flows from operating	33
activities
24. Key management personnel disclosures	33
25. Related parties	37
26. Parent entity disclosures	37
27. Subsequent events	37

Consolidated statement of comprehensive income

For the year ended 30 June 2012

In thousands of AUD Notes	Consolidated
	2012 2011
Revenue Revenue from licence fees Revenue from maintenance fees Revenue from consulting Total revenue Research and development expenses Sales, consulting and marketing expenses General and administration expenses Total expenses 4 Other gains and losses Currency exchange losses Profit before finance income and tax Finance income 3 Profit before tax Income tax expense 6 Profit for the year Other comprehensive income (Loss)/gain on cash flow hedge taken to equity Foreign exchange translation differences Income tax relating to gains/(loss) on cash flow hedge 13 Other comprehensive income (net of tax) Total comprehensive income for the year Profit attributable to: Owners of the parent Total comprehensive income attributable to: Owners of the parent Basic earnings per share (AUD cents) 7 Diluted earnings per share (AUD cents) 7	28,861 25,005 16,406 16,941 3,341 2,646
	48,608 44,592
	(10,134) (8,949) (23,004) (21,023) (4,278) (4,137)
	(37,416) (34,109) (133) (1,170)
	11,059 9,313 509 381
	11,568 9,694 (2,533) (2,229)
	9,035 7,465 (147) 287 125 (602) - (42)
	(22) (357)
	9,013 7,108
	9,035 7,465 9,013 7,108 5.41¢ 4.47¢ 5.38¢ 4.47¢

The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements set out on pages 6 to 37.

Consolidated statement of financial position

As at 30 June 2012

In thousands of AUD Notes	Consolidated
	2012 2011
Current assets Cash and cash equivalents 8 Trade and other receivables 9 Current tax assets Other current assets 10 Total current assets Non-current assets Trade and other receivables 9 Other financial assets 11 Property, plant and equipment 12 Deferred tax assets 13 Intangible assets 14 Total non-current assets Total assets Current liabilities Trade and other payables 15 Provisions 17 Income tax liabilities Other current liabilities 18 Total current liabilities Non-current liabilities Deferred tax liabilities 13 Provisions 17 Other non-current liabilities 18 Total non-current liabilities Total liabilities Net assets Equity Issued capital 19 Reserves 19 Retained earnings Total equity	12,038 11,635 20,725 14,058 163 715 953 1,129
	33,879 27,537
	656 1,018 1,802 1,800 1,820 1,875 453 286 13,849 13,808
	18,580 18,787
	52,459 46,324
	4,285 3,365 1,779 1,528 1,653 1,664 9,832 8,737
	17,549 15,294
	3,003 2,605 621 528 2,053 540
	5,677 3,673
	23,226 18,967
	29,233 27,357
	1,175 845 (1,507) (1,495) 29,565 28,007
	29,233 27,357

The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 6 to 37.

Consolidated statement of changes in equity

For the year ended 30 June 2012

Consolidated In thousands of AUD	Share capital Hedging reserve Translation reserve Employee benefit reserve Retained earnings Total	Share capital Hedging reserve Translation reserve Employee benefit reserve Retained earnings Total	Share capital Hedging reserve Translation reserve Employee benefit reserve Retained earnings Total	Share capital Hedging reserve Translation reserve Employee benefit reserve Retained earnings Total	Share capital Hedging reserve Translation reserve Employee benefit reserve Retained earnings Total	Share capital Hedging reserve Translation reserve Employee benefit reserve Retained earnings Total	Share capital Hedging reserve Translation reserve Employee benefit reserve Retained earnings Total
Balance at 1 July 2011 Profit for the year Other comprehensive income for the year (net of tax) Total comprehensive income for the year Lapsed employee options Expensed employee options Expensed employee performance rights Shares issued Dividends to shareholders Balance at 30 June 2012		845	147	(1,908)	266	28,007	27,357
		-	-	-	-	9,035	9,035

		-	(147)	125	-	-	(22)

		-	(147)	125	-	9,035	9,013
		-	-	-	(35)	35	-
					44	-	44

		-	-	-	83	-	83
		330	-	-	(82)	-	248
		-	-	-	-	(7,512)	(7,512)
		1,175	-	(1,783)	276	29,565	29,233

Balance at 1 July 2010 Profit for the year Other comprehensive income for the year (net of tax) Total comprehensive income for the year Lapsed employee options Expensed employee options Shares issued Dividends to shareholders Balance at 30 June 2011	835 (98) (1,306) 544 24,527 24,502 - - - - 7,465 7,465 - 245 (602) - - (357)
	- 245 (602) - 7,465 7,108 - - - (186) 186 - - - - (89) - (89) 10 - - (3) - 7 - - - - (4,171) (4,171)
	845 147 (1,908) 266 28,007 27,357

The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 6 to 37.

Consolidated statement of cash flows

For the year ended 30 June 2012

In thousands of AUD Notes	Consolidated
	2012 2011
Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Income taxes paid Net cash provided by operating activities 23 Cash flows from investing activities Payments for capitalised development Payments for property, plant and equipment Payments for intangible assets Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issuing of shares Payment of dividend 19 Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Effects of exchange rate changes on cash Cash and cash equivalents at 30 June 8	45,565 43,875 (29,409) (28,536)
	16,156 15,339 (1,510) (1,485)
	14,646 13,854
	(6,730) (5,655) (518) (397) (221) (243) 509 381
	(6,960) (5,914)
	248 7 (7,512) (4,171)
	(7,264) (4,164)
	422 3,776 11,635 8,396 (19) (537)
	12,038 11,635

The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 6 to 37.

Notes to the Financial Statements

For the year ended 30 June 2012

Note 1: Significant accounting policies

Integrated Research Limited (the “Company”) is a company domiciled in Australia. The financial report of the Company for the year ended 30 June 2012 comprises the Company and its subsidiaries (together referred to as the “consolidated entity”).

a) Statement of Compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, and Interpretations and the Corporations Act 2001. Accounting Standards include Australian Equivalent to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures the financial statements of the consolidated entity also comply with International Financial Reporting Standards and interpretations adopted by the International Accounting Standards Board.

b) Basis of Preparation

The financial statements are presented in Australian dollars and are prepared on the historical cost basis, with the exception of cash flow hedges, which are at fair value.

