2021 Annual Report web - Flipbook - Page 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Significant accounting judgments, estimates and assumptions (continued)
(a) Incremental Borrowing Rate
The Group has applied as a key judgement on the calculation of right-of-use assets and lease liabilities. The
lease liabilities are measured at amortised cost using the incremental rate to borrow the funds necessary to
obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic
environment of 3.66% for 31 December 2020.
(b) Employee benefits
Employee benefits are accrued at the current rate of earnings. Employee benefits expected to be settled within
one year have been measured at the amounts expected to be paid when the liability is settled, plus related oncosts. Employee benefits payable later than one year have been measured at the present value of the estimated
future cash outflows based on Australian corporate bonds at the reporting date.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
(d) Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment. The deprecation and amortisation charge will increase where the useful lives
are less than the previously estimated lives, or the asset is technically obsolete.
(e) Determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods
after termination options) are only included in the lease term if the lease is reasonably certain to be extended
(or not terminated). Potential future cash outflows have not been included in the lease liabilities because it is
not reasonably certain that leases will be extended (or not terminated). The assessment is reviewed if a
significant event or a significant change in circumstances occurs which effects this assessment and that is within
the control of the lessee.
(f) Determining whether a grant contains enforceable and sufficiently specific obligations
The interaction between AASB 15 and AASB 1058 require management to assess whether the government
grants and other funding received need to be accounted for under AASB 15 or AASB 1058. Key to this
assessment is whether the government grants and other funding agreements contain:
a contract with a customer that creates ‘enforceable’ rights and obligations, and
the contract includes ‘sufficiently specific’ performance obligations.
Critical judgement was applied by management in assessing whether a promise is ‘sufficiently specific’, taking
into account all facts and circumstances and any conditions specified in the arrangement (whether explicit or
implicit) regarding the promised goods or services. This involves firstly identifying all the activities of Group is
required to perform under the contract, and determining which activities transfer goods and services to the
customer. Where there are multiple goods or services transferred, the management must assess whether each
good or service is a distinct performance obligation or should be combined with other goods or services to
form a single performance obligation.