4 Key sources of estimation uncertainty
The key assumptions made concerning the future, and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include:
Discount rates used in estimating provisions
The PTA undertook an actuarial assessment of its long service leave provision and is using employees’ age based factors for discounting its expected future payments between valuations. These factors incorporate a series of assumptions like demographics, salary inflation, and market yields on commonwealth government bonds. Fluctuations in any of the assumptions used to calculate these factors may impact the provision for annual and long service leave.
Estimating useful life of key assets
The useful lives are estimated having regard to such factors as asset maintenance, rate of technical and commercial obsolescence, asset usage. The useful lives of key assets are reviewed annually.
The estimated useful life of Freight Network Infrastructure is based on the term of the freight lease, i.e. 49 years.
Depreciated replacement cost of railway infrastructure assets
The Building Cost Index from the Department of Housing and Works has been applied in a model developed by the PTA for measuring the current replacement cost of railway infrastructure.
Contingencies
The PTA is defending all claims lodged against it by Leighton Contractors and RailLink Joint Venture but the outcome of these is not quantifiable in its entirety and might impact on the PTA’s future year’s financial performance.
The PTA is unable to assess the outcome of the classification process for 41 possible contaminated sites. Possible remediation costs associated with these sites might have an impact on the provision for contaminated sites.
PTA has issued indemnities to parties to cross border lease transactions for the financial obligations and performance of the lessees and deposit takers. In the event of default by lessees or deposit takers the PTA will need to meet these liabilities and it will have an impact on its financial performance. PTA has issued indemnities to cross border lease parties in respect to taxation resulting from changes in law, taxation administration determinations or as a result of loss of railcars. In case of adverse taxation circumstances the PTA will need to honour its obligations.
See note 38 ‘Contingent liabilities and contingent assets’ for more details.