4 Key sources of estimation uncertainty
The key assumptions made concerning the future, and other key sources of estimation uncertainty at the end of the reporting period 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, and asset usage. The useful lives of key assets are reviewed annually.
Depreciated replacement cost of railway infrastructure assets
The Building Cost Index from the Department of Treasury and Finance has been applied in a model developed by the PTA for measuring the current replacement cost of the urban railway infrastructure.
The remaining useful life of the freight network infrastructure assets has been assessed by experienced independent engineering and valuation professionals based on a review of information pertaining to age, history, site assessment observation and condition. The PTA has assumed no residual value on life expired freight network infrastructure assets.
Contingencies
The PTA is unable to assess the outcome of the classification process for 42 possible contaminated sites. Possible remediation costs associated with these sites might have an impact on the provision for contaminated sites.
See note 36 ‘Contingent liabilities and contingent assets’ for more details.