Home' Acrux Annual Report : Acrux Annual Report 2017 Contents Notes to the consolidated financial statements continued
For the financial year ended 30 June 2017
1. Statement of significant accounting policies continued
(r) Accounting Standards issued but not yet effective at 30 June 2017 continued
AASB 116 Leases
AASB 116 introduces a single lessee accounting model that will require a lessee to recognise right-of-use assets and lease liabilities for all
leases with a term of more than 12 months, unless the underlying asset is of low value. Right-of-use assets are initially measured at their cost
and lease liabilities are initially measured on a present value basis. Subsequent to initial recognition:
• right-of-use assets are accounted for on a similar basis to non-financial assets, whereby the right of use is:
asset is accounted for in accordance with a cost model unless the underlying asset is accounted for on a revaluation basis, in which case
if the underlying asset is:
-- investment property, the lessee applies the fair value model in AASB 140 Investment Property to the right-of-use asset; or
-- property, plant or equipment, the lessee can elect to apply the revaluation model in AASB 116 Property, Plant and Equipment
to all of the right-of-use assets that relate to that class of property, plant and equipment; and
• lease liabilities are accounted for on a similar basis as other financial liabilities, whereby interest expense is recognised in respect
of the liability and the carrying amount of the liability is reduced to reflect lease payments made.
The effective date is annual reporting periods commencing on or after 1 January 2019.
Although the Directors anticipate that the adoption of AASB 116 may have an impact on the Group's accounting for its operating leases,
the impact has not yet been quantified. These Standards however, are not expected to significantly impact the Group's financial statements.
2. Significant accounting estimates and judgements
Certain accounting estimates include assumptions concerning the future, which, by definition, will seldom represent actual results. Estimates
and assumptions based on future events have a significant inherent risk, and where future events are not as anticipated there could be
a material impact on the carrying amounts of the assets and liabilities discussed below:
(a) Income tax
Income tax benefits are based on the assumption that no adverse change will occur in the income tax legislation and the anticipation
that the Group will derive sufficient future assessable income to enable the benefit to be realised and that it will comply with the conditions
of deductibility imposed by the law.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses as Management considers that it is probable
that future tax profits will be available to utilise those temporary differences and unused tax losses.
(b) Impairment testing
The Company uses discounted cash flow models to determine that the capitalised development costs in the consolidated entity are not
being carried at a value that is materially in excess of recoverable value. The models value each product by estimating future cash flows
and discounting the future net cash flows for the risks specific to the assets as well as for the time value of money. The following approach
and assumptions have been applied:
• Multiple cash flow scenarios have been forecast where appropriate, including impact of generic product launch and consideration
of the Axiron® patent Appeal's success, providing a weighted average of the possible scenarios.
• Revenue from a product is estimated using current market data and projections of market volumes, product price and market share,
adjusted for the impact of generics entering the market based on external analysis of the market effect of generics.
• The cash flow forecasts are over 10.5 years, which is justified based on the products' patents' lives.
• The cash flows have been discounted using a post-tax rate of 12%.
The Company recorded a non-cash impairment loss of $10.680 million for the financial year and is a result of a reassessment of the
estimated future discounted cash flows from the Axiron® product utilising current market data for Testosterone market in the United States
and the generic market penetration since 6 July 2017.
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