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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
l) Intangible assets
continued
Brand names
Brand names acquired as part of a business combination are recognised separately from goodwill. Brand names are carried at their fair
value at the date of acquisition less accumulated amortisation and any impairment losses. Where brand names’ useful lives are assessed
as indefinite, the brand names are not amortised but are tested for impairment annually, or more frequently whenever there is an indication
that it might be impaired. Where brand names’ useful lives are assessed as finite, the brand names are amortised over their estimated
useful lives
Customer contracts
Customer contracts acquired as part of a business combination are recognised separately from goodwill. Customer contracts are carried
at their fair value at the date of acquisition less accumulated amortisation and any impairment losses. Where customer contracts’ useful
lives are assessed as indefinite, the customer contract is not amortised but is tested for impairment annually, or more frequently whenever
there is an indication that it might be impaired. Where customer contracts’ useful lives are assessed as finite, the customer contracts are
amortised over their estimated useful lives.
IT systems
Costs incurred in developing systems and costs incurred in acquiring software and licenses that will provide future period economic benefits
are capitalised to other intangibles. Costs capitalised include external direct costs of materials and services and direct payroll and payroll
related costs of employees’ time spent on projects. IT systems are amortised over their estimated useful lives of up to 7 years.
IT systems are carried at cost less accumulated amortisation and any impairment losses.
m) Impairment
The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any indication of impairment.
If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of goodwill and indefinite lived intangible
assets are reviewed at each reporting date irrespective of an indication of impairment.
An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. An assets recoverable amount is
the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset. The recoverable amount for an asset that does not generate largely independent cash flows is determined for the cash-generating
unit to which the asset belongs.
Impairment losses are recognised in the statement of profit or loss unless the asset has been previously revalued, in which case the
impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised in the statement of profit
or loss. Reversals of impairment losses, other than in respect of goodwill and available-for-sale assets, are recognised in the statement of
profit or loss.
n) Employee benefits
Liabilities in respect of employee benefits which are not due to be settled within twelve months are discounted at period end using rates
which most closely match the terms of maturity of the related liabilities. Corporate bond rates are utilised where a deep market exists.
Rates from national government securities are utilised where a deep market for Corporate bonds does not exist.
Wages, salaries, annual and long service leave
The provision for employee entitlements to wages, salaries and annual and long service leave represents the amount which the Group has
a present obligation to pay resulting from employees’ services provided up to the reporting date. Provisions have been calculated based
on expected wage and salary rates and include related on-costs. In determining the liability for these employee entitlements, consideration
has been given to estimated future increases in wage and rates, and the Group’s experience with staff departures.
Superannuation
Defined contribution superannuation plans exist to provide benefits for eligible employees or their dependants. Contributions by the Group
are expensed to the statement of profit or loss as incurred.
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