The company is of a kind referred to in ASIC Class Order (CO) 98/100 dated 10 July 1998 (updated by CO 05/641 effective 28 July 2005 and CO 06/51 effective 31 January 2006) and in accordance with that Class Order, amounts in the financial report and Directors‟ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

The preparation of financial statements in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the consolidated entity.

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.

Note 1: Significant accounting policies (continued)

Standards and Interpretations issued not yet effective

At the date of authorisation of the financial report, a number of standards and Interpretations were in issue but not yet effective.

Initial application of the following Standards is not expected to materially affect any of the amounts recognised in the financial statements, but may change the disclosures presently made in relation to the consolidated entity‟s financial statements:

	Effective for	Expected to be
Standard/Interpretation	annual reporting periods beginning	initially applied in the financial year
	on or after	ending
AASB 9 „Financial Instruments‟, AASB 2009-11 and AASB 2010-7
„Amendments to Australian Accounting Standards arising from AASB 9‟	1 January 2013	30 June 2014
AASB 2010-8 „Amendments to Australian Accounting Standards –
Deferred Tax: Recovery of Underlying Assets‟	1 January 2012	30 June 2013
AASB 10 „Consolidated Financial Statements‟	1 January 2013	30 June 2014
AASB 12 „Disclosure of Interests in Other Entities‟	1 January 2013	30 June 2014
AASB 13 „Fair Value Measurement‟ and AASB 2011-8 „Amendments to
Australian Accounting Standards arising from AASB 13‟	1 January 2013	30 June 2014
AASB 119 „Employee Benefits‟(2011) and AASB 2011-10 „Amendments
to Australian Accounting Standards arising from AASB 119 (2011)‟	1 January 2013	30 June 2014
AASB 127 „Separate Financial Statements‟ (2011)	1 January 2013	30 June 2014
AASB 2011-9 „Amendments to Australian Accounting Standards –
Presentation of Items of Other Comprehensive Income‟	1 July 2012	30 June 2013
AASB 2012-2 „Amendments to Australian Accounting Standards –
Disclosures – Offsetting Financial Assets and Financial Liabilities‟	1 January 2013	30 June 2014
AASB 2012-3 „Amendments to Australian Accounting Standards –
Disclosures – Offsetting Financial Assets and Financial Liabilities‟	1 January 2014	30 June 2015
AASB 2012-5 „Amendments to Australian Accounting Standards arising
from Annual Improvements 2009-2011 Cycle‟	1 January 2013	30 June 2014
At the date of authorisation of the financial statements, the following
IASBs were also in issue but not effective, although Australian equivalent
Standards have not yet been issued:
Mandatory Effective Date of IFRS 9 and Transition Disclosures
(Amendments to IFRS 9 and IFRS 7)	1 January 2015	30 June 2016
Consolidated Financial Statements, Joint Arrangements and Disclosure of
Interests in Other Entities: Transition Guidance (amendments to IFRS 10,
IFRS 11 and IFRS 12	I January 2013	30 June 2014

Note 1. Significant accounting policies (continued)

The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements.

c) Basis of consolidation

Subsidiaries are entities controlled by the company. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial report from the date that control commences until the date that control ceases.

Intragroup balances and any gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

d) Foreign currency

In preparing the financial statements of the individual entities transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.

On consolidation, the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation are translated to Australian dollars at foreign exchange rates ruling at the year end date. The revenues and expenses of foreign operations, are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in other comprehensive income and accumulated in the translation reserve.

e) Derivative financial instruments

The consolidated entity uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from operational activities. In accordance with its treasury policy, the consolidated entity does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

The fair value of forward exchange contracts is their quoted market price at the year end date, being the present value of the quoted forward price.

Note 1. Significant accounting policies (continued)

f) Hedging

On entering into a hedging relationship, the consolidated entity normally designates and documents the hedge relationship and risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument‟s effectiveness in offsetting the exposure to changes in the item‟s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated.

For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in profit or loss in the same period or periods during which the hedged forecast transaction affects profit or loss. The ineffective part of any gain or loss is recognised immediately in the profit or loss.

g) Property, plant and equipment

Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses (see accounting policy (k)). The cost of acquired assets includes (i) the initial estimate at the time of installation and during the period of use, when relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and (ii) changes in the measurement of existing liabilities recognised for these costs resulting from changes in the timing or outflow of resources required to settle the obligation or from changes in the discount rate.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Depreciation is provided on property, plant and equipment. Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed annually, with the effect of any changes recognised on a prospective basis.

The following useful lives are used in the calculation of depreciation: Leasehold improvements 6 to 10 years Plant and equipment 4 to 8 years

h) Intangible Assets

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the consolidated entity has sufficient resources to complete development.

The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in profit or loss as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses (see accounting policy (k)).

Amortisation is charged to profit or loss on a straight-line basis over the estimated useful life, but no more than three years.

Note 1. Significant accounting policies (continued)

h) Intangible Assets

Intellectual property

Intellectual property acquired from third parties is amortised over its estimated useful life, but no more than three years.

Computer software

Computer software is stated at cost and depreciated on a straight-line basis over a 2½ to 3 year period.

i) Trade and other receivables

Trade and other receivables are stated at their amortised cost less impairment losses. The carrying amount of uncollectible trade receivables is reduced by an impairment loss through the use of an allowance account.

Allowance for returns is offset against trade receivables for estimated warranty claims based upon historical experience.

j) Cash and cash equivalents

Cash and cash equivalents comprises cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity‟s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

k) Impairment

The carrying amounts of the consolidated entity‟s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset‟s recoverable amount is estimated.

For intangible assets that are not yet available for use, the recoverable amount is estimated at each year end date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss.

The recoverable amount of other assets is the greater of their 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 pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

l) Employee benefits

Superannuation

Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss as incurred. There are no defined benefit plans in operation.

Long-term service benefits

The consolidated entity‟s net obligation in respect of long-term service benefits, other than pension plans, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government bonds at the year end date which have maturity dates approximating to the terms of the consolidated entity‟s obligations.

