Notes to the Financial Statements
continued
50
2.3 Critical accounting estimates
The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the
Group’s accounting policies. The estimates and judgements are reviewed by management on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised. The following
are the critical estimates and judgements management has made in the process of applying the Group’s
accounting policies and that have the most significant impact on the amounts recognised in the financial
statements.
(a) Fair value of assets and liabilities
The Company and Group record certain assets and liabilities at fair value in the statement of financial position
as follows:
Investment properties (note 19), farm and other properties (note 18) have been valued by independent valuers
as at 31 March 2013 and 31 March 2012 using a mixture of market evidence of transactional prices for similar
properties, direct comparison, capitalisation and discounted cash flow approaches.
Biological assets (note 14) comprise livestock and forests. Both are valued by independent valuers using
current market prices less point of sale costs (livestock) and expectation value method less point of sale costs
(forests).
Other financial assets at fair value through profit or loss (note 16) include shares in unlisted companies held at
fair value. The fair value of these shares, in the absence of quoted prices, has been determined using valuation
techniques.
Interest rate swaps (note 23) are valued using discounted cash flow techniques.
The determination of fair value for each of the assets and liabilities above requires significant estimation and
judgement which have a material impact on the statement of comprehensive income and statement of financial
position.
(b) Impairment testing
Intangible assets with indefinite useful lives being quota (note 17) are required to be tested for impairment
at least annually. This requires an estimation of the recoverable amount of the quota based on the higher of
value in use or fair value less costs to sell. The determination of the recoverable amount of the quota requires
significant estimation and judgment.
2.4 Principles of consolidation
(a) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the
financial and operating policies, generally accompanying a shareholding of more than one‑half of the voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are de‑consolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset
or liability resulting from a contingent consideration arrangement. Acquisition‑related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date. On an acquisition‑by‑acquisition basis, the
Group recognises any non‑controlling interest in the acquiree either at fair value or at the non‑controlling
interest’s proportionate share of the acquiree’s net assets.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in
consideration arising from contingent consideration amendments. Cost also includes direct attributable costs
of investment.
The excess of the consideration transferred, the amount of any non‑controlling interest in the acquiree and
the acquisition‑date fair value of any previous equity interest in the acquiree over the fair value of the Group’s
share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the
statement of comprehensive income.
Inter‑company transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
