Financial Report 2008 - Leighton Holdings

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Notes to the Financial Statements continuedfor the year ended 30 June 20081. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUEDInventoriesInventories are carried at the lower ofcost and net realisable value.Inventories comprise:Property developmentsCost includes the costs ofacquisition, development and holdingcosts such as rates, taxes andfinance costs. Holding costs onproperty developments not underactive development are expensed asincurred.Raw materials and consumablesCost is based on the first-in, first-outprinciple and includes expenditureincurred in acquiring the inventoriesand bringing them to their existingcondition and location.InvestmentsControlled entitiesInvestments in controlled entities arecarried at cost less impairment in theCompany’s financial statements.Equity accounted investmentsInvestments in entities over whichthe Group has the ability to exercisesignificant influence but not control,and jointly controlled entities areaccounted for using equityaccounting principles. Theseinvestments are carried at cost pluspost-acquisition changes in the netassets of the investment. Theconsolidated income statementreflects the Group’s share of theresult of these investments. Wherethere has been a change recogniseddirectly in equity, the Grouprecognises its share of that change.Property, plant and equipmentProperty, plant and equipment isstated at cost less accumulateddepreciation and any impairment invalue.Depreciation and amortisationDepreciation and amortisation iscalculated so as to write off the netbook value of property, plant andequipment over their estimatedeffective useful lives as follows: freehold buildings: straight linemethod - up to 40 years; major plant and equipment:cumulative number of hoursworked - up to 10 years; major plant and equipment -component parts: cumulativenumber of hours worked - up to 10years; leased plant and equipment:straight line method, over the termsof the leases - up to 10 years; waste management assets: straightline method, economic life of thewaste operations - up to 20 years; office and other equipment:diminishing value method - up to10 years; leasehold buildings andimprovements: straight linemethod, over the terms of theleases - up to 40 years.Subsequent costsSubsequent costs are included in thecarrying amount of property, plantand equipment only when it isprobable that the associated futureeconomic benefits will flow to theGroup. All other costs arerecognised in the income statement.Leased assetsLeases under which the Groupassumes substantially all the risksand benefits of ownership areclassified as finance leases. Otherleases are classified as operatingleases.Finance leasesA lease asset and a lease liabilityequal to the lower of the fair value ofthe leased property and the presentvalue of the minimum leasepayments is recorded at the inceptionof the lease. The finance leaseliability is the net present value offuture finance lease rentals andresiduals. Lease liabilities arereduced by repayments of principal.The interest components of the leasepayments are expensed. Contingentrentals, which are potentialincremental lease payments not fixedin amount as they relate to futurechanges, are expensed as incurred.Operating leasesPayments made under operatingleases are expensed on a straightline basis over the term of the lease.GoodwillGoodwill represents the excess of thecost of an acquisition over the fairvalue of the Group’s share of the netidentifiable assets of the acquiredcontrolled entity or business at thedate of acquisition. Goodwill onacquisitions of associates is includedin investments in associates.Goodwill acquired in businesscombinations is not amortised.Goodwill is allocated to related cashgeneratingunits and is tested forimpairment annually or morefrequently if events or changes incircumstances indicate that it mightbe impaired, and is carried at costless accumulated impairment losses.Negative goodwill arising on anacquisition is recognised in theincome statement.Acquisition of assetsAssets acquired are initially recordedat their cost of acquisition being thefair value of the consideration plusincidental costs directly attributable tothe acquisition.ImpairmentThe carrying amounts of the Group’sassets are reviewed at each reportingdate to determine whether there isany indication of impairment.If any such indication exists, theasset’s recoverable amount isestimated. The recoverable amountof goodwill is reviewed at eachreporting date irrespective of anindication of impairment.Leighton Holdings Limited Financial Report 2008 NOTES TO THE FINANCIAL STATEMENTS 8
Notes to the Financial Statements continuedfor the year ended 30 June 20081. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUEDAn impairment loss is recognisedwhen the carrying amount of an assetexceeds its recoverable amount.Recoverable amount is the greater offair value less costs to sell and valuein use. In assessing value in use, theestimated future cash flows arediscounted to their present valueusing a pre-tax discount rate thatreflects current market assessmentsof the time value of money and therisks specific to the asset. Therecoverable amount for an asset thatdoes not generate largelyindependent cash flows is determinedfor the cash-generating unit to whichthe asset belongs.Impairment losses are recognised inthe income statement unless theasset has been previously revalued,in which case the impairment loss isrecognised as a reversal to theextent of that previous revaluationwith any excess recognised in theincome statement.Reversals of impairment losses otherthan in respect of goodwill andavailable-for-sale assets, arerecognised in the income statement.Any increase above original cost ofthe asset is treated as a revaluationincrease in equity.Employee benefitsLiabilities in respect of employeebenefits which are not expected to besettled within twelve months arediscounted using the rates attachingto national government securities atreporting date, which most closelymatch the terms of maturity of therelated liabilities.Wages, salaries, annual and longservice leaveThe provision for employeeentitlements to wages, salaries andannual and long service leaverepresents the amount which theGroup has a present obligation topay resulting from employees’services provided up to the reportingdate. Provisions have beencalculated based on expected wageand salary rates and include relatedon-costs. In determining the liabilityfor these employee entitlements,consideration has been given toestimated future increases in wageand rates, and the Group’sexperience with staff departures.Related on-costs have been includedin the liability.SuperannuationDefined benefit and definedcontribution superannuation plansexist to provide benefits for eligibleemployees or their dependants.Contributions by the Group areexpensed to the income statementas incurred. Actuarial gains andlosses may arise in relation todefined benefit superannuationplans. To the extent that anycumulative unrecognised actuarialgain or loss exceeds 10 per cent ofthe greater of the present value ofthe defined benefit obligation and thefair value of fund assets, that portionof the actuarial gain or loss isrecognised in the income statementover the expected average remainingworking lives of the active employeesparticipating in the fund. Otherwise,the actuarial gain or loss is notrecognised.Share-based payment transactionsOwnership based remuneration isprovided to employees via theLeighton Executive Share OptionPlan and the Leighton SeniorExecutive Share Option Plan.These shares are recognised whenthe options are exercised and theproceeds received are allocated toshare capital.Under the Leighton ManagementShare Plan, the Company ispermitted to grant selectedexecutives shares which theCompany acquires on market.Under the Leighton EmployeesShare Plan, the Company ispermitted to make an annual offer ofshares in the Company to eligibleemployees. The maximum value ofshares which may be offered to anyemployee in any one year is $1,000.These share offers are recognised asan expense at the time the sharesare granted.Retention arrangementsRetention arrangements are in placeranging from three years toretirement for certain key employeeswhich are payable upon completionof the retention period. Theprovisions are accrued on a pro-ratabasis during the retention period andhave been calculated based oncurrent salary rates, including relatedon-costs.Annual bonus and deferred incentivearrangementsAnnual bonuses and deferredincentives are provided at reportingdate and include related on-costs.The Group recognises a provisionwhere there is a contractual orconstructive obligation.Restoration provisionsProvisions for restoration representrestoration obligations in respect oflandfills. The provisions are the bestestimate of the present value of theexpenditure required to settle therestoration obligation at reportingdate, based on current legalrequirements and technology. Theamount of the provision for futurerestoration costs is capitalised as awaste management asset andamortised over the asset life.Leighton Holdings Limited Financial Report 2008 NOTES TO THE FINANCIAL STATEMENTS 9
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Statutory StatementsDirectors’ De
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Financial Report 2008 - Leighton Holdings

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