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 or may involve a higher degree of judgement or complexity within the next financial year
are set out below.
(i) Defined benefit plan
Various actuarial assumptions are required when determining the Group’s defined benefit
obligations. See note 6(g). The emergence of a deep high quality corporate bond market as
reported by the Milliman report commissioned by the G100 group of companies has required ARTC
to move from using the Australian Government Bond rate to the new Australian Corporate Bond
rate in line with the relevant accounting standard (AASB 119). This change in accounting estimate
moving from the Australian Government Bond rate of 3.03% to the Australian Corporate Bond rate
of 4.61% has reduced the defined benefit liability by an amount of $6.3m from $12.9m to $6.6m.
(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 the Group undertook a fair value
assessment of the infrastructure assets, the results of which are detailed in notes 6(c) and 10(d).
Key assumptions when completing the assessment are: the forecast data including; revenue,
expense and capital cash flows and the discount rate used. Therefore management has reviewed
the cash flow and made adjustments to account for any known variables and to ensure a market
participant would view the positions taken as reasonable. In addition the discount rate used is
compiled with the support of an external market specialist. Note 10(d) contains further detail on
the process and valuation technique.
(iv) Deferred tax recognition
The Group has recognised a net deferred tax asset as set out in note 6(d). The Group has
recognised a deferred tax asset in relation to deductible temporary differences to the extent that a
deferred tax liability exists in relation to taxable temporary differences, which are expected to reverse
over the same periods. In addition, excess deferred tax asset has been recognised to the extent that
it is probable that taxable profit will be available against which the deductible temporary differences
can be utilised. The recognition of the net deferred tax asset is considered appropriate following an
assessment of the overall forecast accounting profit and tax payable position of the Group over the
next five years.
(v) Incident recognition
The provision for incidents recognises the Group’s estimated liability with respect to costs associated
with damage caused by incidents such as force majeure, derailments, including the potential for third
party and/or insurance recoveries. See note 1(k) and 6(f)(ii).
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