2 Critical Accounting Estimates and Judgements

The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

Key Estimates – Impairment

The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

No impairment has been recognised in respect of intangible assets (including Goodwill and Research and Development) for the year ended 30 June 2009. The recoverable amount of the Group’s cash-generating units is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. The growth rate used for the projections is consistent for the five year period.

The Company commenced production of its 1ml Safety Syringe during 2009. The Company has entered into a number of supplier agreements that can be fulfilled as a result of commencing production.

The recoverability of capitalised Research and Development costs amounting to $6,761,668 is dependent on the Company being able to successfully exploit the Company’s products and technologies in excess of the carrying value of its Research and Development costs. This exploitation may require further working capital and investment. See further details in note 17.

Key Judgements – Non-recovery of Loans

The recovery of debt was assessed at 30 June 2009. A provision has been made ($12,045,942) in the Parent Entity for the non-recovery of loans to the wholly owned Australian Subsidiary. The provision was determined primarily on the basis of cash funding provided to the Controlled Entity.

Deferred Tax Assets

Deferred tax assets by way of carried forward tax losses ($1,847,664) from Unilife Medical Solutions Inc. (formerly Integrated BioSciences Inc.) was recognised as at 30 June 2009. The deferred tax assets have been brought to account as their recoverability has been assessed as probable, based on future earnings. This will be reassessed on an on going basis.

Share Based Payment

The Black-Scholes methodology and the Barrier Pricing models are used to calculate the fair value of the options issued by Unilife Medical Solutions Limited. Refer to Note 22 for the underlying assumptions used in the fair value calculations.