CSL Ltd Annual Report 2020

CSL Limited Annual Report 2020 101 d. Other accounting policies Significant accounting policies that summarise themeasurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. e. Key judgements and estimates In the process of applying the Group’s accounting policies, a number of judgements and estimates of future events are required. Material judgements and estimates are found in the following notes: Note g: AASB 16 Leases Page 101 Note 2: Revenue and Expenses Page 106 Note 3: Tax Page 107 Note 4: Inventories Page 109 Note 5: People Costs Page 110 Note 7: Intangible Assets Page 114 Note 15: Trade Receivables & Payables Page 126 Note 16: Provisions Page 128 f. The notes to the financial statements The notes to these financial statements have been organised into logical groupings to help users find and understand the information they need. Where possible, related information has been provided in the same place. More detailed information (for example, valuation methodologies and certain reconciliations) has been placed at the rear of the document and cross-referenced where necessary. CSL has also reviewed the notes for materiality and relevance and provided additional information where it is helpful to an understanding of the Group’s performance. g. Significant changes in the current reporting period The consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 30 June 2019, except for the adoption of AASB 16 Leases and AASB Interpretation 23 Uncertainty over Income Tax Treatments. AASB Interpretation 23 clarifies the application of recognition and measurement requirements of AASB 112 Income Taxes where there is uncertainty over income tax treatments. The adoption of this interpretation did not result in any material change to the financial statements of the group. AASB 16 supersedes AASB 117 Leases and related interpretations. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model. The Group adopted AASB16 using the modified retrospective method of adoption with the date of initial application of July 1, 2019. The Group elected to use the transition practical expedient approach allowing the following: • Standard to be applied only to contracts that were previously identified as leases applying AASB 117 and AASB Interpretation 4 at the date of initial application; • Recognition exemptions for lease contracts that, at initial application date, have a remaining lease term of 12 months or less; • Recognition exemptions for lease contracts for which the underlying asset is of low value; • Apply a single discount rate to a portfolio of leases with reasonable similar characteristics; • Use of hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease; and • Exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application The effect of adopting AASB 16 is as follows: Impact on the balance sheet (increase/(decrease)) as at 1 July 2019 US$m Assets Right-of-use assets 926 Finance lease assets (11) Total assets 915 Liabilities Interest-bearing liabilities 1,004 Finance lease liabilities (11) Asset retirement obligations 25 Trade and other payables (29) Deferred tax liabilities (9) Total liabilities 980 Equity Retained earnings (65) The Group has lease contracts for various items of plant, land and vehicles. Before the adoption of AASB 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group; otherwise it was classified as an operating lease. Finance leases were capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest (recognised as finance costs) and reduction of the lease liability. In an operating lease, the leased property was not capitalised and the lease payments were recognised as rent expense in the statement of income on a straight-line basis over the lease term. Any accrued rent was recognised under Trade and other payables. Upon adoption of AASB 16, the Group applied a single recognition and measurement approach for all leases that it is the lessee, except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. In accordance with the modified retrospective method of adoption, the Group applied AASB 16 at the date of initial application as though effective at the commencement date of existing lease contracts. The comparative information in the consolidated financial statements has not been restated.