NEW ZEALAND GAZETTE

No. 98

disclosed in the Notes to the Financial Statements. A debit balance in the deferred tax account, arising from timing differences or income tax benefits from income tax losses, is only recognised if there is virtual certainty of realisation.

(f) Receivables

Receivables are stated at their estimated realisable value. An estimate is made for doubtful debts based on a review of all outstanding amounts at year end. Bad debts are written off during the period in which they are identified.

(g) Inventories

Inventory has been stated at the lower of cost and net realisable value. Inventory has been valued on the basis of average cost during the year.

The reticulation stock held for the purpose of supporting the existing distribution network is accounted for as a fixed asset.

(h) Financial Instruments

Pursuant to FRS 31 the company estimates that in respect of the reported Financial Instruments, being cash, short term investments and debtors, fair value is equivalent to the carrying amount as stated in the Statement of Financial Position.

The company holds cash in minimal quantities and places short term investments with only registered banks and limits the amount of credit exposure to any one registered bank. Concentrations of credit risk with respect to debtors are limited due to the large number of customers included in the company's customer base.

Tasman Energy has entered into electricity price hedges with ECNZ for the period 1 April 1997 to 30 September 2001. Under these contracts Tasman Energy has purchased a financial instrument that fixes the price of electricity in different daily and seasonal time slots. On maturity electricity is purchased at the spot price prevailing at the time of consumption. The difference between the price of the hedge and the spot price is then settled between the counterparties and Tasman Energy, regardless of whether any of the electricity for which the hedge was matched was actually purchased or not. The gain or loss on these hedge transactions is not quantifiable at balance date. As at 31 March 1997 the contract value of these hedges was $41.7 million.

(i) Changes In Accounting Policies

The following changes to the accounting policies have taken place during the current year.

(i) Deferred income has been reclassified and has been included as a non-recurring item in the 1997 financial year. In future years the capital contributions received will be recognised as revenue in the Statement of Financial Performance in the year which they are received. Details of this change are included in Note 3. This effects the Line Business Statement of Financial Performance.

(ii) Distribution assets have been revalued to 80% of Optimised Deprival Value as at 31 March 1997. Details of this change are included in Note 7. This effects the Line Business Statement of Financial Position.

(iii) The rate of depreciation used for computer equipment has been increased from 25% to 48% on a diminishing value basis. This reflects the shorter economic life of this asset. This change does not have a material effect on the results of the current period.

(iv) The basis of accounting for deferred tax has been changed from the comprehensive basis to the partial basis of applying the liability method. The reason for this change relates to the timing differences resulting from the revaluation of the distribution system network not crystallising in the foreseeable future. The effect of the change is to reverse the deferred taxation asset balance in the Statement of Financial Position and to increase the taxation expense in the Statement of Financial Performance of the Line Business by $1,061,000 and in the Statement of Financial Performance for Other Businesses by $298,000. There is no effect on cashflow.

All other policies have been applied on bases consistent with those used in the previous year.