2596

NEW ZEALAND GAZETTE

No. 104

MARLBOROUGH LINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2000

1. STATEMENT OF ACCOUNTING POLICIES

These financial statements have been prepared in accordance with and for the sole purpose of the requirements of regulation 6 of Electricity (Information Disclosure) Regulations 1999 and amendments to those regulations. These accounts are not comparable with the consolidated financial statements prepared and published with the Company’s Annual Report. These accounts cannot and should not be used to assess the actual performance of the Company as they are prepared to the guidelines as laid out in the Act which bear a limited relationship to actual activity.

Contracting, maintenance and construction with their associated revenue and costs have been separated out of these Financial Statements in accordance with the Regulations. These and other business activities are required to function separately and produce commercial rates of return and will continue to be a core part of Marlborough Lines activities.

The financial statements comprise separate statements of financial performance and financial position for Network Operations.

1.1 GOODS AND SERVICES TAX (GST)

The statement of financial performance has been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of GST with the exception of receivables and payables which include GST invoiced.

1.2 INCOME TAX

Income tax expense recognises the current obligations and all amounts arising from differences between the accounting results and assessable income for the period. This is the liability method applied on a comprehensive basis.

1.3 RECEIVABLES

Receivables are stated at the amount they are expected to realise. An estimate for doubtful debts is made and bad debts are written off during the year in which they are identified.

1.4 INVENTORIES

Inventories are valued on the basis of the lower of cost and net realisable value. Cost is determined on the basis of weighted average of purchase costs. Due allowance is made for damaged and obsolete inventory. Work in progress comprises the cost of direct materials and labour together with chargeable overheads.

1.5 FIXED ASSETS AND DEPRECIATION

All fixed assets are recorded at cost. The cost of assets constructed by the company includes all materials used in construction, direct labour and direct overheads. Capital contributions are credited against the cost of the reticulation assets. Where commitments arise offshore for capital purchases the exchange rates are fixed forward to minimise foreign currency risk. All costs and exchange variations are included in the capitalised cost of the asset.

Depreciation rates used are in accord with the determinations issued from time to time by the Inland Revenue Department. These rates are as follows:

Buildings (concrete) 1 % on cost price
Buildings (wooden) 2 - 3.8 % on cost price
Reticulation system (global) 5 % on cost price
Reticulation system (from 1.4.87) 5 - 18 % on diminishing value
Substation equipment 7.5 - 39.6 % on diminishing value
Plant 10 - 62.5 % on diminishing value
Motor vehicles, office, communications 20 - 25 % on diminishing value

1.6 EMPLOYEE ENTITLEMENTS

Employee entitlements to salaries and wages, annual and long service leave and other benefits are recognised when they accrue to employees. Allowance is made for the present value of future staff retirement gratuity benefits. The calculations provide also for the probability of the employees completing the appropriate period of service.

1.7 FINANCIAL INSTRUMENTS

Financial instruments carried in the statement of financial position include cash and bank balances, receivables, trade creditors and borrowing’s. These instruments are generally carried at their estimated fair value. For example receivables are carried net of estimated doubtful debts.