Note 1. Significant accounting policies (continued)

l) Employee benefits (continued)

Share-based payment transactions

The share option and performance rights programmes allows the consolidated entity‟s employees to acquire shares of the Company. The fair value of options and performance rights granted are recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options or the performance rights. The fair value of the instrument granted is measured using a binomial option pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options or performance rights that are expected to vest.

Wages, salaries, annual leave, and non-monetary benefits

Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting from employees‟ services provided to the year end date, calculated at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at the year end date.

m) Provisions

A provision is recognised in the statement of financial position when the consolidated entity has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

n) Trade and other payables

Trade and other payables are stated at their amortised cost.

o) Revenue

The consolidated entity allocates revenue to each element in software arrangements involving multiple elements based on the relative fair value of each element. The typical elements in the multiple element arrangement are licence and maintenance fees. The company‟s determination of fair value is generally based on the price charged when the same element is sold separately.

Revenue from the sale of licences, where the consolidated entity has no post delivery obligations to perform is recognised in profit or loss at the date of delivery of the licence key.

Revenue from maintenance contracts is recognised rateably over the term of the service agreement, which is typically one year. Maintenance contracts are typically priced based on a percentage of licence fees and have a one year term. Services provided to customers under maintenance contracts include technical support and supply of software updates.

Revenue from multiple element software arrangements, where the fair value of an undelivered element cannot be reliably measured are recognised over the period the undelivered services are provided.

Revenue from consulting services is recognised over the period the services are provided.

No revenue is recognised if there are significant uncertainties regarding the recovery of the consideration due, the costs incurred or to be incurred cannot be measured reliably, there is a risk of return of goods or there is continuing management involvement with the goods.

Note 1. Significant accounting policies (continued)

p) Expenses

Operating lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense and spread over the lease term.

Financing income

Financing income comprises interest receivable on funds invested.

q) Income tax

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the year end date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the year end date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional dividend franking deficit tax that arises from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

r) Goods and Services Tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), or similar taxes, except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable or payable is included as a current asset or liability in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities, which are recoverable or payable are classified as operating cash flows.

Note 1. Significant accounting policies (continued)

s) Significant accounting judgements, estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Intangible assets

An intangible asset arising from development expenditure on an internal project is recognised only when the consolidated entity can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected benefits from the related project commencing from the commercial release of the project. The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the asset is not yet available for use or more frequently when an indication of impairment arises during the reporting period.

Share based payment transactions

The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a binomial option pricing model and applying management determined probability factors relating to non-market vesting conditions.

Receivables

The consolidated entity assesses impairment of receivables based upon assessment of objective evidence for significant receivables and by placing non significant receivables in portfolios of similar risk profiles, based on objective evidence from historical experience adjusted for any effects of conditions existing at each reporting date. This assessment includes judgements and estimates of future outcomes the actual results of which may differ from the estimates at the reporting date.

Note 2. Segment reporting

The information reported to the CODM (being the Chief Executive Officer) for the purposes of resource allocation and assessment of performance is focused on geographical performance. The principal geographical regions are The Americas – Operating from the United States with responsibility for the countries in North, Central and South America, Europe – operating from the United Kingdom with responsibility for the countries in Europe, Asia Pacific – operating from Australia with responsibility for the countries in the rest of the world and Corporate Australia – includes revenue and expenses for research and development and corporate head office functions of the company.

Inter-segment pricing is determined on an arm‟s length basis.

Segment profit represents the profit earned by each segment without allocation of investment revenue and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

Information regarding these segments is presented below. The accounting policies of the reportable segments are the same as the Group‟s accounting policies.

Note 2. Segment reporting (continued)

In thousands of AUD	Americas	Europe	Asia Pacific	Corporate Australia*	Eliminations	Consolidated
	2012 2011	2012 2011	2012 2011	2012 2011	2012 2011	2012 2011
Sales to customers outside the consolidated entity Inter-segment sales Total segment revenue Total revenue Segment results Results from operating activities Financing income Income tax expense Profit for the year Capital additions Depreciation and amortisation expenditure Non-current assets In thousands of local currency*	31,890 26,706 - -	7,183 7,099 -	8,668 8,858 - -	867 1,929 26,594 23,890	- - (26,594) (23,890)	48,608 44,592 - -
	31,890 26,706	7,183 7,099	8,668 8,858	27,461 25,819	(26,594) (23,890)	48,608 44,592
	784 777	175 168	244 225	9,856 8,143	- -	48,608 44,592
						11,059 9,313
	203 61 67 63 1,048 822 Americas (USD)	32 37 20 20 108 93 Europe (UK Sterling)	- - - - - -	504 542 7,402 6,478 17,478 17,926	- - - - (54) (54)	11,059 9,313
						509 381 (2,533) (2,229)
						9,035 7,465
						739 640 7,489 6,561 18,580 18,787
	2012 2011	2012 2011
Sales to customers outside the consolidated entity Inter-segment sales Total segment revenue Segment results	33,137 26,489 - -	4,687 4,416 - -
	33,137 26,489	4,687 4,416
	825 662	114 110

Corporate Australia includes both the research and development and corporate head office functions of the Company.
** Excludes internal development costs capitalised but includes third party assets acquired.

*** Segment results represented in local currencies as reviewed by the Chief Operating Decision Maker

Note 3. Finance income

In thousands of AUD	Consolidated
	2012 2011
Interest income	509 381
	509 381

Note 4. Expenses

Note 4. Expenses
Total expenses include: In thousands of AUD	Consolidated
	2012 2011
Employee benefits expense: Defined contribution plans Equity settled share-based payments Other employee benefits Depreciation and amortisation Bad and doubtful debt expense Operating lease rental expenses Note 5. Auditors’ remuneration 2012 and 2011 – Deloitte Touche Tohmatsu In AUD	1,382 1,150 127 (89) 25,316 23,350
	26,825 24,411 7,489 6,561 572 227 1,207 1,258 Consolidated
	2012 2011
Remuneration for audit and review of the financial reports of the Company or any entity in the consolidated entity: Audit and review of financial reports: Auditors of the company Other auditors Remuneration for other services by the auditors of the Company or any entity in the consolidated entity: Taxation services: Auditors of the company Other auditors Other services: Other auditors	168,000 163,760 15,530 15,308 16,800 15,750 1,932 1,531 3,523 -

