3498 NEW ZEALAND GAZETTE No. 145

CAPITAL POWER LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 1996

1.1 STATEMENT OF ACCOUNTING POLICIES

Reporting Entity and Statutory Base
Capital Power Limited is a company registered under the Companies Act 1993 and an energy company in terms of the Energy Companies Act 1992. Capital Power Limited (the "Company") has a balance date of 31 March.

The principal activity of the Company is that of electricity supply.

The financial statements of the Company have been prepared in accordance with Regulation 6 of 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 by the Company.

Particular Accounting Policies
The following Particular Accounting Policies which significantly affect the measurement of financial performance and financial position have been applied:

(a) Income Recognition
Electricity sales represent customer usage during the financial period. Allowance has been made in the sales of electricity for unbilled sales (unread meters and unbilled line charges) as at balance date.

(b) Fixed Assets
All fixed assets are initially recorded at cost. Fixed assets include direct costs attributable to their construction plus the cost of capitalised overheads. Capitalisation of expenses ceases when the asset is ready for its intended use.

Depreciation is provided on a straight line or diminishing value basis on all tangible fixed assets other than freehold land, at rates calculated to allocate the assets' cost over their estimated useful lives.

Major depreciation periods are:

• Distribution Equipment: 25 to 40 years (SL)
• Freehold Buildings: 50 years (SL)
• Motor Vehicles, Plant and Equipment: 3-5 years (SL)
• Computer Hardware and Software: 3-5 years (SL)

Contributions by developers towards fixed assets are recognised as revenue in the year received.

(c) Accounts Receivable
Accounts receivable have been valued at estimated net realisable value after providing for doubtful debts.

(d) Stocks and Work in Progress
Stocks and work in progress are valued at the lower of cost (determined on a FIFO basis) or net realisable value.

(e) Investments
Investments have been valued at cost.

(f) Income Tax
The income tax expense for the year is the estimated liability in respect of any assessable income, after allowance for permanent differences and timing differences not expected to reverse in the foreseeable future. The Company follows the liability method of accounting for deferred tax. Future tax benefits attributable to losses carried forward or timing differences are recognised in the financial statements only where there is virtual certainty that the benefit of the losses will be utilised by the Company.

(g) Operating Lease Payments
Where the lessors effectively retain substantially all the risks and benefits of ownership of the leased items, lease charges are expensed in the period in which they are incurred.

(h) Financial Instruments
The Company is party to financial instrument arrangements as part of its everyday operations, which have been recognised in these financial statements. There are no off-balance sheet exposures. These financial instruments include cash, accounts receivable, short term investments and the capital note.

Revenues and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance.

Changes in Accounting Policies
There have been no changes in accounting policies. All policies have been applied on a basis consistent with those used in previous years.