(d) Fair value measurements (continued)
(v) Valuation processes
The Group calculates the fair value for infrastructure assets using the income method approach,
whereby the measurement reflects current market expectations of future cashflows discounted to
their present value for each cash generating unit that would be considered reasonable by a normal
market participant. The estimated future cash flows are discounted to their present value using a
post-tax discount rate that reflects current market assessments of the time value of money and the
business risk.
ARTC’s policy is to revalue on a triennial basis or if in an intervening year the fair value of the revalued
asset class differs materially from its carrying amount. Property, plant and equipment reviews are
undertaken annually to ensure significant movements are identified and accounted for. At 30 June 2015
the Group undertook a fair value assessment on an income method approach as there are no similar
market quoted assets. The net present value of the cash flows for each business unit is compared with
the current carrying value and any significant variance is taken to the financial statements.
The main level 3 inputs used by the Group for this process are derived and evaluated as follows:
•
•
The Interstate business unit comprises the East West and North South CGU’s, the underlying cash
flows are compiled on the basis that the CGU’s operate as a combined Interstate business unit.
•
•
Due to the long life of the asset base of the business, cash flows are considered for the shorter
of mine life or 20 years.
•
•
Expected cash flows are based on the terms of existing contracts, along with the entity’s
knowledge of the business and assessment of the likely current economic environment impacts,
adjusted to account for an expected arm’s length market participant’s view of cash flow risks.
•
•
Growth rates for income are derived from the underlying contract data, GDP growth rates,
inflation estimates and pricing assumptions. Long term average growth rates used range from
1.6% to 5.0% (2014: 2.4% to 7.2%).
•
•
Discount rates are determined using an external expert assessment to calculate a post-tax rate
that reflects current market assessments of the time value of money and the risk specific to the
business providing a range of 7.0% to 7.3% (2014: 7.1% to 7.9%).
NOTE 10
FINANCIAL RISK MANAGEMENT
(CONTINUED)
96
