4246

NEW ZEALAND GAZETTE

No. 161

BAY OF PLENTY ELECTRICITY LIMITED

Special Purpose Financial Statements

Electricity (Information Disclosure) Regulations 1994

Notes to the Financial Statements

for the 12 months ended 31 March 1996

1 Statement of Accounting Policies

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.

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, as modified by the revaluation of certain assets, has been followed. Reliance has been placed on the fact that the business and undertakings of Bay of Plenty Electricity Limited are a going concern.

B Particular Accounting Policies

The following particular accounting policies, which significantly affect the measurement of financial performance 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.

(ii) Capital Contributions

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

(iii) Investments

Investments in associate entities are stated at the fair value of the net tangible assets at acquisition plus the share of post-acquisition increases in reserves. Other 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 Company includes the cost of all materials used in constructions, 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.

Generation and distribution assets are valued using modified historical cost. These assets will be revalued on a cyclical basis at least every three years, by independent valuers.

(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.

(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. This is the comprehensive basis for the calculation of deferred taxation.

Future taxation benefits attributable to timing differences or losses carried forward are recognised in the financial statements only where there is virtual certainty that the benefit of the timing differences or will be utilised.

(ix) Financial Instruments

Financial instruments entered into as hedges of an underlying exposure are accounted for on the same basis as the underlying exposure. Financial instruments entered into with no underlying exposure are accounted for on a mark to market basis.

(x) Research & Development

Costs incurred on all research and development projects are written off as incurred, except that Development Costs are capitalised to the extent that such costs are expected, beyond any reasonable doubt, to be recovered.

(xi) Foreign Currency

Foreign currency transactions are recorded at exchange rates in effect at the date of settlement, except where forward contracts have been taken out to cover future commitments. Where forward contracts have been taken out, the transaction is translated at the rate contained in the contract.