McConnell Dowell 2018 Annual Review

12 Notes to the Annual Financial Statements For the year ended 30 June 2018 1. Accounting Policies COMPANY DETAILS McConnell Dowell Corporation Limited (the Company) is a public unlisted for-profit company incorporated and domiciled in Australia. The Company’s registered place of business is Level 3, 109 Burwood Road, Hawthorn, Victoria, Australia. The ultimate Australian parent is Aveng Australia Holdings Pty Ltd. The ultimate parent is Aveng Limited (a company incorporated in South Africa). BASIS OF PREPARATION The financial report is a general purpose financial report, which has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). The financial report has also been prepared on a historical cost basis, except for certain financial instruments (when applicable) which have been measured at fair value. Where necessary, comparative figures have been reclassified and repositioned for consistency with current year disclosures. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand ($000’s) except when otherwise indicated in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The financial report was approved by a resolution of the Directors of the Company on 25 September 2018. Going Concern In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The company enters the 30 June 2019 financial year with a more sustainable Statement of Financial Position than at the previous year end, which has been recapitalised by its immediate parent company during the year. The Directors have reviewed business plans and detailed financial budgets for the year ending 30 June 2019 and beyond which indicate significant construction opportunities ahead. The company has more than $1.0bn worth of opportunities (based on contract value) that are in sole source negotiations or in Early Contractor Involvement stage and therefore it is probable that these will be converted to contracted projects in the year ending 30 June 2019 and subsequent years (this figure is provided as additional non-IFRS information). The Group has opportunities to further improve cash resources from claim settlements and seek external financial support if required. The Group has also confirmed financial support from its ultimate parent company, Aveng Limited covering a minimum of 12 months from the date of these financial statements subject to consents that the Directors do not consider would be unduly withheld if required. These detailed financial budgets and business plans that are being implemented by management indicate that the Group will have sufficient cash resources for the foreseeable future. The Company has met its banking covenants for 30 June 2018 resulting in no breaches at year-end and forecasts indicate no breaches in the upcoming financial quarters. The Group retains the support of its lenders, guarantee providers, and insurance bonding providers. In the opinion of the Directors, the market opportunities in all areas in which the Group operates are strong and provide the basis to grow the Group’s order book. The Directors have considered the business plans and detailed financial budgets, including all available information, and whilst significant estimates and judgements including the impacts of the wider economic environment are always required the Directors are of the opinion that the going concern assumption is appropriate in the preparation of the financial statements. STATEMENT OF COMPLIANCE The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements of McConnell Dowell Corporation Limited and its subsidiaries as at 30 June each year (the Group). Control over a subsidiary is achieved when the Group is exposed, or has the rights to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Specifically, the Group deems it controls a subsidiary if and only if the Group has: • Power over the subsidiary (i.e. existing rights that give it the current ability to direct the relevant activities of the subsidiary) • Exposure, or rights, to variable returns from its involvement with the subsidiary, and • The ability to use its power over the subsidiary to affect its returns When the Group has less than a majority of the voting or similar rights of a subsidiary, the Group considers all relevant facts and circumstances in assessing whether it has power over a subsidiary, including; • The contractual arrangement with the other vote holders of the subsidiary • Rights arising from the other contractual arrangements • The Group’s voting rights and potential voting rights The Group reassess whether or not it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The parent’s investments in controlled entities are initially recognised at cost and subsequently measured at cost, less any impairment charges.