NEW ZEALAND GAZETTE

No. 114

Sales

Sales shown in the statement of financial performance comprise the amounts received and receivable by the Company for goods supplied to customers in the ordinary course of business. The sales are shown exclusive of Goods and Services Tax collected from customers.

Electricity Sales

Electricity meters are read on the basis of constant cycles each year. Interim assessed monthly bills are issued for most customers. Unbilled sales at the financial year end have been accrued.

Accounts Receivable

Accounts receivable are stated at expected net realisable value after providing against debts where collection is doubtful.

Financial Instruments

Counties Power Limited has financial instruments with off-balance sheet risk for the primary purpose of reducing its exposure to fluctuations in electricity spot market prices. While these financial instruments are subject to risk that market rates may change subsequent to acquisition, such changes would generally be offset by opposite effects on the items being hedged.

The Company has entered into electricity price hedging contracts with electricity generators in order to minimise the risk of price fluctuations on the electricity spot market. Assets, liabilities, and any unrealised revenues and expenses associated with these instruments as at balance date are not recognised in the financial statements. Realised revenues and expenses are recognised in the statement of financial performance on maturity of the hedging contracts and are incorporated as part of the cost of wholesale electricity.

Full disclosure of information about electricity price hedging contracts to which the Company is a party is provided in note 15.

Inventories

Inventories are stated at the lower of cost or net realisable value. Cost is determined at average in store prices. Allowance for obsolescence is made when necessary.

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation, less any amount written off for permanent impairment in value.

The cost of fixed assets created or enhanced by the Company (self-constructed assets) is direct expenses incurred and an appropriate proportion of indirect expenses.

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.

Depreciation

Fixed assets have been depreciated, so as to write off cost less estimated residual value over their estimated useful lives, on the following basis:

• Distribution System: 4% straight line
• 22% DV for system automation equipment
• Buildings: 2% straight line for majority of buildings (some at 1 1/2% straight line)
• Plant & Equipment: 40% DV for computer hardware and software
• 20% and 25% DV for other items
• Motor Vehicles: 20% and 25% DV for majority of vehicles

Taxation

The statements of financial performance and movements in equity includes taxation expense on operating results.

The income tax expense charged to earnings includes both the income tax payable on assessable income in the period and the income tax effects of timing differences calculated using the liability method.

Tax effect accounting is applied on a comprehensive basis to all timing differences. 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.

CHANGES IN ACCOUNTING POLICY

During the period there have been no changes in accounting policies.

2. OPERATING REVENUE

3. OPERATING SURPLUS BEFORE TAXATION

4. TAXATION