Note 6. Income tax expense

Recognised in profit for the year

In thousands of AUD Note	Consolidated
	2012 2011
Current tax expense: Current year Prior year adjustments Deferred tax expense: Origination and reversal of temporary differences 13 Total income tax expense in profit and loss	2,326 2,752 (24) (69)
	2,302 2,683
	231 (454)
	2,533 2,229

Numerical reconciliation between income tax expense and profit before tax

In thousands of AUD	Consolidated
	2012 2011
Profit before tax Income tax using the domestic corporate tax rate of 30% Increase in income tax expense due to: Non-deductible expenses Effect of tax rates in foreign jurisdictions Decrease in income tax expense due to: R&D tax incentive Other Prior year adjustments Income tax expense	11,568 9,694
	3,470 2,908 79 11 105 69 (1,097) (751) - 61 (24) (69)
	2,533 2,229

Note 7. Earnings per share

The calculation of basic and diluted earnings per share at 30 June 2012 was based on the profit attributable to ordinary shareholders of $9,035,000 (2011: $7,465,000); a weighted number of ordinary shares outstanding during the year ended 30 June 2012 of 166,977,446 (2011: 166,837,850); and a weighted number of ordinary shares (diluted) outstanding during the year ended 30 June 2012 of 168,086,211 (2011: 167,055,263), calculated as follows:

In thousands of AUD	Consolidated
	2012 2011
Profit for the year Weighted average number of shares used as the denominator (Number)	9,035 7,465 Consolidated
	2012 2011
Number for basic earnings per share: Ordinary shares Effect of employee share plans on issue Number for diluted earnings per share Basic earnings per share (AUD cents) Diluted earnings per share (AUD cents) Note 8. Cash and cash equivalents In thousands of AUD	166,977,446 166,837,850 1,108,765 217,413
	168,086,211 167,055,263

	5.41¢ 4.47¢
	5.38¢ 4.47¢
	Consolidated
	2012 2011
Cash at bank and on hand	12,038 11,635

Note 9. Trade and other receivables

Current

Current
In thousands of AUD	Consolidated
	2012 2011
Trade debtors Less: Allowance for doubtful debts Less: Allowance for returns GST receivable	21,878 14,620 (516) (244) (721) (418)
	20,641 13,958
	84 100
	20,725 14,058

Non-current In thousands of AUD	Consolidated
	2012 2011
Trade debtors	656 1,018

The credit period on sales ranges from 30 to 90 days although in limited circumstances extended payment terms have been offered. No interest is charged on trade debtors.

Ageing of past due but not impaired:

In thousands of AUD	Consolidated
	2012 2011
Past due 90 days	3,772 2,637

The movement in the allowance for doubtful debts in respect of trade receivables is detailed below:

In thousands of AUD	Consolidated
	2012 2011
Balance at beginning of year Amounts written off during the year Increase in provision Balance end of year	244 470 (300) (453) 572 227
	516 244

The consolidated entity has used the following criteria to assess the allowance loss for trade receivables and as a result is unable to specifically allocate the allowance to the ageing categories shown above:

historical bad debt experience;
the general economic conditions;
an individual account by account specific risk assessment based on past credit history; and
any prior knowledge of debtor insolvency or other credit risk.

Included in the consolidated entity‟s trade receivable balance are debtors with a carrying amount of $2,535,000 (2011: $1,975,000) which are 90 days past due at the reporting date which the consolidated entity has not provided for as there has been no significant change in credit quality and the consolidated entity believes that the amounts are still considered recoverable. The consolidated entity does not hold any collateral over these balances.

Note 10. Other current assets

Note 10. Other current assets
In thousands of AUD	Consolidated
	2012 2011
Other prepayments Fair value of hedge asset – forward foreign exchange contracts Note 11. Other financial assets In thousands of AUD	676 463 277 666
	953 1,129
	Consolidated
	2012 2011
Deposits	1,802 1,800

Deposits are term deposits which are held to secure a bank guarantee on leased premises and a foreign exchange facility.

The carrying amount of other financial assets is a reasonable approximation of their fair value.

Note 12. Property, plant and equipment

Plant and Equipment In thousands of AUD	Consolidated
	2012 2011
At cost Accumulated depreciation Leasehold Improvements In thousands of AUD	4,321 3,844 (3,458) (3,052)
	863 792
	Consolidated
	2012 2011
At cost Accumulated depreciation Total property, plant and equipment In thousands of AUD	2,068 1,993 (1,111) (910)
	957 1,083
	Consolidated
	2012 2011
At cost Accumulated depreciation Total written down amount	6,389 5,837 (4,569) (3,962)
	1,820 1,875

Note 12. Property, plant and equipment (continued)

Note 12. Property, plant and equipment (continued)
Plant and Equipment In thousands of AUD	Consolidated
	2012 2011
Carrying amount at start of year Additions Effects of foreign currency exchange Depreciation expense Carrying amount at end of year Leasehold Improvements In thousands of AUD	792 788 445 397 6 (36) (380) (357)
	863 792
	Consolidated
	2012 2011
Carrying amount at start of year Additions Effects of foreign currency exchange Depreciation expense Carrying amount at end of year	1,083 1,276 73 - (1) 6 (198) (199)
	957 1,083

Note 13. Deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Consolidated In thousands of AUD	Assets Liabilities Net
	2012 2011 2012 2011 2012 2011
Property, plant and equipment Intangible assets Trade and other payables Employee benefits Provisions Other current liabilities Unrealised foreign exchange gain Unrealised foreign exchange loss Deferred tax assets/liabilities Set off of deferred tax asset Net deferred tax assets/liabilities	- - 50 - (50) - - - 4,063 4,021 (4,063) (4,021) 468 567 - - 468 567 772 596 - - 772 596 364 243 - - 364 243 - - - - - - - - 41 - (41) - - 296 - - - 296
	1,604 1,702 4,154 4,021 (2,550) (2,319) (1,151) (1,416) (1,151) (1,416) - -
	453 286 3,003 2,605 (2,550) (2,319)

Note 13. Deferred tax assets and liabilities (continued)

Movement in temporary differences during the year:

