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CIMIC Group Limited Annual Report 2016 |
Financial Report
Notes to the Consolidated Financial Statements continued
for the 12 months to 31 December 2016
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTINUED
i) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Depreciation and amortisation
Depreciation and amortisation is calculated so as to write-off the net book values of property, plant and equipment over their estimated
effective useful lives as follows:
freehold buildings: straight line method - up to 40 years;
major plant and equipment: cumulative number of hours worked - up to 10 years;
major plant and equipment - component parts: cumulative number of hours worked - up to 10 years;
leased plant and equipment: cumulative number of hours worked - up to 10 years;
office and other equipment: diminishing value method - up to 10 years; and
leasehold buildings and improvements: straight line method, over the terms of the leases - up to 40 years.
Subsequent costs
Subsequent expenditure is included in the carrying amount of property, plant and equipment only when it is probable that the associated
future economic benefits will flow to the Group. All other costs are recognised in the statement of profit or loss.
j) Leased assets
Leases under which the Group assumes substantially all of the risks and benefits of ownership are classified as finance leases. Other leases
are classified as operating leases.
Finance leases
A lease asset equal to the lower of the fair value of the leased property and the present value of the minimum lease payments is recorded
at the inception of the lease. A finance lease liability is recognised at the net present value of future finance lease rentals and residuals.
Lease liabilities are reduced by repayments of principal. The interest components of the lease payments are expensed. Contingent rentals,
which are potential incremental lease payments not fixed in amount as they relate to future changes, are expensed as incurred.
Operating leases
Payments made under operating leases are expensed on a straight line basis over the term of the lease.
k) Business combinations
The acquisition method of accounting is used to account for all business combinations. The consideration for the acquisition of a
controlled entity comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group.
The consideration transferred also includes the fair value of any pre-existing equity interest in the controlled entity. Acquisition related
costs are expensed as incurred. Identifiable assets acquired and liabilities assumed in a business combination are measured at their fair
values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree
either at fair value or at the non-controlling interest's proportionate share of the acquiree’s net identifiable assets. The excess of the
consideration transferred over the fair value of the Group's share of the net identifiable assets acquired is recorded as goodwill.
Where the consideration is less than the fair value of the net identifiable assets of the controlled entity acquired the difference is recognised
directly in the statement of profit or loss as a gain on acquisition of a controlled entity.
l) Intangible assets
Goodwill
Goodwill arising from business combinations is included in intangible assets. Goodwill on acquisition of associates is included in equity
accounted investments. Goodwill is not amortised but it is tested for impairment annually or more frequently if there is an indication that
it might be impaired. Goodwill is allocated to cash-generating units for the purpose of impairment testing.
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