NOTE 02
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
(a) Critical accounting estimates
and assumptions
The Group makes estimates and assumptions
concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that may
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.
(i) Defined benefit plan
Various actuarial assumptions are required when
determining the Groups’ defined benefit obligations.
(ii) Timing of project completion
The Group is undertaking an extensive investment
program in the coming years with the continued
delivery which is reliant on the availability of
requisite material, project resources and applicable
regulatory approvals.
(iii) Fair value
In order to comply with relevant accounting standards,
ARTC undertook a fair value assessment of the Group’s
infrastructure assets, which resulted in ARTC taking
up an impairment loss of $482.0m (2012: $290.2m)
against the carrying value of the assets for the North
South Corridor as they could not be supported by
the forecast net cash flows. In addition a revaluation
increment of $160.8m (2012: decrement $311.9m) has
been taken up against the carrying value of the East
West Corridor as the forecast net cash flows indicated
a significant increase in value.
(iv) Deferred tax recognition
The recognition of the deferred tax asset of $527.8m
is considered appropriate following an assessment
of the overall forecast profit and taxation position of
the Group. A major component of the deferred tax
asset relates to the forecast utilisation of temporary
differences over the next five years. The other
significant element relates to the recognition of the
deferred tax asset corresponding to the deferred tax
liability, which is mandatory due to the matching
timing of the reversals. The deferred tax liability of
$281.6m comprises the difference between the tax
base and carrying value relating to various assets
and liabilities.
(v) Incident recognition
The provision for incidents of $21.9m recognises
the Group’s estimated liability with respect to costs
associated with damage caused by incidents such as
derailments, including the potential for third party
and/or insurance recoveries.
(vi) Provisions
Short-term employee benefits
Short term employee benefit obligations are measured
on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for
the amount expected to be paid under short-term cash
bonus if the Group has a present legal or constructive
obligation to pay this amount as a result of past service
provided by the employee and the obligations can be
measured reliably.
Other long-term employee benefits
The Group’s net obligation in respect of long-term
employee benefits is the amount of future benefit
that employees have earned in return for their
service in the current and prior periods. The future
benefit is altered to take into account probability
of reaching entitlement and inflationary increases.
That benefit is discounted to determine its present
value. The discount is the yield at the reporting date
on government bonds that have maturity dates
approximating the terms of the Group’s obligations
and that are denominated in the currency in which the
benefits are expected to be paid.
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