Financial statements
Section B: Notes to the Group financial statements for the year ended 30 June 2024
Section B: Notes to the Group financial statements for the year ended 30 June 2024
B3 Basis of preparation (continued) Key accounting estimates and judgements
Accounting estimates and judgements are regularly made by the Group and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The accounting estimates and assumptions that have the most significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows: • Potential impacts of climate-related threats and opportunities Note B3 • Provision for income taxes and recoverability of deferred tax assets Note B6 • Fair value of derivatives and other financial instruments Note B14 • Recoverability of goodwill, other intangible assets and equity accounted investments Concession Summary and Note B22 • Determination of CityLink and West Gate Tunnel cash generating unit Note B16 • Measurement of the maintenance provision Note B17 • Measurement of the construction obligation liability Note B18 • Measurement of promissory notes and concession notes Note B19 • Assessment of control of A25, NorthWestern Roads Group (NWRG), STP JV and Transurban Chesapeake (TC) Note B22 • Contingencies. Note B25 KEY ACCOUNTING ESTIMATE AND JUDGEMENT Climate-related risks (threats and opportunities) The Group continues to progress its assessment of the potential impacts of climate-related risks (threats and opportunities) on its business over the short, medium and long term. Progress made in FY24 In FY24, additional Climate Change Adaptation Plans (CCAPs) were developed resulting in climate-related risk assessments and adaptation pathways substantially in place for most of the Group’s assets. The Group has also begun to refresh climate scenarios and conducted workshops with internal stakeholders to review Group-wide physical and transitional climate- related risks. The outcomes of these workshops are expected in FY25. A new Steering Committee was also established to oversee the implementation of the expected mandatory climate-related disclosures under Australian Sustainability Reporting Standards. This includes overseeing the integration of measures of climate-related risks into the Group’s disclosure and reporting framework. To date, the focus of the financial reporting implications has been on acute and chronic physical climate-related risks, which may be more impactful over time. The assessment of potential climate-related financial reporting implications has also been largely qualitative, informed by asset specific indicators identified from the Group’s CCAPs. Learnings to date around climate-related risks continue to indicate that the key potential financial impact areas may include the carrying amount of concession intangible assets, maintenance provisions and expenses. Based on the qualitative risk data from the Group’s CCAPs and the continued focus on asset resilience and business continuity programs, the Group is not currently aware of any material near term financial reporting impacts from climate-related risks at the date of this report. However, further analysis of climate-related risks is planned in FY25 to determine the associated financial impact projections across the Group’s assets and value chain, including additional analysis of transitional climate-related risks. With respect to the carrying amount of the Group’s concession intangible assets, the potential impacts of climate-related risks on future cash flows are not expected to be significant enough to erode the excess in recoverable amount due to the existing valuation headroom over carrying amount (which is also reducing over time through amortisation). With respect to the maintenance provision and expense, while financial analysis performed to date has not identified material near term financial impacts, without further quantitative data, and given the uncertainty over insurance cover into the future, it is possible that climate-related risks could impact the maintenance expense or maintenance provision particularly in the medium to long term. Plan from FY25 and beyond From FY25, the Group’s priority is to build on the scenario analysis and CCAP work and integrate the potential medium and long-term impacts of climate-related risks into asset adaptation strategies and forward planning. The Group will continue the assessment of climate-related financial impacts, using qualitative risk data from the Group’s CCAPs and the latest science-based climate assumptions relating to the incidence and severity of acute and chronic climate related events. The Group also intends to investigate transitional climate-related risk drivers and scenario-based assumptions, such as changing commodity prices, new technologies or shifting travel patterns, for incorporation into the Group’s financial forecasts in line with expected mandatory climate-related disclosure requirements. Given the complexity of physical climate-related risk modelling, the ongoing risk assessment process and changes and evolution of the Group’s response to climate- related risks, there may be material changes to the Group’s financial results and the carrying amount of assets and liabilities in future reporting periods. As the Group better understands the potential financial reporting impacts of climate-related risks, the Group will update the assumptions underlying the financial models to reflect any material climate-related risks.
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