Home' Nufarm Annual Report : Nufarm Annual Report 2017 Contents 2. Basis of preparation (continued)
(d) Use of estimates and judgements (continued)
(ii) Impairment testing (continued)
FVLCD is an estimate of the amount that a market participant would pay for an asset or cash-generating unit (CGU), less the
cost to dispose. Fair value is generally determined using independent market assumptions to calculate the present value of
the estimated future cash flows expected to arise from the continued use of the asset, and its eventual sale where a market
participant may take a consistent view. Cash flows are discounted using an appropriate discount rate to arrive at a net present
value of the asset, which is compared against the asset’s carrying value.
These estimates are subject to risk and uncertainty that may be beyond the control of the group; hence there is a possibility
that changes in circumstances will materially alter projections, which may impact the recoverable amount of assets at each
Other non-current assets are also assessed for impairment indicators. Refer to note 23 for key assumptions made in
determining the recoverable amounts of the CGUs.
(iii) Income taxes
Uncertain tax matters:
The group is subject to income taxes in Australia and overseas jurisdictions. There are many transactions and calculations
undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The group has
exercised judgement in the application of tax legislation and its interaction with income tax accounting principles. Where the
final tax outcome of these matters is different from the amounts initially recorded, such differences will impact the current and
deferred tax provisions recognised on the balance sheet and the amount of other tax losses and temporary differences not yet
recognised in the period in which the tax determination is made.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against
which the assets can be utilised. Judgement is required by the group to determine the likely timing and the level of future
taxable income. The group assess the recoverability of recognised and unrecognised deferred taxes including losses in
Australia and overseas using assumptions and projected cash flows.
Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings held in
foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are not expected
to occur in the foreseeable future.
(iv) Defined benefit plans
A liability in respect of defined benefit pension plans is recognised in the balance sheet, and is measured as the present value
of the defined benefit obligation at the reporting date less the fair value of the pension plan’s assets. The present value of the
defined benefit obligation is based on expected future payments which arise from membership of the fund at the reporting date,
calculated annually by independent actuaries and requires the exercise of judgement in relation to assumptions for expected
future salary levels, long term price inflation and bond rates, experience of employee departures and periods of service.
Refer to note 26 for details of the key assumptions used in determining the accounting for these plans.
(v) Working capital
In the course of normal trading activities, the group uses judgement in establishing the carrying value of various elements
of working capital, which is principally inventories and trade receivables. Judgement is required to estimate the provision
for obsolete or slow-moving inventories and bad and doubtful receivables.
In estimating the provision for obsolete or slow-moving inventories, the group considers the net realisable value of inventory
using estimated market price less cost to sell. In estimating the provision for bad and doubtful receivables, the group considers
material change in credit quality considering each geographical location’s specific circumstances.
Actual expenses in future periods may be different from the provisions established and any such differences would impact
future earnings of the group.
NUFARM LIMITED ANNUAL REPORT 2017
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