Bradken Limited Annual Report 2015 - page 81

Notes to the consolidated financial statements
30 June 2015
4 Critical accounting estimates and judgements
(a) Critical accounting estimates and assumptions
(i) Estimated impairment of assets or cash generating units
(ii) Estimated percentage completion for major contracts
(iii) Equity accounting for Austin Engineering
(iv) Intangibles
(v) Taxes
(vi) Restructuring provision
(vii) Share-based payments
The group values identifiable intangibles acquired in a business combination based on a combination of independent valuations
in some cases and management's estimate of the net present value of estimated future cash flows of the assets. Identifiable
intangible assets are amortised over their estimated useful lives. Given the estimates involved, management review the carrying
value of these assets annually for impairment.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning
A restructuring provision is recognised for the expected costs associated with restructuring where there is a detailed formal plan
for restructure and a valid expectation has been raised to those affected. The group estimates a number of costs including
termination benefits and costs associated with decommissioning of the affected sites and does not include costs associated with
ongoing activities which are yet to be incurred. Please refer to note 7(c) for further details.
The Group initially measures the cost of cash-settled transactions with employees using a binomial model to determine the fair
value of the liability incurred. The Group initially 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. Estimating fair value for share-based payment
transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of
the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected
life of the share option, volatility and dividend yield and making assumptions about them. For cash-settled share-based payment
transactions, the liability needs to be remeasured at the end of each reporting period up to the date of settlement, with any
changes in fair value recognised in profit or loss. This requires a reassessment of the estimates used at the end of each
reporting period. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed
in Note 35.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the
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 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.
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note
2(p). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These
calculations require the use of assumptions. Refer to note 16 for details of these assumptions and the potential impact of
changes to the assumptions.
The Group reviews the percentage of completion for its major contracts monthly including assessing costs to be incurred to
complete the project in accordance with the accounting policy stated in note 2(e) and note 2(l). These assessments require an
estimate of the remaining labour and material costs for the projects.
The Group has equity accounted the latest available published results of Austin Engineering Limited for the half year ending 31
December 2014 and extrapolated these to 30 June 2015 based on market conditions, market updates and analyst estimates.
Differences identified when Austin Engineering Limited publishes results for the 2015 financial period will be adjusted in Bradken
Limited's interim report for the half year ending 31 December 2015.
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Bradken Limited
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