For year ended 30 June 2012 In thousands of AUD	Consolidated
	Balance 1 July 11 Recognised in income Recognised in equity	Balance 30 June 12
Property, plant and equipment Intangible assets Trade and other payables Employee benefits Provisions Unrealised foreign exchange gain Unrealised foreign exchange loss	- (50) -	(50)
	(4,021) (42) -	(4,063)
	567 (99) -	468
	596 176 -	772
	243 121 -	364
	- (41) -	(41)
	296 (296) -	-
	(2,319) (231) -	(2,550)

For year ended 30 June 2011 In thousands of AUD	Consolidated
	Balance 1 July 10 Recognised in income Recognised in equity Balance 30 June 11
Property, plant and equipment Intangible assets Trade and other payables Employee benefits Provisions Unrealised foreign exchange gain Unrealised foreign exchange loss	28 (28) - - (4,185) 164 - (4,021) 339 228 - 567 510 86 - 596 670 (427) - 243 (162) 162 - - 69 269 (42) 296
	(2,731) 454 (42) (2,319)

Note 14. Intangible assets

The amortisation is recognised in the following line item in the statement of comprehensive income :

In thousands of AUD		Consolidated	Consolidated
		2012	2011
Research and development expenses Cost In thousands of AUD	Consolidated	6,911	6,005
		6,911	6,005

	Software development	Third party software	Total
Balance at 1 July 2010 Fully amortised & offset Effects of foreign currency exchange Internally developed Acquired Balance at 30 June 2011 Balance at 1 July 2011 Fully amortised & offset Effects of foreign currency exchange Internally developed Acquired Balance at 30 June 2012	28,193 (12,490) - 5,655 61	1,551 (205) (44) - 181	29,744 (12,695) (44) 5,655 242
	21,419	1,483	22,902

	21,419	1,483	22,902
	(7,242)	-	(7,242)
	-	3	3
	6,730	-	6,730
	57	164	221
	20,964	1,650	22,614

Amortisation In thousands of AUD		Consolidated	Consolidated
		Software development Third party software Total
Balance at 1 July 2010 Fully amortised & offset Effects of foreign currency exchange Amortisation for year Balance at 30 June 2011 Balance at 1 July 2011 Fully amortised & offset Effects of foreign currency exchange Amortisation for year Balance at 30 June 2012 Carrying amounts In thousands of AUD		14,684 1,103 15,787 (12,490) (205) (12,695) - (3) (3) 5,821 184 6,005
		8,015 1,079 9,094

		8,015 1,079 9,094
		(7,242) - (7,242)
		- 2 2
		6,649 262 6,911
		7,422 1,343 8,765
		Consolidated
	Software development Patents & trademarks Third party software		Total
Balance at 30 June 2011 Balance at 30 June 2012	13,404 - 404		13,808
	13,542 - 307		13,849

Note 15. Trade and other payables

Note 15. Trade and other payables
In thousands of AUD	Consolidated
	2012 2011
Trade and other creditors	4,285 3,365
	4,285 3,365

The average credit period on trade and other payables is 30 days.

Note 16. Employee benefits

Current

Current
In thousands of AUD	Consolidated
	2012 2011
Liability for annual leave Liability for long service leave	1,314 1,084 465 444
	1,779 1,528

Non-current

Non-current
In thousands of AUD	Consolidated
	2012 2011
Liability for long service leave	242 149

Pension plans

Employees of the consolidated entity accumulate pension benefits through statutory contributions by the entities in the consolidated entity as required by the laws of the jurisdictions in which they operate, supplemented by individual contributions.

Share based payments

Performance Rights

On 21 November 2011, the consolidated entity established the Integrated Research Performance Rights and Options Plan (IRPROP). The plan enables the Company to offer performance rights to eligible employees to obtain shares in Integrated Research at no cost contingent upon performance conditions being met. The performance conditions for non-executive employees includes a service period and performance components. The performance conditions for executives includes a service period and profit after tax hurdles. The performance rights are automatically exercised into shares upon the performance conditions being met. The following performance rights were granted during the period:

		Number of
Grant Date	Type	Rights	Vesting Date	Expiry date
December 2011	Non Executive	887,500	15 Oct 2014	15 Nov 2014
December 2011	Executive	665,000	31 Aug 2014	30 Sep 2014

The fair value of the performance rights including assumptions used are as follows:

	Executive	Non-Executive
Grant date	30 Dec 11	30 Dec 11
Fair value at measurement date	$0.38	$0.38
Share price	$0.47	$0.47
Exercise price	nil	nil
Expected volatility	51%	51%
Contractual life (expressed in days)	1,005	1,051
Expected dividends	7.5%	7.5%
Risk-free interest rate (based on 3 year treasury bonds)	3.1%	3.1%

Note 16. Employee benefits (continued)

The fair values of services received in return for performance rights granted to employees is measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on a Binomial option-pricing model.

During the year ended 30 June 2012, the consolidated entity recognised an expense through profit of $83,000 related to the fair value of performance rights granted (2011: $nil).

The following table provides the movement in performance rights during the year:

In thousands of performance rights	Executive Non-Executive Executive Non Executive 2012 2012 2011 2011
Outstanding at the beginning of the year Forfeited during the year Exercised during the year Granted during the year Outstanding at the end of the year Exercisable at the end of the year (vested)	- - - - - (18) - - - - - - 665 888 - -
	665 870 - -
	- - - -

Share Options

On 4 October 2000, the consolidated entity established a share option programme that entitles employees to purchase shares in the entity. In accordance with this programme, options are exercisable at the market price of the shares at the date of grant.

The terms and conditions of the grants made and number outstanding at 30 June 2012 are as follows:

==> picture [10 x 14] intentionally omitted <==

==> picture [10 x 13] intentionally omitted <==

All options vest at the rate of 25% per annum, starting on the first anniversary of the grant date
The contractual life of each option is five years from the grant date
Exercises are settled by physical delivery of shares
Grants marked (*) include performance hurdles as conditions for vesting

Grant date	Exercise	Number of	Grant date	Exercise Price	Number of Instruments
	Price	Instruments			Outstanding
		Outstanding
Sep 2007 (*)	$0.42	1,000,000	Oct 2008 (*)	$0.31	340,000
Apr 2008 (*)	$0.38	350,000	May 2009	$0.28	755,000
Jul 2008 (*)	$0.35	200,000

Note 16. Employee benefits (continued)

The number and weighted average exercise prices of share options is as follows:

In thousands of options	Weighted Average exercise price	Number of options Weighted Average exercise price 2012 2011	Number of options 2011
	2012
Outstanding at the beginning of the year Forfeited during the year Exercised during the year Granted during the year Outstanding at the end of the year Exercisable at the end of the year (vested)	$0.37	3,872 $0.38 (572) $0.42 (655) $0.28 - $- 2,645 $0.37 1,289 $0.38	5,420 (1,523) (25) -
	$0.42
	$0.38
	$-
	$0.36		3,872
	$0.35		1,429

The options outstanding at 30 June 2012 have a weighted average exercise price of $0.36 and a weighted average of contractual life of five years from inception.

