NOTE 03
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 or may involve a higher degree of judgement
or complexity within the next financial year are
discussed below.
(i)
Defined benefit plan
Various actuarial assumptions are required when
determining the Group’s defined benefit obligations.
See note 8(g) and 1(z).
(ii) Timing of project completion
The Group continues a capital investment program,
with the continued delivery being reliant on industry
demand, the availability of requisite material, project
resources and applicable regulatory approvals.
(iii) Fair value
In order to comply with relevant accounting standards
see note 1(p), ARTC undertook a fair value assessment
of the Group’s infrastructure assets, which resulted in
ARTC taking up a reversal of impairment of $2.1m (2013:
$482.0m impairment loss) against the carrying value of
the assets for the North South rail corridor as they could
be supported by the discounted forecast net cash flows.
A revaluation decrement of $58.5m (2013: increment
$160.8m) has been taken up against the carrying value
of the East West rail corridor as the discounted forecast
net cash flows indicated a reduction in the carrying
value of the assets. In addition a revaluation increment
of $29.4m has been taken up against the carrying value
of the Hunter Valley rail corridor as supported by the
discounted forecast net cash flows. See note (8(c)).
(iv) Deferred tax recognition
The net deferred tax asset of $228.5m comprises a
deferred tax asset of $533.9m netted by deferred tax
liabilities of $305.4m.The recognition of the deferred
tax asset of $533.9m 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 $305.4m
comprises the difference between the tax base
and carrying value relating to various assets and
liabilities. See note 1(n).
(v) Incident recognition
The provision for incidents of $11.6m (2013: $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. See note 1(k) and
8(f)(ii).
(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. See note 1(w)(i).
(vii) Provisions - Long service leave
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. For long service leave
the future benefit is altered to take into account
probability of reaching entitlement and inflationary
increases. These benefits are discounted to determine
its present value. The discount for long service leave 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. See note 1(w)(ii).
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