070917_KPGHL_Annual Report 2017_final_PREVIEW

Notes to the Financial Statements | For the Year Ended 30 June 2017
(u) New Accounting Standards and Interpretations continued
‐ Step 3: Determine the transaction price
‐ Step 4: Allocate the transaction price to the performance obligations in the contract
‐ Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under AASB 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when 'control' of the
goods or services underlying the particular performance obligation is transferred to the customer.
Far more prescriptive guidance has been added in AASB 15 to deal with specific scenarios. Furthermore, extensive
disclosures are required by AASB 15.
The Group will adopt this standard from 1 July 2018 but the impact of its adoption has not yet been assessed by the
Group.
AASB 16 Leases
This standard is applicable for annual reporting periods beginning on or after 1 January 2019.
AASB 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments
for both lessors and lessees. AASB 16 will supersede the current lease guidance including IAS 117 Leases and the related
interpretations when it becomes effective.
AASB 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a
customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for
lessee accounting, and is replaced by a model where a right‐of‐use asset and a corresponding liability have to be
recognised for all leases by lessees (i.e. all on balance sheet) except for short‐term leases and leases of low value assets.
The right‐of‐use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions)
less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease
liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently,
the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst
others. Furthermore, the classification of cash flows will also be affected as operating lease payments under AASB 117 are
presented as operating cash flows; whereas under the AASB 16 model, the lease payments will be split into a principal
and an interest portion which will be presented as financing and operating cash flows respectively.
The Group will adopt this standard from 1 July 2019. Whilst the directors are yet to assess the impact of AASB 16,
it is noted that operating leases will be capitalised on the balance sheet by recognising a 'right‐of‐use' asset and a
lease liability for the present value of the obligation and the rental expense will be replaced with depreciation of the
right‐of‐use asset and interest on the lease liability.
3 Critical Accounting Estimates and Judgments
The directors make estimates and judgements during the preparation of these financial statements regarding
assumptions about current and future events affecting transactions and balances.
These estimates and judgements are based on the best information available at the time of preparing the financial
statements, however as additional information is known then the actual results may differ from the estimates.
The significant estimates and judgements made have been described below.
Key estimates ‐ impairment of goodwill and other indefinite life intangible assets
Goodwill is tested for impairment annually and whenever there is an indicator of impairment in accordance with the
accounting policy stated in Note 2. The recoverable amounts of cash‐generating units have been determined based on
value‐in‐use calculations. These calculations require the use of assumptions, including estimated discount rates based
on the current cost of capital and growth rates of the estimated future cashflows. Details of the impairment testing is
included in note 12.
Key estimates ‐ business combinations
The Group has exercised judgement in determining the purchase price allocation for acqusitions, including the fair
value of the intangible assets and resulting goodwill, taking into account all available information at the eporting date.
Details of acquisitions are included in Note 28.
84 KELLY+PARTNERS ANNUAL REPORT 2017