During the year ended 30 June 2012, 654,500 options were exercised (2011: 25,000).

The fair values of services received in return for share options granted to employees is measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on the Binomial option-pricing model. The contractual life of the option (five years) is used as an input into this formula. Expectations of early exercise are incorporated into the Binomial formula.

There were no options granted during the 2012 financial year (2011:nil).

During the year ended 30 June 2012, the consolidated entity recognised an expense through profit of $44,000 related to the fair value of options granted (2011: credit of $89,000).

Note 17. Provisions

Current

In thousands of AUD Note	Consolidated
	2012 2011
Employee benefits 16	1,779 1,528
	1,779 1,528

Non-current

In thousands of AUD Note	Consolidated
	2012 2011
Employee benefits 16 Lease make good	242 149 379 379
	621 528

Note 18. Other liabilities

Current

In thousands of AUD	Consolidated
	2012 2011
Fair value of hedge liabilities - forward foreign exchange contracts Deferred revenue Non-Current In thousands of AUD	102 18 9,730 8,719
	9,832 8,737
	Consolidated
	2012 2011
Deferred revenue	2,053 540

Note 19. Capital and reserves

Share capital In thousands of shares	Ordinary shares
	2012 2011
On issue 1 July Issued against employee options exercised On issue 30 June	166,852 166,827 655 25
	167,507 166,852

Effective 1 July 1998, the Company Law reform Act abolished the concept of par value shares and the concept of authorised capital. Accordingly, the company does not have authorised capital or par value in respect of its issued shares.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company‟s residual assets.

Hedging reserve

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

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the consolidated entity, as well as from the translation of liabilities that hedge the consolidated entity‟s net investment in a foreign subsidiary.

Employee benefit reserve

The employee benefit reserve arises on the grant of either share options or performance rights to employees under the Integrated Research Performance Rights and Option Plan (established November 2011) or the Employee Share Option Plan (established October 2000). Amounts are transferred out of the reserve and into share capital when the options or performance rights are exercised. Refer to note 16 for further details.

Note 19. Capital and reserves (continued)

Dividends

Dividends recognised in the current year by the company are:

In thousands of AUD	Cents per share	Total amount Franked/ unfranked Date of payment
2012 Final 2011 Interim 2012 Total amount 2011 Final 2010 Interim 2011 Total amount
	2.5	4,172 75% franked 16 Sep 2011
	2.0	3,340 40% franked 16 Mar 2012
		7,512
	1.0 1.5 2.5	1,668 45% franked 17 Sep 10 2,503 50% franked 11 Mar 11 4,171

After the end of the financial year, the following dividend was proposed by the directors. The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 June 2012 and will be recognised in subsequent financial statements:

	Cents per	Total amount	Franked/	Date of payment
In thousands of AUD	share		unfranked
Final 2012	3.0	5,033	70% franked	14 Sep 12

The final dividend declared of 3.0 cents together with the interim dividend paid in March 2012 of 2.0 cents takes total dividends for the 2012 financial year to 5.0 cents.

Franking account disclosure:

In thousands of AUD	Company
	2012 2011
Adjusted franking account balance Impact on franking account balance of dividends not recognised	1,669 1,446 (1,510) (1,340)

Note 20. Financial instruments

Capital risk management

The consolidated entity manages its capital to ensure that controlled entities will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of treasury management.

The capital structure of the consolidated entity consists of cash and cash equivalents and equity attributable to equity holders of the company, comprising issued capital, reserves, and retained earnings as disclosed in Notes 8 and 19 respectively.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.

Financial risk management objectives

The Board of Directors has overall responsibility for the establishment and oversight of the consolidated entity‟s financial management framework. The Board has an established Audit and Risk Committee, which is responsible for developing and monitoring the consolidated entity‟s financial management policies. The Committee provides regular reports to the Board of Directors on its activities.

The Audit and Risk Committee oversees how Management monitors compliance with risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks.

The main risks arising from the consolidated entity‟s financial instruments are currency risk, credit risk, liquidity risk and cash flow interest rate risk.

The consolidated entity seeks to minimise the effects of these risks, where deemed appropriate, by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the consolidated entity‟s policies on foreign exchange risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. The consolidated entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Market risk

The consolidated entity‟s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and cash flow interest rate risks. The consolidated entity enters into foreign exchange forward contracts to hedge the exchange rate risk arising from transactions not recorded in an entity‟s functional currency.

Note 20. Financial instruments (continued)

Foreign currency risk management

The consolidated entity undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.

The carrying amount of the consolidated entity‟s foreign currency denominated monetary assets and monetary liabilities at the reporting date that are denominated in a currency that is different to the functional currency of the respective entities undertaking the transactions is as follows:

In thousands of AUD	Consolidated	Consolidated
	Liabilities	Assets
	2012 2011	2012 2011
US Dollar Euro UK Sterling	- - - - - -	3,400 1,700 2,507 1,611 9 9

Foreign currency sensitivity

At 30 June 2012, if the US Dollar, Euro and UK sterling weakened against the Australian dollar by the percentage shown, with all other variables held constant, net profit for the year would increase (decrease) by:

In thousands of AUD		Consolidated
	US Impact	Euro Impact	Sterling Impact
	2012 2011	2012 2011	2012 2011
Net profit Retained earnings Change in currency (i) – 10% decrease	378 189 378 189	279 179 279 179	1 1 1 1

(i) This has been based on the change in the exchange rate against the Australian dollar in the financial years ended 30 June 2012 and 30 June 2011.

