Notes to the Financial Statements
For the year ended 30 June 2009
4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the Financial Statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenues and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
Profit recognised on developments
Profit on developments is generally recognised on settlement as discussed in note 2(r).The calculation of profit for projects that are in progress, is based on actual costs to date and estimates of costs to complete.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and tax losses carried forward as management considers that based upon forecast profits, it is probable that future taxable profits will be available to utilise these.
Significant judgements, estimates and assumptions made by management in the preparation of these Financial Statements are outlined as follows:
Value of inventory
As discussed in note 2(j), the Consolidated Entity carries inventories at the lower of cost and net realisable value. The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and costs of selling. Estimated selling price is derived from publicly available market data and historical experience, while estimated costs of completion and selling costs are derived from contracted vendor pricing and historical experience. Key assumptions in conducting this exercise require the use of management’s judgement and are reviewed on an ongoing basis.
Should the net realisable value be below cost, the carrying amount of inventory is written down to the net realisable value.