Page 190 - UBP - IR2020

FINANCIAL STATEMENTS
Notes to the financial statements
For the year ended June 30 2020
3 SIGNIFICANT ACCOUNTING JUDGEMENTS ESTIMATES AND ASSUMPTIONS (CONTINUED)
Estimates and assumptions
The key key assumptions
concerning the the the future and other key key sources of estimation uncertainty at at at at the the the reporting date that have a a a a a a a a a a a a a a significant risk of of causing a a a a a a a a a a a a a a material adjustment to the the carrying amounts of of assets and liabilities within the the next financial year are described below The Group based its assumptions
and estimates on on on parameters available when the consolidated financial statements
were prepared Existing circumstances and assumptions
about future developments however may change change change due to market changes changes or circumstances arising beyond the the control of the the Group Such changes changes are reflected in in the the assumptions
when they occur Useful lives and and residual values of property plant and and equipment
Determining the the the carrying amounts of of property plant and and equipment
requires the the the estimation of of the the the useful lives and and residual values of of these assets which carry a a a a a a a a a degree of of uncertainty The directors have used historical information relating to to to the the Group Group and and the the the relevant industries in in in in which the the the Group’s entities operate in in in in order to best determine the the the useful lives and and residual values of property plant and equipment
There has been no impact on the re-assessment made by management The Group measures land and and buildings at revalued amounts with changes in in in in fair value value being recognised in in in in other comprehensive income The fair values are determined by by independent professional valuers by by reference to market-based evidence using comparable prices adjusted for specific market factors such as nature location and condition of the properties Refer to note 5 Valuation of standing cane
The The fair value value of of biological assets is based on the the estimated net present value value of of future cash flows for the the coming crop The The standing cane
valuation has been arrived at at at based on on on an an an estimate of the future cash flows arising on on on a a a a a a a a a a a a a a normal crop with sugar sugar proceeds being adjusted for for the drop in in sugar sugar price as as well as as estimated foreign currency movements and budgeted costs and applying a a a a a a a a a suitable discount rate in in order to to calculate the net present value Refer to to note 14 for key assumptions
used to determine valuation of standing cane
Valuation of plants
The The fair value value of of plants
is based on on the the estimated net present value value of of future cash flows for the the coming crops The The valuation of of plants
has been arrived at at based on on an an estimate of of the future cash flows arising on on a a a a a a a a a a a normal crop less budgeted costs discounted at at at a a a a a a a a suitable rate in order to to to calculate the net present value Refer to to to note 14 for key assumptions
used to to to determine valuation of plants
Provision for expected credit losses of trade receivables and contract assets- Under IFRS 9
The The Group uses a a a a a a a a a a a a provision provision matrix to calculate ECLs for trade receivables and contract assets The The provision provision rates are based on days past due for groupings of various customer customer segments that have similar loss patterns (i e e e e e e e e e by customer customer type and rating) The The provision matrix matrix is is is initially based on on the the Group’s historical observed default rates The The Group Group will calibrate the the matrix matrix to to adjust the historical credit loss experience with forward-looking information For instance if forecast economic conditions (i e e e e e e e e e e e e e e e e e gross domestic product) are expected to to deteriorate over the next year which can lead to to an an increased number of defaults the the historical historical default default default rates rates are are adjusted At every reporting date date the the historical historical default default default rates rates are are updated and changes in in the forward looking estimates are analysed The assessment of the correlation between historical observed default rates forecast economic conditions and ECLs is is a a a a a a a a significant estimate The The amount of of ECLs is sensitive to changes in circumstances and of of forecast economic conditions The The Group’s historical credit loss experience and forecast of of economic conditions may also not be representative of of customer’s actual default in the future Refer to notes 16 and 17 190 - UBP INTEGRATED REPORT 2020