SYDNEY PORTS CORPORATION ANNUAL REPORT 12

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Sydney PortS CorPoration
noteS to the FinanCiaL StateMentS
note 2. SUmmary of SignifiCant aCCoUnting PoliCieS
(ContinUed)
Tax consolidation
The consolidated entity entered the tax consolidation
regime on 1 July 2003. As a consequence, the Corporation,
as the head entity in the consolidated tax group, recognises
current tax payable for the tax group. Amounts receivable
or payable under a tax sharing agreement between the tax
consolidated entities, are recognised as tax related
amounts receivable or payable. Expenses and revenues
arising under the tax sharing agreement are recognised as
a component of income tax equivalent expense.
Other taxes
Revenues, expenses, assets and liabilities are recognised
net of the amount of GST except where the GST incurred
on a purchase of goods and services is not recoverable
from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or
as part of the expense item as applicable. Receivables and
payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or
payables in the statement of financial position.
Cash flows are included in the statement of cash flows on a
gross basis and the GST component of cash flows arising
from investing and financing activities which is recoverable
from or payable to the taxation authority, are classified as
operating cash flows. Contingencies are disclosed net of GST.
Commitments and accrual items that are shown in the
statement of financial position are inclusive of GST
where applicable.
(x) Dividend
The Corporation reviews its financial performance for the
accounting period and recommends to its shareholders an
appropriate dividend payment in light of the current
financial position and longer-term financial commitments.
Under NSW Treasury’s Financial Distribution Policy for
Government Businesses, the Corporation prepares a
Statement of Corporate Intent which is an agreement
between the relevant Ministers and the Board. This
agreement includes dividend targets for the year ahead
and is signed before the end of the financial year to which
it relates. This creates a valid expectation that a dividend
will be paid. Consequently the dividend for the financial
year, if any, is set aside as a provision in the statement of
financial position.
(y) Contingent assets and contingent liabilities
Contingent assets and contingent liabilities are not
recognised in the statement of financial position, but
are disclosed by way of a note and, if quantifiable, are
measured at nominal value.
Sydney PortS CorPoration finanCial rePort 2011/12
(z) 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,
revenue 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.
The nature of these assumptions and conditions are found
in the relevant notes to the financial statements.
Management has identified the following critical
accounting policies for which significant judgements,
estimates and assumptions are made.
(i) Impairment of non-financial assets
The Corporation assesses impairment of all assets at each
reporting date by evaluating conditions specific to the
Corporation and to the particular asset that may lead to
impairment. If an impairment trigger exists, the recoverable
amount of the asset is determined.
(ii) Valuation of property, plant and equipment
The gross fair value measurement of property, plant and
equipment is determined by independent specialist valuers
and the remaining useful lives of each asset are determined
by the Corporation’s qualified engineers.
(iii) Superannuation
Various actuarial assumptions are required to quantify
the net position of the defined benefit funds. The
determination of superannuation obligations is dependent
on an annual actuarial assessment in accordance with
the accounting policy.
(iv) Taxation
Judgement is required in assessing whether deferred tax
assets and certain deferred tax liabilities are recognised
in the statement of financial position. Deferred tax assets,
including those arising from temporary differences, are
recognised only where it is considered more likely than
not that they will be recovered, which is dependent on the
generation of sufficient future taxable profits. Assumptions
about the generation of future taxable profits depend on
management’s estimate of future cash flows. These depend
on estimates of future revenues, operating costs, capital
expenditure and dividends.