The sensitivity analysis has been based on the sensitivity rates used when reporting foreign currency risk internally to key management personnel and represents management‟s assessment of the possible change in foreign exchange rates based on historical volatility.

In management‟s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk as the year end exposure does not necessarily reflect the exposure during the course of the year. The consolidated entity includes certain subsidiaries whose functional currencies are different to the consolidated entity presentation currency. The main operating entities outside of Australia are based in the United States and the United Kingdom. As stated in the consolidated entity‟s accounting policies per Note 1, on consolidation the assets and liabilities of these entities are translated into Australian dollars at exchange rates prevailing on the year end date. The income and expenses of these entities is translated at the average exchange rates for the year. Exchange differences arising are classified as equity and are transferred to a foreign exchange translation reserve. The consolidated entity‟s future reported profits could therefore be impacted by changes in rates of exchange between the Australian Dollar and the United States Dollar and the Australian Dollar and the UK Sterling.

Note 20. Financial instruments (continued)

Forward foreign exchange contracts

The consolidated entity is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the AUD. The currencies giving rise to this risk are primarily United States Dollar and UK Sterling.

The consolidated entity uses forward exchange contracts to hedge its foreign currency risk. The forward exchange contracts have maturities of less than two years after the year end date.

The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and measures them at fair value. The following table details the forward foreign currency contracts outstanding as at reporting date:

Outstanding contracts	Average Exchange Rate	Foreign Currency	Contract Value	Fair Value
	2012 2011	2012 FC’000 2011 FC’000	2012 A$’000 2011 A$’000	2012 A$’000 2011 A$’000
Consolidated Sell US Dollar Less than 3 months 3 to 6 months 6 to 9 months 9 to 12 months Sell UK Sterling Less than 3 months Sell Euros Less than 3 months 3 to 6 months 6 to 9 months 9 to 12 months	1.01 0.89 1.01 0.99 1.01 1.02 - 1.01 - 0.71 0.71 0.71 0.73 0.76 0.72 - 0.72	3,500 2,650 2,250 1,600 3,250 1,100 - 1,500 - 1,100 300 300 300 300 400 - 200	3,468 2,981 2,228 1,619 3,205 1,082 - 1,481 - 1,540 420 424 409 395 559 - 277	8 487 (11) 98 (51) 26 - 25 - 168 12 47 (3) 14 5 - (2)
				175 648

These hedge assets are classified as a level 2 fair value measurement, being derived from inputs rather than quoted prices that are observable for the asset either directly (ie as prices) or indirectly (ie derived from prices).

Interest rate risk management

The consolidated entity is exposed to interest rate risk on the cash held in bank deposits. Cash in bank and term deposits of $13,840,000 were held by the consolidated entity at the reporting date, attracting an average interest rate of 4.2% (2011: 4.6%) If interest rates had been 50 basis points higher or lower and all other variables were held constant, the consolidated entity‟s net profit would increase/(decrease) by $69,000 (2011: $67,000).

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts.

The consolidated entity does not have any significant credit risk exposure to any single counterparty or any consolidated entity of counterparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

Note 20. Financial instruments (continued)

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the consolidated entity‟s short, medium and long-term funding and liquidity management requirements.

The consolidated entity manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

All creditor and other payables shown in Note 15 for both 2012 and 2011 carry no interest obligation and have a maturity of less than three months.

Fair value of financial instruments

The carrying value of financial assets and financial liabilities of the consolidated entity is a reasonable approximation of their fair value.

Note 21. Operating leases

Non-cancellable operating lease rentals is for office space with payables as follows:

In thousands of AUD	Consolidated
	2012 2011
Less than one year Between one and five years Greater than five years	1,140 1,004 3,303 3,648 - 542
	4,443 5,194

Note 22. Consolidated entities

Parent entity: Integrated Research Limited Subsidiaries: Integrated Research, Inc Integrated Research UK Limited	Country of incorporation	Ownership interest
		2012 2011
	Australia USA UK	100% 100% 100% 100%

Note 23. Reconciliation of cash flows from operating activities

In thousands of AUD	Consolidated
	2012 2011
Profit for the year Depreciation and amortisation Provision for doubtful debts Allowance for returns Interest received Share-based payments expense Net exchange differences Change in operating assets and liabilities: (Increase)/decrease in trade debtors (Increase)/decrease in future income tax benefit (Increase)/decrease in other operating assets Increase/(decrease) in trade and other payables Increase/(decrease) in other operating liabilities Increase/(decrease) in provision for income taxes payable Increase/(decrease) in provision for deferred income taxes Increase/(decrease) in other provisions Net cash from operating activities	9,035 7,465 7,489 6,561 272 (226) 303 (655) (509) (381) 127 (89) 117 181 (6,880) 1,867 (167) 456 580 (538) 920 275 2,628 (1,703) (11) 1,453 398 (868) 344 56
	14,646 13,854

Note 24. Key management personnel disclosures

The following were key management personnel of the consolidated entity at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period:

Directors (full year)

Steve Killelea – Chairman Mark Brayan – Chief Executive Officer Alan Baxter John Brown Kate Costello Peter Lloyd Clyde McConaghy

Other key management personnel (full year)

Peter Adams - Chief Financial Officer Alex Baburin - GM – Research & Development Andre Cuenin – President Americas David Leighton - Company Secretary (retired July 2012) Pierre Semaan - Vice President – Asia Pacific Brian Bigley – Vice President – Europe

Other key management personnel (part year)

Geoff Bryant – Vice President Consulting (resigned Nov 2011) Andrew Levido- GM - Global Sales (Appointed May 2012)

Note 24. Key management personnel disclosures (continued)

Individual directors and executives compensation disclosures

Apart from the details disclosed in this note, no director has entered into a material contract with the consolidated entity since the end of the previous financial year and there were no material contracts involving directors‟ interests existing at year-end.

Key management personnel transactions with the consolidated entity

It is the consolidated entity‟s policy that service contracts for executive directors and senior executives be unlimited in term but capable of termination by either party on one months notice and that the consolidated entity retains the right to terminate the contract immediately by payment in lieu of notice or a severance payment or an amount for redundancy equal to the scale of payments prescribed in the NSW Employment Protection Act.

