SYDNEY PORTS CORPORATION ANNUAL REPORT 12

(l) Recoverable amount of assets
At each reporting date, the Corporation assesses whether
there is any indication that an asset may be impaired.
Where an indicator of impairment exists, the Corporation
makes a formal estimate of recoverable amount.
Where the carrying amount of an asset exceeds its
recoverable amount the asset is considered impaired and
is written down to its recoverable amount. The recoverable
amount is determined for an individual asset unless the
asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets.
If this is the case, recoverable amount is determined for the
cash-generating unit to which the asset belongs, unless
either the asset’s fair value less costs to sell is higher than
its carrying amount, or the asset’s value in use can be
estimated to be close to its fair value less costs to sell and
fair value less costs to sell can be determined. 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.
(m) Channel dredging cost
The Corporation has incurred costs to dredge Botany Bay
thereby creating a channel for ships to enter the wharf area
constructed as part of its Port Botany expansion project.
The Corporation is applying the accounting treatment
agreed with NSW Treasury, relevant Port Corporations and
Roads and Maritime Services (formerly Maritime Authority
of NSW) in 2008. Under the accounting treatment, costs
incurred for capital dredging (harbour deepening) of
channels are recognised as a prepaid licence fee with the
licensor being NSW Roads and Maritime Services (a NSW
Government Authority). The prepayment is amortised over
the period of the licence.
(n) Assets held for sale
Assets (or disposal groups comprising assets and
liabilities) whose carrying amounts are expected to be
recovered primarily through sale rather than through
continuing use are classified as held for sale. Immediately
before classification as held for sale, the assets are
re-measured in accordance with the Corporation’s
accounting policies. Thereafter, assets held for sale are
measured at the lower of carrying amount and fair value
less costs to sell; not depreciated; reclassified from
non-current to current; and separately presented in the
statement of financial position. An impairment loss is
recognised in profit or loss for any initial and subsequent
write down from the carrying amount measured
immediately before reclassification or re-measurement to
fair value less costs to sell.
A gain is recognised for any subsequent increases in fair
value less costs to sell of an asset (or disposal group), but
not in excess of any cumulative impairment loss previously
recognised. A gain or loss not previously recognised by the
date of the sale of the non-current asset (or disposal group)
is recognised at the date of derecognition.
The sale of the asset should be expected to qualify for
recognition as a completed sale within one year from the
date of classification. The Corporation may extend the
period where events and circumstances beyond the control
of the Corporation cause a delay and there is such
evidence that the Corporation remains committed to its
plans to sell the asset.
(o) Trade and other payables
Trade and other payables are carried at amortised cost
and due to their short-term nature they are not discounted.
Trade and other payables represent liabilities for goods and
services provided to the Corporation prior to the end of the
financial year that are unpaid and arise when the Corporation
becomes obliged to make future payments in respect of the
purchase of these goods and services. The amounts are
unsecured and are usually paid within 28 days of recognition.
(p) Interest-bearing loans
All loans and borrowings are initially recognised at cost,
being the fair value of the consideration received net of
issue costs associated with the borrowing. After initial
recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the
effective interest method. Amortised cost is calculated by
taking into account any issue costs, and any discount or
premium on settlement. Gains and losses are recognised in
the statement of comprehensive income when the liabilities
are derecognised.
(q) Borrowing costs
Borrowing costs are expensed as incurred within finance
costs in the statement of comprehensive income unless
they relate to qualifying assets, in which case they are
capitalised as part of the cost of those assets. Qualifying
assets are assets that take a substantial period of time to
be ready for their intended use.
Capitalisation of borrowing costs is undertaken where a
direct relationship can be established between the
borrowings and the relevant projects giving rise to the
qualifying assets. Where funds are borrowed specifically
for the acquisition, construction or production of a
qualifying asset, the amount of borrowing costs capitalised
is net of any interest earned on those borrowings.
(r) Provisions
Provisions are recognised when the Corporation has a
present obligation (legal or constructive) as a result of a
past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the
amount of the obligation.
Where the Corporation expects some or all of a provision
to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but
only when the reimbursement is virtually certain and can
be measured reliably. The expense relating to any provision
is recognised in the statement of comprehensive income
net of any reimbursement. If the effect of the time value of
money is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the
liability. The increase in the provision due to the passage
of time is recognised as interest expense.
Sydney PortS CorPoration finanCial rePort 2011/12 53