Home' Slater and Gordon Annual Report : Slater and Gordon AR 2016 Contents Notes to the Financial Statements
For the Year Ended 30 June 2016
Slater and Gordon Limited
1.3 Adoption of New Accounting Standards (continued)
Remeasured amounts relate solely to the application of AASB 15 and do not reflect other adjustments as a result of
finalisation of provisional accounting for acquisitions.
* Prior period remeasurements converted at the closing rate in the current period with the resulting foreign exchange
difference included in the Foreign Currency Translation Reserve included in Equity.
1.4 Significant Accounting Judgements, Estimates and Assumptions
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions
that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to estimates are recognised prospectively.
The significant judgements made by management in applying the Group’s accounting policies and the key sources of
estimation uncertainty are outlined in detail within the specific note to which they relate. Noted below are new significant
accounting judgements and key sources of estimation uncertainty applied in the current reporting year:
(i). Revenue Recognition – Identifying the Performance Obligation
In personal injury matters, contracts with clients generally comprise a single distinct performance obligation, being the
provision of services in pursuit of the successful settlement of a customer’s claim, and the transaction price is allocated
to this single performance obligation. Some contracts contain multiple deliverables – such as legal services in respect of
a statutory claim and a common law claim, or initial pre-issue work and litigation work. In such circumstances, these
multiple deliverables are considered to represent a single distinct performance obligation, given there is a significant
service of integration performed by the Group in delivering these services. Management considers the methods used
provide a faithful depiction of the transfer of goods or services.
The Group has some contractual arrangements outside of personal injury matters that include multiple performance
obligations. In these transactions, the transaction price must be allocated to the performance obligations on a relative
stand-alone selling price basis. In most cases, the price for each separate performance obligation is identified in the
contract and in most cases, these prices are considered to be reflective of the stand-alone selling price of each
The Group notes that it is not practicable to determine and track on a case-by-case basis the elements of a transaction
that should be attributed to pre- and post-acquisition performance, given the nature of the estimates of variable
consideration, and the methodology adopted (based around actual historical average fees and estimates of success
rates on a cohort-by-cohort rather than case-by-case basis).
(ii). Revenue Recognition – Estimating the Transaction Price: Variable Consideration – No Win – No Fee
The Group provides various services on the basis of No Win – No Fee conditional fee arrangements. The uncertainty
around the fees ultimately receivable under these types of contracts is generally only fully resolved when a matter is
Where the Group has sufficient historical experience in similar contracts in order to be able to estimate the expected
outcome of a group of existing contracts reliably, revenue is estimated using the expected value method. Fees are only
included in revenue to the extent that it is highly probable that the cumulative amount of revenue recognised in respect of
a contract at the end of a reporting period will not be subject to significant reversal when a matter is concluded.
To determine the probability of success of a case using the expected value method, a level of judgement is required to
be applied based on past experience and historical performance of similar matters. The estimated amount of variable
consideration is based on the expected fee for the nature of the legal service provided with reference to internal historical
fee levels and relative rates of successful and unsuccessful outcomes.
Where historical averages are not predictive of the probability of outcomes for a given contract, or where the Group has
limited historical experience with similar contracts, the expected amount of variable consideration is estimated using a
most likely amount approach on a contract by contract basis. In such circumstances, a level of judgement is required to
determine the likelihood of success of a given matter, as well as the estimated amount of fees that will be recovered in
respect of the matter.
In addition, when new businesses are acquired, there is a transition period during which time the Group’s practices and
procedures are embedded into the operations of the new business. Therefore the valuation of work in progress acquired
in a business combination may be adjusted during the period of provisional accounting for the acquisition.
56 Slater and Gordon Limited
Annual Report 2016
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