NEW ZEALAND GAZETTE

No. 147

CITIPOWER LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 1996

1 STATEMENT OF ACCOUNTING POLICIES

Reporting Entity and Statutory Base

• Citipower Limited is a company registered under the Companies Act 1993 and an energy company in terms of the Energy Companies Act 1992. Citipower Limited (the "Company") has a balance date of 31 March.
• The principal activity of the Company is that of electricity supply.
• The Company has a ten year lease of the distribution system from Nelson City Council from 1 December 1991.
• 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

  • Historical cost is the purchase price paid to Nelson City Council per the independent valuations undertaken by Duke & Cooke Limited for Land and Buildings and Darroch & Co Limited for Plant and Equipment.
  • Depreciation is provided on a straight line and 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:

  • Freehold Building: 40 years

  • Plant and Equipment: 10% DV

  • Motor Vehicles: 20% DV

  • Furniture and Fittings: 20% DV

  • Motor Vehicles: 20% DV

  • Fixed assets purchased after 16 December 1991 have an extra 25% loading.

  (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. In the case of the lease of Nelson City Council’s distribution system, the cost of improvements to leasehold distribution equipment is partially recoverable from the lessor as betterment, in accordance with the terms of the lease agreement. The balance is expensed in the Statement of Financial Performance.
  • The cost of improvements to leased property are capitalised (except costs to improve the distribution system, which is charged to the Nelson City Council as betterment) and are disclosed as leasehold improvements and amortised over the unexpired period of the lease or the estimated useful life of the improvements whichever is shorter.

  (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 and bank, accounts receivable, short term investments and accounts payable and accruals.
  • 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.