Lendlease Annual Report 2022

134 Lendlease Annual Report 2022 Notes to Consolidated Financial Statements continued Section B. Investment Investment in the Development pipeline, joint ventures in property projects, the retirement sector, and more passive assets, such as property funds, drive the current and future performance of the Group. This section includes disclosures for property such as Inventories and indirect property assets such as Equity Accounted Investments and Other Financial Assets contained within the Statement of Financial Position. 11. Inventories Accounting Policies Development Properties Property acquired for development and sale in the ordinary course of business is carried at the lower of cost and Net Realisable Value (NRV). The cost of development properties includes expenditure incurred in acquiring the property, preparing it for sale and borrowing costs incurred. The NRV is the estimated selling price, less the estimated costs of completion and selling expenses. Management considers the estimation of both selling prices and costs of completion to be an area of estimation uncertainty, as these estimations take into consideration market conditions affecting each property and the underlying strategy for selling the property. The recoverable amount of each property is assessed at each balance date and accounting judgement is required to assess whether a provision is raised where cost (including costs to complete) exceeds NRV. Inventories are expensed as cost of sales in the Income Statement. Management uses accounting judgement in determining the following: • The apportionment of cost of sales through sales revenue • The amount of cost of sales, which includes costs incurred to date and final forecast costs • The nature of the expenditure, which may include acquisition costs, development costs, borrowing costs and those costs incurred in preparing the property for sale. Construction Contract Assets The gross amount of Construction and Development Work in Progress consists of costs attributable to work performed, including recoverable pre contract and project bidding costs and emerging profit after providing for any foreseeable losses. In applying the accounting policies on providing for these losses, accounting judgement is required. Construction contract assets are presented as part of inventories for all contracts in which revenue recognised (costs incurred plus recognised profits) exceed progress billings. If progress billings and/or recognised contract losses exceed revenue recognised, then the difference is presented in Trade and other payables as a Construction contract liability. June 2022 June 2021 Note $m $m Current Development properties 1 792 894 Construction contract assets 21.a 664 565 Other 3 10 Total current 1,459 1,469 Non Current Development properties 1 2,320 2,404 Total non current 2,320 2,404 Total inventories 3,779 3,873 1. The Group has considered the impacts of the COVID pandemic and other economic conditions on its recoverability assessment of inventories at 30 June 2022. As part of its semi annual review of development property projects, the Group has considered sales volumes in the short term, production timeframes, and potential increased costs for its projects. The carrying value of the Group’s projects has not been materially impacted during the period due to their long dated nature, except for those projects impacted by the revised strategy announcement and business review undertaken by the Global CEO during the financial year. The Development impairment expense of $289 million (30 June 2021: $nil) and Property inventories impairment expense of $12 million (30 June 2021: $13 million reversal) as disclosed in Note 7 'Other Expenses', have been recorded net against the inventories balance. Refer to Note 7 ‘Other Expenses’ for further detail.