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NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 1 — SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)

(h) Intangible Assets
(i) Goodwill
Goodwill on acquisition is initially measured at cost being
the excess of the cost of the business combination over
the acquirer’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost
less any accumulated impairment losses. Goodwill is not
amortised. Goodwill is reviewed for impairment, annually
or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.

As at the acquisition date, any goodwill acquired is
allocated to each of the cash-generating units expected
to benefit from the business combination’s synergies.

Impairment is determined by assessing the recoverable
amount of the cash-generating unit to which the goodwill
relates. Where the recoverable amount of the cash-
generating unit is less than the carrying amount, an
impairment loss is recognised. An impairment loss
recognised in respect of goodwill cannot be reversed.

The carrying amount of goodwill in respect of associates
is included in the carrying amount of the investment in
the associate.

(ii) Construction Rights
Construction rights relate to the Group’s ability to develop
accommodation in the Thredbo Alpine Resort. Construction
rights are recognised at cost and are amortised as the
rights are either sold or developed. The carrying value of
construction rights is reviewed annually. Any amounts no
longer considered recoverable are written off.

(iii) Other Intangible Assets
Other intangible assets, which largely comprise
management rights and software costs, are stated at cost
less accumulated amortisation and impairment losses.

Management rights are amortised over the life of the
management agreements on a straight-line basis.

Software costs for mainframe application and major
operating systems are amortised over a four to five year
period on a straight-line basis.

(i) Recoverable Amount of Assets
At each reporting date, the Group assesses whether there is
any indication that an asset may be impaired. Where an indicator
of impairment exists, the Group makes a formal estimate of
recoverable amount. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.

The recoverable amount of assets is the greater of their net
selling price 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. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined
for the cash-generating unit to which the asset belongs.

Impairment of receivables is not recognised until objective
evidence is available that a loss event has occurred.

Receivables are individually assessed for impairment.

An impairment loss is recognised whenever the carrying
amount of an asset or its cash-generating unit exceeds the
recoverable amount. Impairment losses are recognised in the
Income Statement unless the asset or its cash-generating
unit has previously been revalued, in which case the
impairment loss is recognised as a reversal to the extent of
the previous revaluation, with any excess recognised through
the Income Statement.

An impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.

With the exception of goodwill, an impairment loss is reversed
when there is an indication that the impairment loss no longer
exists and there has been a change in the estimates used to
determine the recoverable amount.

(j) Investments
All investments are initially recognised at cost, being the fair
value of the consideration given and including acquisition
charges associated with the investment.

After initial recognition, investments, which are classified as
available-for-sale, are measured at fair value. Available-for-sale
financial assets comprise marketable equity securities.

For investments that are actively traded in organised financial
markets, fair value is determined by reference to securities
exchange quoted market bid prices at the close of business
on the balance sheet date.

Gains or losses on available-for-sale investments are
recognised as a separate component of equity in the
available-for-sale investments revaluation reserve until the
investment is sold, collected or otherwise disposed of, or
until the investment is determined to be impaired, at which
time the cumulative gain or loss previously reported in equity
is included in the Income Statement. An impairment loss
recognised in the Income Statement in respect of an
available-for-sale investment is not reversed through
the Income Statement.

(k) Inventories
Inventories are carried at the lower of cost and net realisable
value.

Work in progress is valued at cost. Cost is based on the
first-in-first-out principle and includes expenditure incurred
in bringing inventories to their existing condition and location.

(l) Contract Work in Progress
For short term contracts, profit is brought to account on
completion of each job.

For long term contracts, profit recognition commences on
50% completion of each job and is recognised on a
percentage completion basis.

(m)Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and call
deposits with an original maturity of three months or less.
Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as
a component of cash and cash equivalents for the purpose of
the Statement of Cash Flows.

NOTE 1 — SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)

(n) Receivables
Trade and other receivables are stated at their amortised cost
less an allowance for impairment losses. Where the payment
terms for the sale of an asset are deferred, the receivable is
discounted using the prevailing rate for a similar instrument
of an issuer with similar credit terms. The unwinding of the
discount is treated as finance revenue.

