27 NOVEMBER NEW ZEALAND GAZETTE 4571

Outstanding forward foreign exchange contracts which are not designated as hedges are valued at the forward rate of exchange at balance date and the resulting gains and losses are recognised in the statement of financial performance.

Investments

Investments in subsidiaries are stated at cost.

Investments in associate entities are stated at cost.

Short term investments consist of investments which mature or are otherwise realisable within not more than 12 months from the date of purchase and are stated at cost or market value (where available), with resulting gains and losses taken to the statement of financial performance.

Borrowings

Debt is stated at face value less unamortised discounts, premiums and prepaid interest which are amortised to interest expense on a yield to maturity basis over the period of the borrowing. Borrowing costs such as origination, commitment and transaction fees are deferred and amortised to expense over the period of the borrowing.

Joint Ventures

ECNZ’s method of accounting for a material interest in a joint venture is to recognise in the respective classification categories the amount of:

(a) ECNZ’s share in each of the individual assets employed in the joint venture;

(b) liabilities incurred in relation to the joint venture, including ECNZ’s share of liabilities for which it is severally liable; and

(c) ECNZ’s share of revenue earned and expenses incurred in relation to the joint venture.

Fixed Assets

Fixed assets are stated at the cost at which they were purchased from the Crown as at 1 April 1987, adjusted by subsequent additions at cost, disposals and depreciation.

The cost of purchased fixed assets equals the consideration given to acquire the assets plus other directly attributable costs incurred in bringing the assets to the location and condition necessary for their intended service.

The cost of assets constructed by ECNZ, including capital work in progress, includes the cost of all materials used in construction, direct labour on the project, financing costs that are directly attributable to the project and an appropriate proportion of variable and fixed overheads. Costs cease to be capitalised as soon as the asset is ready for productive use and do not include any inefficiency costs. Financing costs on uncompleted capital work in progress are capitalised at ECNZ’s weighted average interest rate.

Leased Assets

ECNZ leases certain plant, equipment, land and buildings.

Leases under which ECNZ assumes substantially all the risks and rewards incidental to ownership have been classified as finance leases and are capitalised. The asset and corresponding liability are recorded at the inception of the lease at the lower of fair value of the leased asset and, amounts equivalent to the discounted present value of minimum lease payments, including residual values.

Finance charges are apportioned over the terms of the respective leases using the actuarial method.

The cost of improvements to leasehold property is capitalised and amortised over the estimated useful life of the improvements, or over the unexpired portion of the lease, whichever is shorter.

Capitalised leased assets are depreciated over their expected lives in accordance with rates established for other similar ECNZ assets.

Operating lease payments are representative of the pattern of benefits derived from the leased assets and accordingly are charged to the statement of financial performance in the periods in which they are incurred.