All monetary amounts are expressed
in millions of Rands |
| 48. |
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS |
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Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. |
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Key sources of estimation uncertainty |
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The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The most significant estimates and assumptions made in the preparation of these
consolidated financial statements are discussed below. |
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Revenue recognition and contract accounting |
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The Group uses certain assumptions and key factors in the management of and reporting for its contracting arrangements.
These assumptions are material and relate to: |
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| • |
the estimation of costs to completion and the determination of the percentage of completion, |
| • |
the recoverability of under claims, |
| • |
the recognition of penalties and claims on contracts, and |
| • |
the recognition of contract incentives. |
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Impairment testing of investments in associate companies (note 5) |
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The directors applied judgement in assessing the investment in Clough Limited for impairment. The fair value at 30 June 2007
was reassessed based on the provision recorded in the books of Clough for completion and final settlement on pre-acquisition
contracts. This led to an impairment charge of R115 million in the current year. |
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Estimated impairment of goodwill |
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Assumptions were made in assessing any possible impairment of goodwill. Details of these assumptions and risk factors are
set out in note 3. |
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Estimation of the fair value of share options |
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Assumptions were made in the valuation of the Group's share options. Details of the assumptions used are set out in note 11 |
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Estimated value of employee benefit plans |
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Assumptions were made in the valuation of the Group's retirement and other benefit plans. Details of the assumptions and risk
factors used are set out in note 44. |
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Other estimates made |
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Assumptions were made in the valuation of the Group’s share options. Details of the assumptions used are set out in note 11 |
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The Group also makes estimates for: |
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| • |
the calculation of the provision for doubtful debts, |
| • |
the determination of useful lives and residual values of items of property, plant and equipment, |
| • |
the calculation of the provision for obsolete inventory, |
| • |
the calculation of any provision for claims, litigation and other legal matters, |
| • |
the calculation of any other provisions including warrantees, guarantees and bonuses, |
| • |
the assessment of impairments and the calculation of the recoverable amount of assets, |
| • |
the calculation of the fair value of financial instruments including the service concessions, |
| • |
the calculation of the fair value of assets, identifiable intangible assets and contingent liabilities on acquisition of businesses,
and |
| • |
the determination of taxation liabilities. |
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