4 . Critical accounting judgements and key sources of estimationuncertainty
The preparation of financial statements requires management to make judgements , estimates and assumptions that affect the application of policies and reported amounts of assets , liabilities , income and expenses . The estimates and associated assumptions are based on historical experience and other various factors that are believed to be reasonable under the circumstances , the results of which form the basis of making the judgements . Actual results may differ from these estimates .
The estimates and underlying assumptions are reviewed on an ongoing basis . Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods .
The following are the critical judgements that management has made in the process of applying the Company ’ s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements :
4.1 Employee entitlements Management judgement is applied in determining the following key assumptions used in the calculation of long service leave at balance date :
• future increases in wages and salaries ;
• future on-cost rates ; and
• experience of employee departures and period of service including future years in which long service leave is expected to be taken .
4.2 Leasehold improvements As described at 3 ( a ) above , the Company reviews the estimated useful lives of property , plant and equipment at the end of each reporting period .
4.3 Impairment In assessing impairment , the Company estimates the recoverable amount of each asset based on the depreciable replacement cost in accordance with AASB 136 Impairment of assets .
4.4 Impairment of trade and other receivables The Company has applied the simplified approach to measuring expected credit losses , which uses a lifetime expected loss allowance . To measure the expected credit losses , trade receivables have been grouped based on days overdue . The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument .
4.5 Make good provision Provisions for make good are included , where applicable , using the present value of anticipated costs for future restoration of leased premises . The provision includes future cost estimates associated with closure of the premises .
4.6 Revenue recognition To determine if a grant contract should be accounted for under AASB 1058 or AASB 15 , the Company has to determine if the contract is ‘ enforceable ’ and contains ‘ sufficiently specific ’ performance obligations . When assessing if the performance obligations are ‘ sufficiently specific ’, the Company has applied significant judgement in this regard by performing a detailed analysis of the terms and conditions contained in the grant contracts , review of accompanying documentation ( e . g . activity work plans ) and holding discussions with relevant parties .
Income recognition from grants received by the Company have been appropriately accounted for under AASB 1058 or AASB 15 based on the assessment performed .
Determining the timing of satisfaction of performance obligations ( and therefore whether to use an output or input method to recognise revenue over time ) requires particular judgement in the case of grant contracts not directly linked to enrolment numbers . In most cases the best measure of performance obligations being satisfied was determined to be the Input method . As such revenue is recognised on these types of contracts as costs are incurred as this was determined to be the most accurate measure of satisfaction of performance obligations .
4.7 Leases ( Company as a lessee )
Concessionary leases The Company leases various buildings from local councils with significantly below-market terms and conditions principally to enable it to further its objectives .
As outlined in the Company ’ s accounting policy in Note 3 ( f ), the Company has elected to measure these leases at cost .
FINANCIAL REPORT
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