Abacus Property Group – Annual Financial Report 2018

Inventories
Why significant
The Group’s total assets include development
property assets either held directly or via
interests in Joint Ventures. Development assets
are carried at the lower of cost or net realisable
value. The net realisable value is determined
through a feasibility model for each project that
estimates the revenue and costs of the
development over the life of the project.
This was considered a key audit matter as the
determination of net realisable value is affected
by subjective elements within the estimated
costs and projected revenues over an assumed
development life. These values are sensitive to
changes in the underlying assumptions.
Disclosure of inventories is included in Note 6 of
the financial report.
Disclosure of revenue recognition policies is
included in Note 22(f) of the financial report.
How our audit addressed the key audit matter
Our audit procedures included the following:
We Interviewed Project Managers employed by
the Group, to understand the status and progress
of the developments
We assessed the historical accuracy of previous
forecast development outcomes
We assessed the feasibility models prepared by
the Group for a sample of developments currently
in progress
Where applicable we evaluated the assumptions
adopted in light of current market evidence by:
• comparing the sales revenue assumed to the
most recent historical or comparable sales;
• corroborating the costs projected to signed
contracts, recent or actual costs incurred for
current or comparable projects; and
• assessed contingency estimates for remaining
development risks.
Where relevant, we performed sensitivity
analyses in relation to the key forward looking
assumptions including sales price achieved,
finance costs, time to completion, and escalation
rates.
We tested the mathematical accuracy of the
feasibilities.
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