NEW ZEALAND GAZETTE

No. 91

POWERCO LIMITED - LINE BUSINESS

NOTES TO THE ACCOUNTS

STATEMENT OF ACCOUNTING POLICIES

REPORTING ENTITY

Powerco Limited is a public company registered under the Companies Act 1955.

The financial statements of Powerco Limited have been prepared in accordance with the Companies Act 1955 as amended and the Financial Reporting Act 1993; they have also been prepared to comply with the Electricity (Information Disclosure) Regulations 1994.

MEASUREMENT BASE

The accounting principles recognised as appropriate for the measurement and reporting of earnings and financial position on a historical cost basis are followed.

BASIS OF ALLOCATIONS TO BUSINESS UNITS

Expense Allocation
Meter reading, billing and all associated costs are charged to Powerco’s energy business on a per account basis; this is a variation to the guidelines which state these costs are fully chargeable to the energy business.

Electricity Sales and Cost of Sales Allocation
Electricity sales for the energy business is the energy component of the total sales while the line business sales are the total of fixed distribution and transmission charges.

The cost of sales for each business unit is on the same basis.

SPECIFIC ACCOUNTING POLICIES

The following specific accounting policies which materially affect the measurement of financial performance and the financial position have been applied:

VALUATION OF FIXED ASSETS

All fixed assets are valued at cost less accumulated depreciation with the exception of land which is valued at cost.

DEPRECIATION

Depreciation has been calculated to allocate the cost of the assets over their estimated useful lives at the following rates:

• Buildings: 1% to 2.5% SL
• Plant and equipment: 10% to 12.5% DV
• Motor vehicles: 20% to 25% DV
• Office furniture and equipment: 20% to 50% DV
• Globo distribution system: 5% to 6.3% SL
• Distribution system: 5% to 6.3% DV
• Transformers: 7.5% to 9.4% DV

RENEWALS
The renewal of a component (poles or wire of a similar capacity) is treated as capital expenditure where the renewal of major components of a line increases the life and value of that asset.

DEBTORS

Debtors are stated at their estimated net realisable value after making a general provision for doubtful debts. All known bad debts have been written off during the year.

STOCKS

All stock is valued at the lower of the average cost price and the net realisable value as at 31 March 1995. Allowance has been made for obsolete and damaged inventory.

INVESTMENTS

As it is the company's policy to be holders to maturity and not traders of interest bearing investments, these investments are valued at cost amortised by the yield to maturity method.

Long term share investments in other companies are stated at cost.

ACCRUED ELECTRICITY REVENUE

Electricity revenue includes an estimate for electricity used but not billed as at year end.

INCOME TAX

The income tax expense charged against the profit for the year is the estimated liability in respect of that profit and is calculated after allowance for permanent differences. The company uses the liability method of accounting for deferred taxation and applies this on a comprehensive basis. Future tax benefits attributable to tax losses or timing differences are only recognised where there is virtual certainty of realisation.

CHANGES IN ACCOUNTING POLICIES

There have been no changes of accounting policies. All policies have been applied on bases consistent with those used in previous years.