Qantas 2011 Annual Report Download - page 60

THE QANTAS GROUP 58
for the year ended 30 June 2011
Notes to the Financial Statements continued
J TAX CONSOLIDATION
Qantas and its Australian wholly-owned controlled entities, trusts and
partnerships are part of a tax consolidated group. As a consequence,
all members of the tax consolidated group are taxed as a single entity.
K RECEIVABLES
Current receivables are recognised and carried at original invoice
amount less impairment losses. Bad debts are written off as incurred.
Non-current receivables are carried at the present value of future
net cash inows expected to be received.
L CONTRACT WORK IN PROGRESS
Contract work in progress represents the gross unbilled amount
expected to be collected from customers for contract work performed
to date. It is measured at cost plus prot recognised to date, in
accordance with Note (G), less an allowance for foreseeable losses
and less progress billings. Cost includes all expenditure related
directly to specic projects and an allocation of xed and variable
overheads incurred in the Qantas Group’s contract activities based
on normal operating capacity.
Contract work in progress is presented as part of trade and other
receivables in the Consolidated Balance Sheet for all contracts in
which costs incurred plus recognised prots exceed progress billings.
If progress billings exceed costs incurred plus recognised prots, then
the difference is presented as deferred income in the Consolidated
Balance Sheet.
M INVENTORIES
Inventories are measured at the lower of cost and net realisable value.
The costs of engineering expendables, consumable stores and work
in progress are assigned to the individual items of inventories on the
basis of weighted average costs.
N IMPAIRMENT
Non-nancial Assets
The carrying amounts of non-nancial assets (other than inventories
and deferred tax assets) are reviewed at each balance date to
determine whether there is any indication of impairment. If any such
indication exists, the assets’ recoverable amount is estimated. For
goodwill and intangible assets with indenite lives, the recoverable
amount is estimated each year.
The recoverable amount of assets is the greater of their fair value less
costs to sell and value in use. Assets which primarily generate cash
ows as a group, such as aircraft, are assessed on a cash generating
unit (CGU) basis inclusive of related infrastructure and intangible assets
and compared to net cash ows for the CGU. Estimated net cash ows
used in determining recoverable amounts are discounted to their net
present value using a pre-tax discount rate that reects current
market assessments of the time value of money and the risks specic
to the asset.
An appropriate impairment charge is made if the carrying amount
of an asset or CGU exceeds its recoverable amount. The impairment
is expensed in the year in which it occurs. An impairment loss is
reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss with respect
to goodwill is not reversed.
Financial Assets
The carrying value of nancial assets is assessed at each reporting
date to determine whether there is any objective evidence that it is
impaired. A nancial asset is considered to be impaired if objective
evidence indicates that one or more events have had a negative
effect on the estimated future cash ows of that asset.
An impairment loss in respect of a nancial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash ows
discounted at the asset’s original effective interest rate.
O ASSETS CLASSIFIED AS HELD FOR SALE
Non-current assets, or disposal groups comprising assets and
liabilities, that are expected to be recovered primarily through sale
rather than through continued use are classied as held for sale.
Immediately before classication as held for sale, the measurement
of the assets or components of a disposal group is brought up-to-
date in accordance with applicable Accounting Standards. Thereafter,
the assets, or disposal group, are measured at the lower of carrying
amount and fair value less costs to sell. Impairment losses on initial
classication as held for sale and subsequent gains or losses on
remeasurement are recognised in the Consolidated Income Statement.
P PROPERTY, PLANT AND EQUIPMENT
Owned Assets
Items of property, plant and equipment are stated at cost or deemed
cost less accumulated depreciation and impairment losses. Items of
property, plant and equipment are initially recorded at cost, being the
fair value of the consideration provided plus incidental costs directly
attributable to the acquisition.
The cost of acquired assets includes the initial estimate at the time
of installation and during the period of use, when relevant, the costs
of dismantling and removing the items and restoring the site on
which they are located, and changes in the measurement of existing
liabilities recognised for these costs resulting from changes in the
timing or outow of resources required to settle the obligation or
from changes in the discount rate. The unwinding of the discount
is treated as a nance charge. The cost also may include transfers
from hedge reserve of any gain or loss on qualifying cash ow
hedges of foreign currency purchases of property, plant and
equipment in accordance with Note (F).
Borrowing costs associated with the acquisition of qualifying assets,
such as aircraft and the acquisition, construction or production of
signicant items of other property, plant and equipment, are
capitalised as part of the cost of the asset to which they relate.
Depreciation
Depreciation is provided on a straight-line basis on all items of
property, plant and equipment except for freehold land which is not
depreciated. The depreciation rates of owned assets are calculated
so as to allocate the cost or valuation of an asset, less any estimated
residual value, over the asset’s estimated useful life to the Qantas
Group. Assets are depreciated from the date of acquisition or, with
respect to internally constructed assets, from the time an asset is
completed and available for use. The costs of improvements to assets
are depreciated over the remaining useful life of the asset or the
estimated useful life of the improvement, whichever is the shorter.
Assets under nance lease are depreciated over the term of the
relevant lease or, where it is likely the Qantas Group will obtain
ownership of the asset, the life of the asset.
1. Statement of Signicant Accounting Policies continued