Abacus Property Group – Annual Financial Report 2018
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ABACUS PROPERTY GROUP<br />
NOTES TO THE FINANCIAL STATEMENTS <strong>–</strong> About this <strong>Report</strong> (continued)<br />
30 JUNE <strong>2018</strong><br />
Net realisable value of inventory<br />
Inventories are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling<br />
price in the ordinary course of business less the estimated costs of completion and selling expenses. The<br />
estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of<br />
the period to the extent that such events confirm conditions existing at the end of the period. The key<br />
assumptions that require the use of management judgment are reviewed half-yearly and these assumptions<br />
include the number of lots/units sold per year and the average selling price per lot/unit. If the net realisable value<br />
is less than the carrying value of inventory, an impairment loss is recognised in the income statement.<br />
Fair value of derivatives<br />
The fair value of derivatives is determined using closing quoted market prices (where there is an active market) or<br />
a suitable pricing model based on discounted cash flow analysis using assumptions supported by observable<br />
market rates. Where derivatives are not quoted in an active market their fair value has been determined using<br />
(where available) quoted market inputs and other data relevant to assessing the value of the financial instrument,<br />
including financial guarantees granted by the <strong>Group</strong>, estimates of the probability of exercise.<br />
Fair value of financial assets<br />
The <strong>Group</strong> holds investments in unlisted securities and enters into loans and receivables with associated options<br />
that provide for a variety of outcomes including repayment of principal and interest, satisfaction through obtaining<br />
interests in equity or property or combinations thereof.<br />
Impairment of goodwill and intangibles with indefinite useful lives<br />
The <strong>Group</strong> determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an<br />
annual basis. This requires an estimation of the recoverable amount of the cash-generating units to which the<br />
goodwill and intangibles with indefinite useful lives are allocated. For goodwill this involves value in use<br />
calculations which incorporate a number of key estimates and assumptions around cash flows and fair value of<br />
investment properties upon which these determine the revenue / cash flows. The assumptions used in the<br />
estimations of the recoverable amount and the carrying amount of goodwill and intangibles with indefinite useful<br />
lives are discussed in Note 21.<br />
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