Endeavour Energy Annual Performance Report - Parliament of New ...

09
Financial
statements
Notes to the Financial Statements
For the year ended 30 June 2011
2 Statement of Significant
Accounting Policies
continued
(i)
Inventories
Inventories are measured at the
lower of cost and net realisable
value. Costs incurred in bringing
each product to its present location
and condition are accounted for
as follows:
(i)
(ii)
Raw materials – purchase
cost on weighted average
cost basis; and
Finished goods and workin-progress
– cost of direct
material, labour and a
proportion of manufacturing
overheads based on normal
operating capacity.
Net realisable value is the estimated
selling price in the ordinary course
of business, less the estimated costs
of completion and selling costs.
(j)
Impairment
Financial assets
(including receivables)
A financial asset not carried at
fair value through profit or loss
is assessed at each reporting
date to determine whether there
is objective evidence that it is
impaired. A financial asset is
impaired if objective evidence
indicates that a loss event has
occurred after the initial recognition
of the asset, and that the loss
event had a negative effect on the
estimated future cash flows of that
asset that can be estimated reliably.
Impairment for receivables is
generally considered at a collective
level, however where objective
evidence exists that a receivable
is impaired, such as when a
debtor ceases trading, individual
significant receivables are assessed
for impairment. In assessing
collective impairment an estimate
is made of probable non-payment
based on historical trends and an
assessment of current economic
and credit conditions.
An impairment loss in respect
of a financial asset measured at
amortised cost is calculated as the
difference between its carrying
amount and the present value of
the estimated future cash flows
discounted at the asset’s original
effective interest rate. Losses are
recognised in profit or loss. When a
subsequent event causes the amount
of impairment loss to decrease,
the decrease in impairment loss is
reversed through profit or loss.
Non-financial assets
The carrying amounts of nonfinancial
assets other than inventories
and current tax receivable are
reviewed at each reporting date
to determine whether there is any
indication of impairment, or when
events or changes in circumstances
indicate the carrying value may not
be recoverable. If any such indication
exists, then the asset’s recoverable
amount is estimated.
The recoverable amount of an asset
or cash-generating unit (CGU) is
the greater of its value in use and
its fair value less costs to sell. In
assessing value in use, the estimated
future cash flows are discounted to
their present value using a pre-tax
discount rate that reflects current
market assessments of the time
value of money and the risks specific
to the asset. For the purpose of
impairment testing, assets that
cannot be tested individually are
grouped together into the smallest
group of asset that generates cash
inflows from continuing use that are
largely independent of cash inflows
of other assets or groups of assets
(the CGU).
An impairment loss is recognised
if the carrying amount of an asset
or its CGU exceeds its estimated
recoverable amount. Impairment
losses are recognised in profit or
loss where there is no corresponding
entry in the Asset Revaluation
Reserve. Impairment losses
recognised in prior periods are
assessed at each reporting date
for any indications that the loss
has decreased or no longer exists.
An impairment loss is reversed if
there has been a change in the
estimates used to determine the
recoverable amount. An impairment
loss is reversed only to the extent
that the asset’s carrying amount
does not exceed the carrying
amount that would have been
determined, net of depreciation or
amortisation, if no impairment loss
had been recognised.
(k) Property, plant and
equipment
Recognition and measurement
Items of property, plant and
equipment are initially recognised
at cost. Cost includes expenditure
that is directly attributable to the
acquisition of the asset. The cost
of self-constructed assets includes
the cost of materials and direct
labour, an appropriate proportion of
overheads, costs directly attributable
to bringing the asset to a working
condition for intended use, costs
of dismantling and removing the
asset and restoring the site on which
they were located, and capitalised
borrowing costs.
After recognition as an asset, items
of property, plant and equipment are
measured at fair value. Fair value is
determined in accordance with NSW
Treasury Accounting Policy TPP07-1
Valuation of Physical Non-Current
Assets at Fair Value and AASB 116
Property, Plant and Equipment, and
reviewed annually for impairment
in accordance with AASB 136
Impairment of Assets.
Revaluation increments are credited
to the asset revaluation reserve
included in the equity section of
the Statement of Financial Position,
unless the increment reverses a
revaluation decrement of the same
asset previously recognised in profit
or loss. Any revaluation decrement is
recognised in profit or loss unless it
directly offsets a previous increment
of the same asset in the asset
revaluation reserve.
When parts of an item of property,
plant and equipment have different
useful lives, they are accounted for
as separate components of property,
plant and equipment.
56