1 SEPTEMBER
NEW ZEALAND GAZETTE
2687

Notes to the Financial Statements for the 12 months ended 31 March 1995

Statement of Accounting Policies

1. Special Purpose Financial Statements

These financial statements have been prepared for the purpose of complying with the requirements of the Electricity (Information Disclosure) Regulations 1994, and are intended for no other purpose. As this is the first year the Regulations have been in effect, comparative information is not required and therefore none has been presented.

A. General Accounting Policies

The general accounting policies recognised as appropriate for the measurement and reporting of results and financial position have been followed in the preparation of these financial statements.

The historical cost method has been followed. Reliance has been placed on the fact that the business and undertakings of Bay of Plenty Electricity are a going concern.

B. Particular Accounting Policies

The following particular accounting policies, which significantly affect the measurement of profit and/or financial position have been applied:

(i) REVENUE

Revenue shown in the statements of financial performance comprises amounts received and receivable for electricity, goods and services supplied to customers in the ordinary course of business. Energy Trading and Network revenues are based on actual and assessed readings plus an allowance for unread meters at balance date. Generation revenues are based on a calculation of the avoided cost of purchasing the same number of units from external suppliers. Revenue is stated exclusive of Good and Services Tax collected from customers.

(ii) CAPITAL CONTRIBUTIONS

Capital contributions received are recognised in the statements of financial performance as soon as any obligations attaching to the contributions have been fulfilled.

(iii) INVESTMENTS

Investments are stated at the lower of cost or net realisable value.

Interest income is accounted for as earned.

(iv) FIXED ASSETS

The cost of purchased fixed assets is the value of the consideration given to acquire the assets and the value of other directly attributable costs which have been incurred in bringing the assets to the location and condition necessary for their intended service.

The cost of assets constructed by the Group 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.

(v) DEPRECIATION

Depreciation is charged so as to write off the cost of the fixed assets to their estimated residual value over their expected useful lives. Depreciation has been charged at the following rates:

(vi) INVENTORIES

Inventories are stated at the lower of average cost and net realisable value, with obsolete stock written off.

(vii) ACCOUNTS RECEIVABLE

Accounts receivable are stated at estimated realisable value after providing for debts where collection is considered doubtful.

(viii) TAXATION

The liability method of accounting for deferred taxation has been applied.

The taxation charge against the profit for the twelve months is the estimated liability in respect of that profit after allowance for all permanent differences for the legal entity of Bay of Plenty Electricity Limited.

Taxation expense, provision for deferred taxation and current tax liability have all been apportioned to each business unit on the basis of each business units’ notional profit, after accounting for internal transactions.