Equity instruments

All options refer to options over ordinary shares of Integrated Research Limited, which are exercisable on a one-for-one basis under the Employee Share Option Plan (ESOP).

All performance rights refer to performance rights over ordinary shares of Integrated Research Limited, which are exercisable on a one-for-one basis under the Integrated Research Performance Rights and Option Plan (IRPROP).

Options over equity instruments granted as compensation

The movement during the reporting year in the number of options over ordinary shares in Integrated Research Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

Current Year	Held at 1 July 2011 Granted as compensation Exercised Other changes Held at 30 June 2012 Vested during the year Vested and exercisable at 30 June 2012*
Directors Mark Brayan Executives Peter Adams Alex Baburin Andre Cuenin Pierre Semaan John Dunne Prior Year
	1,000,000 - - - 1,000,000 250,000 500,000

	350,000 - - - 350,000 87,500 87,500
	200,000 - - (160,000) 40,000 10,000 10,000
	300,000 - - - 300,000 75,000 75,000
	200,000 - - - 200,000 50,000 50,000
	50,000 - (35,000) 15,000 7,500 7,500
	Held at 1 July 2010 Granted as compensation Exercised Other changes Held at 30 June 2011 Vested during theyear Vested and exercisable at 30 June 2011*
Directors Mark Brayan Executives Peter Adams Alex Baburin Andre Cuenin Rick Ferguson Pierre Semaan John Dunne	1,000,000 - - - 1,000,000 - 250,000 350,000 - - - 350,000 - - 200,000 - - - 200,000 - - 300,000 - - - 300,000 - - 300,000 - - (300,000) - - - 200,000 - - - 200,000 - - 50,000 - - - 50,000 - 35,000

Other changes represent options that expired or were forfeited during the year

There were no options granted as compensation during the current year.

25% of options granted vest annually on the anniversary of the grant date, and may also be subject to the consolidated entity achieving certain performance hurdles. Options expire on the earlier of their expiry date or termination of the individual‟s employment. No options have been granted since the end of the financial year. The options were provided at no cost to the recipients.

Note 24. Key management personnel disclosures (continued)

Performance rights over equity instruments granted as compensation

The movement during the reporting year in the number of performance rights over ordinary shares in Integrated Research Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

Current Year	Held at 1 July 2011 Granted as compensation Exercised Other changes Held at 30 June 2012 Vested during the year Vested and exercisable at 30 June 2012*
Directors Mark Brayan Executives Peter Adams Alex Baburin Brian Bigley Andre Cuenin Pierre Semaan John Dunne
	- 170,000 - - 170,000 - -

	- 100,000 - - 100,000 - -
	- 75,000 - - 75,000 - -
	- 65,000 - - 65,000 - -
	- 75,000 - - 75,000 - -
	- 65,000 - - 65,000 - -
	- 75,000 - - 75,000 - -

Other changes represent performance rights that expired or were forfeited during the year

The performance rights offered to executives are subject to the consolidated entity achieving profit after tax performance hurdles. The next available testing date is August 2014. Performance rights expire on the earlier of their expiry date or termination of the individual‟s employment. No performance rights have been granted since the end of the financial year. The performance rights were provided at no cost to the recipients.

There were no performance rights granted in the 2011 financial year.

Note 24. Key management personnel disclosures (continued)

Movements in shares

The movement during the reporting period in the number of ordinary shares in Integrated Research Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

			Received
	Held at		on	Received as		Held at
	1 July		exercise of	compensa-		30 June
Current Year	2011	Purchases	options	tion	Sales	2012
Directors
Non-executive
Alan Baxter	100,000	-	-	-	-	100,000
John Brown	101,000	-	-	-	-	101,000
Kate Costello	200,000	-	-	-	-	200,000
Steve Killelea	94,834,951	-	-	-	-	94,834,951
Executive
Mark Brayan	25,000	-	-	-	-	25,000

			Received
	Held at		on	Received as		Held at
	1 July		exercise of	compensa-		30 June
Prior Year	2010	Purchases	options	tion	Sales	2011
Directors
Non-executive
Alan Baxter	-	100,000	-	-	-	100,000
John Brown	101,000	-	-	-	-	101,000
Kate Costello	200,000	-	-	-	-	200,000
Steve Killelea	94,834,951	-	-	-	-	94,834,951
Executive
Mark Brayan	25,000	-	-	-	-	25,000

Shareholdings at the date of the Directors‟ Report for existing Key Management Personnel remain unchanged.

Other transactions with the consolidated entity

There were no other transactions between the key management personnel, or their personally-related entities, and the consolidated entity.

Note 25. Related parties

The consolidated entity has a related party relationship with its key management personnel (see note 24).

At 30 June 2012 Mr Steve Killelea, the Chairman of the Company, owned either directly or indirectly 56.41% of the Company (2011: 56.84%).

Note 26. Parent entity disclosures

Note 26. Parent entity disclosures
Financial Position In thousands of AUD	Parent Entity
	2012 2011
Assets Current assets Non-current assets Total Assets Liabilities Current Liabilities Non-current liabilities Total Liabilities Net Assets Equity Issued Capital Employee benefits Reserve Hedging reserve Retained Earnings Total Equity Financial Performance In thousands of AUD	19,055 20,810 17,479 17,926
	36,534 38,736 6,672 10,488 3,861 3,434
	10,533 13,922
	26,001 24,814
	1,175 845 276 266 - 147 24,550 23,556
	26,001 24,814
	Parent Entity
	2012 2011
Profit for the year Other comprehensive income Total comprehensive income	8,470 6,864 (147) 245
	8,323 7,109

Note 27. Subsequent events

For dividends declared after 30 June 2012 see Note 19 in the financial statements. The financial effect of dividends declared and paid after 30 June 2012 have not been brought to account in the financial statements for the year ended 30 June 2012 and will be recognised in subsequent financial reports.

No other transaction or event of a material or unusual nature has arisen in the interval between the end of the financial year and the date of this report, which is likely, in the opinion of the directors of the company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future financial years.

AI assistant

INTEGRATED RESEARCH LIMITED — Annual Report 2012

65142_rns_2012-08-15_d1b3d3e2-509d-433e-a36c-43ac83e9454d.pdf

Appendix 4E Preliminary final report

Name of entity