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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2015
70
QANTAS ANNUAL REPORT 2015
22. PROVISIONS
Qantas Group
2015
$M
2014
$M
CURRENT
Annual leave 253 259
Long service leave 291 316
Redundancies and other employee benefits 138 206
Total current employee benefits 682 781
Onerous contracts 123
Make good on leased assets 63 10
Insurance, legal and other 72 62
Total other current provisions 136 95
Total current provisions 818 876
NON-CURRENT
Total non-current employee benefits 41 61
Onerous contracts 2 3
Make good on leased assets 211 177
Insurance, legal and other 141 164
Total other non-current provisions 354 344
Total non-current provisions 395 405
Changes in Accounting Estimates – Discount Rates
Qantas has changed its estimate of the discount rates used to calculate the present value of employee benefits in accordance with
AASB 119: Employee Benefits (AASB 119). AASB 119 requires employee benefit provisions to be discounted to their present value
using a discount rate determined by reference to market yields at the end of the reporting period on high quality corporate bonds.
Previously, it was determined that there was no deep market in Australia for such bonds and therefore, the market yields at the end
of the reporting period for government bonds was used. In March 2015, the Group of 100 commissioned the actuarial firm Milliman
toperform an assessment of the depth of Australia’s high quality corporate bond market. In their report released in April 2015,
Milliman concluded that it is generally accepted practice that bonds rated AA or above are considered high quality and therefore
there is now sufficient evidence to support a conclusion that the high quality corporate bond market in Australia is deep. From
this date, as required by AASB 119 the Group has changed the rate it uses to discount its Employee Benefit Provisions from State
Government Bond Rates to the Corporate Bond Rate.
During the year, the discount rate determined with reference to Corporate Bonds was higher than State Government Bonds. However,
a significant reduction in discount rates due to market movements has offset the increase in discount rate resulting from the change
to Corporate Bond Rates. The net favourable impact of the change in discount rates on Employee Benefits provisions of $14 million
was recognised in the Consolidated Income Statement for the year ended 30 June 2015.
Reconciliations of the carrying amounts of each class of provision, other than employee benefits, are set out below:
Qantas Group
2015
$M
Opening
Balance
Provisions
Made
Provisions
Utilised
Unwind of
Discount
Closing
Balance Current Non-current Total
Reconciliations
Onerous contracts 26 –(23) – 3 1 2 3
Make good on leased assets 187 104 (26) 9274 63 211 274
Insurance, legal and other 226 36 (57) 8213 72 141 213
Total 439 140 (106) 17 490 136 354 490