(o) Payables
Trade and other payables are recognised at their amortised
cost. Liabilities are recognised for amounts to be paid in the
future for goods or services received. Trade accounts payable
are normally non-interest bearing and settled within 30 days.

(p) Borrowings
Interest-bearing and non-interest bearing borrowings are
recognised initially at fair value less attributable transaction
costs. Subsequent to initial recognition, borrowings are stated
at amortised cost with any difference between cost and
redemption value being recognised in the Income Statement
over the period of the borrowings on an effective interest basis.

(q) Provisions
(i) Employee Benefits
Provision is made for employee benefits including annual
leave for employees and the retirement benefits for qualifying
non-executive directors. The provision represents the
amount which the Group has a present obligation to
pay resulting from the employees’ services provided up
to the reporting date. The provisions expected to be
settled within 12 months have been calculated at
undiscounted amounts based on the remuneration rates
the employer expects to pay after the reporting date and
includes related on-costs.

The liability for employees’ benefits to long service leave
represents the present value of the estimated future cash
outflows to be made by the employer resulting from
employees’ services provided up to the reporting date.

Liabilities for employee benefits which are not expected to
be settled within 12 months are discounted using the rates
attaching to national government securities at reporting
date, which most closely match the terms of maturity of
the related liabilities.

In determining the liability for employee benefits, consideration
has been given to future increases in wage and salary
rates, and the Group’s experience with staff departures.
Related on-costs have also been included in the liability.

(ii) Onerous Contracts
A provision for onerous contracts is recognised when the
expected benefits to be derived from a contract are less
than the unavoidable costs of meeting the obligations
under that contract, and only after any impairment losses
to assets dedicated to that contract have been recognised.

The provision recognised is based on the excess of the
estimated cash flows to meet the unavoidable costs under
the contract over the estimated cash flows to be received
in relation to the contract, having regard to the risks of the
activities relating to the contract. The net estimated cash
flows are discounted using market yields on national
government guaranteed bonds with terms to maturity that
match, as closely as possible, the expected future cash flows.

(iii) Decommissioning of Leasehold Improvements
A provision for the estimated cost of decommissioning
leasehold improvements is made where a legal or
constructive obligation exists.

In determining the provision for decommissioning costs, an
assessment is made for each location of the likelihood and
amount of the decommissioning costs to be incurred in the
future. The estimated future liability is discounted to a
present value, with the discount amount unwinding over
the life of the leasehold asset as an interest expense.
The estimated decommissioning cost recognised as a
provision is included as part of the cost of the leasehold
improvements at the time of installation or during the
term of the lease, as the liability for decommissioning is
reassessed. This amount capitalised is then depreciated
over the life of the asset.

(iv) Other
Other provisions are recognised in the Balance Sheet when
the Group has a present legal or constructive obligation as
a result of a past event, and it is probable that an outflow
of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.

(r) Superannuation Plans
The Parent Entity and controlled entities contribute to several
defined contribution superannuation plans. Contributions are
charged against income as they are made. These contributions
are in accordance with the relevant trust deeds and the
Superannuation Guarantee Levy.

(s) Share-based payment transaction —
Employee share and options
(i) Executive Performance Share Plan
Equity-based compensation benefits are provided to

employees via the Executive Performance Share Plan.

The fair value of performance shares granted under the
Executive Performance Share Plan is recognised as an
employee expense over the period during which the
employees become unconditionally entitled to the shares.
There is a corresponding increase in equity, being
recognition of a share-based payments reserve. The fair
value of performance shares granted is measured at grant
date. The fair value of the shares was determined using
the Monte Carlo simulation model, taking into account the
terms and conditions upon which the shares were granted.

To facilitate the operation of the Executive Performance
Share Plan, a third party trustee is used to administer the
trust which hold shares allocated under the Executive
Performance Share Plan.

Performance shares are subject to performance hurdles.
The performance shares are recognised in the Balance
Sheet as restricted ordinary shares. Performance shares
are included within the weighted average number of shares
used as the denominator for determining basic earnings
per share and net tangible asset backing per share.

The Company incurs expenses on behalf of the trust. These
expenses are in relation to administration costs of the trust
and are recorded in the Income Statement as incurred.