Recoverability of concession intangible assets and equity accounted investments
Group – Notes B16 and B20
THT – Notes D12 and D14
TIL – Note D14
Key audit matter
How our audit addressed the key audit matter We performed the following procedures, amongst others:
Each toll road within the Group is governed by a concession agreement between entities within the Group and the transport authority of the region in which the concession is granted. The right to toll the roads within the Group are recognised on the consolidated balance sheet(s) either as concession intangible assets, assets under construction or within equity accounted investments.
Assessed the design and tested the operating effectiveness of key controls over a selection of the forecast and budgeting processes impacting the models.
Evaluated the impairment indicator assessment considering the requirements under the Australian Accounting Standards. Assessed, with the assistance of PwC valuation experts, whether the discount rates used in the models were appropriate by comparing them to market data and comparable companies. Evaluated the Group’s historical ability to forecast future cash flows by comparing budgeted revenue with reported actuals for the past three years. Assessed the reasonableness of the disclosures in the financial reports having regard to the requirements of Australian Accounting Standards.
Concession intangible assets
Where the road is held by a controlled entity, the asset is recognised with reference to the cost of construction or price paid at acquisition.
Equity accounted investments
The Group also has interests in toll roads held through equity accounted investments and has a 50% ownership interest in each of: Sydney Transport Partners Joint Venture (STP JV), NorthWestern Roads Group (NWRG) and Transurban Chesapeake (TC) at year end. These investments are held on the consolidated balance sheet(s) and recognised as equity accounted investments.
Recoverability of concession intangible assets and equity accounted investments
The impairment indicator assessment includes calculating the recoverable amounts of the Group’s concession intangible assets and equity accounted investments, based on the net present value of future cash flows using discounted cash flow models (the models). This area requires significant judgement by the Group due to a number of assumptions that impact the timing and quantum of future cash flows, for example, expected traffic performance, discount rates and growth rates. We considered this to be a key audit matter due to the significance of the balances to the consolidated balance sheet(s) and judgement required in determining the recoverable amounts.
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