notes to the financial statements for the year ended 30 June 2001 a) Basis of Accounting The financial statements are a general purpose financial report prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001. The consolidated financial statements incorporate the assets and liabilities of the entity controlled by Transurban City Link Ltd (parent entity) as at 30 June 2001 and the results of the controlled entity for the year then ended. Transurban City Link Ltd and its controlled entity are together referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. The financial statements are prepared on the basis of the historical cost convention and, except where stated, do not take into account current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. The fair value of cash consideration with deferred settlement terms is determined by discounting any amounts payable in the future to their present value as at the date of acquisition. Present values are calculated using rates applicable to similar borrowing arrangements of the Company.  The consolidated entity has not adopted a policy of revaluing its non-current assets on a regular basis.  Toll charges and related fees are recognised when the charge is incurred. The recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal. The expected net cash flows included in determining recoverable amounts of non-current  assets are discounted to their present value using a market-referenced, risk-adjusted discount rate. Where net cash inflows are derived from a group of assets working together, the recoverable amount is applied to the relevant group of assets. Where the carrying amount of a non-current asset is greater than its recoverable amount the asset is revalued to its recoverable amount. Amounts classified as CityLink fixed assets are amortised over the estimated term of the right granted to the Company to operate CityLink (currently 33 years and 6 months), or the assets estimated useful lives, whichever is less. Amortisation commenced with operations on 3 January 2000 and is calculated on a straight line basis. The period of amortisation will be assessed annually. Depreciation is calculated on a straight line basis so as to write off the net cost of plant and equipment over their expected useful lives. Estimates of remaining useful lives will be made on a regular basis for all assets, with annual reassessments for major items. The expected useful lives are as follows: Plant and Equipment 3 – 15 years Leases of plant and equipment where the consolidated entity assumes all the risks and benefits of ownership are classified as finance leases. Other leases are classified as operating leases. Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Capitalised lease assets are amortised on a straight line basis over the term of the lease or, where it is likely that the consolidated entity will obtain ownership of the asset, the life of the asset. Leased assets are being amortised over five years. Other operating lease payments are charged to the statement of financial performance in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets. b) Historical Cost Convention (c) Revenue recognition d) Recoverable Amount of Non-Current Assets e) Amortisation and Depreciation of Fixed Assets CityLink Fixed Assets Other Plant and Equipment f) Leased Non-Current Assets 38 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES