Airways Corporation of New Zealand Limited Annual Report 2018 2019
Audit report CONTINUED
KEY AUD I T MATTER Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
CHAIR AND CEO’S REVIEW
INVESTING IN THE FUTURE
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Capitalisation of costs into property, plant and equipment (PP&E) and Intangible assets The Company operates in a capital intensive industry. In order to maintain and enhance service levels the Company needs to continually invest funds in its infrastructure. This requires a significant annual capital expenditure programme. The Group holds property, plant and equipment of $203 million and intangible assets of $18 million at 30 June 2019. During the period, the Group capitalised $46.5m (2018: $47.1m) of costs, primarily associated with an ongoing project to replace the current Air Traffic Management (ATM) system and the construction of new operations facilities at Auckland and Christchurch airports. Further disclosures on the PP&E and Intangible assets held by the Group are included in note A8 of the financial statements. The capitalisation of costs into PP&E and Intangible assets is a key audit matter as it represents a significant proportion of the Group’s net assets and judgement is applied by the Company when determining which costs to include in the carrying value of PP&E and Intangible assets. The costs should: • deliver economic benefit to the entity beyond a 12 month period • be able to be measured reliably • be directly attributable to the asset being constructed, and • contribute to an asset which is technically feasible and for which the Company has sufficient internal or external resources to complete. Costs capitalised by the Company include both third party costs and internal costs, such as employee labour costs.
To address the key audit matter we tested a sample of additions for PP&E and Intangible assets. For each addition sampled, we agreed the item to appropriate audit evidence. This evidence included third party invoices and approved timesheets for internal labour hours. Internal labour cost rates applied to the labour hours were agreed to supporting evidence including underlying wages and salaries. For each item tested, we assessed the appropriateness of capitalisation against the recognition criteria in the accounting standards, including: • assessing whether it is probable that economic benefit beyond a 12 month period will be generated by the asset by reference to the project status report, meetings with the project manager and using our own judgement • assessing if the costs were directly attributable to the asset. This involved considering invoice narrative for external costs and job description and time sheet records for internal costs, and • assessing whether the Company has the technical and financial resources to complete the project. In assessing this we considered the nature of the projects and the Company’s historic performance at completing projects of a similar nature. From our procedures, no material exceptions were noted.
INTEGRATING DRONES INTO OUR AIRSPACE
AIRWAYS BOARD OF DIRECTORS
PERFORMANCE AND PROGRESS AGAINST SCI METRICS
HOW THE NUMBERS ARE CALCULATED RISK GROUP STRUCTURE UNRECOGNISED ITEMS OTHER INFORMATION
EVA KEY PERFORMANCE INDICATORS
ADDITIONAL FINANCIAL INFORMATION
GOVERNANCE AT AIRWAYS
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