9365206764

SGSP (Australia) Assets Pty Ltd

ABN 60 126 327 624

Notes to the financial statements

For the year ended 31 December 2015 4 Critical accounting estimates and judgements (continued)

In addition, deferred tax assets are recognised for deductible temporary differences only if it is probable that futurę taxable income will be available to utilise those temporary differences. The carrying amount of deferred tax balances are set out in notę 26.

(iv)    Recognition of deferred tax

The Group applies the criteria stated in AASB 112: Income Taxes with regards to the calculation and recognition of deferred tax assets and deferred tax liabilities. The application of the AASB 112 criteria involves the exercise of judgement surrounding the calculation of accounting and tax bases for the Group’s assets and liabilities.

Furthermore, the potential reversal of temporary differences also requires the use of estimates of futurę profitability, availability of taxab!e income on both revenue and Capital account and potential futurę changes in accounting and tax bases.

The carrying amount of deferred tax balances are set out in notę 26.

(v)    Leases

The Group has considered a number of contractual arrangements in applying the accounting policy in notę 2(s). The assessment of these contractual arrangements requires a degree of judgement as to whether the significant risks and rewards of ownership of an asset are substantially transferred to the Group. The classification of a contractual arrangement could materially change the balance sheet of the Group. The carrying amounts of finance leases are set out in notę 22.

(vi)    Deńvative financial instruments

The fair value of derivative financial instruments is determined as follows:

•    the fair value of derivative financial instruments with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market prices. The quoted market price used is the current mid-price, as the derivative financial instruments are in hedging relationships with offsetting market risks; and

•    the fair value of other derivative financial instruments is determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The carrying amounts of derivative financial instruments are set out in notę 13.

(vii)    Revenue Accrued sen/ices revenue

Revenue accrual estimates are madę to account for the unbilled period between the Group's last billing datę and the end of the accounting period. The accrual relies on detailed analysis of customers' historical consumption patterns, which take into account base usage, sensitivity to prevailing weather conditions and consumption growth. The results of this analysis are applied for the number of days and weather conditions over the unbilled period. The carrying amount of accrued revenue is set out in notę 11.

Sen/ices revenue

Asset management sen/ices and construction contracts revenue is recognised in proportion to the stage of completion of the contract when the stage of contract completion can be reliably determined. The stage of completion is measured by reference to work performed using an assessment of total labour hours and other costs incurred to datę as a percentage of estimated total hours and costs for each contract or by reference to the physical proportion of the contract work completed. Services revenue is set out in notę 6.

(viii)    Useful lives of property, plant and equipment and intangible assets

Depreciation is recognised for property, plant and equipment, including freehold buildings but excluding land. Amortisation is recognised for intangible assets. Depreciation and amortisation is calculated on a straight linę basis so as to write off the cost of each asset over its estimated useful life. The estimated useful lives and depreciation/amortisation methods are reviewed annually. Assumptions are madę regarding the useful lives based on the regulatory environment and technological developments. These assumptions are subject to risk and there is the possibility that changes in circumstances will alter expectations. The carrying amount of property, plant and equipment is set out in notę 17. The carrying amount of intangible assets is set out in notę 18.

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