3146 NEW ZEALAND GAZETTE No. 124

Distribution system 5-60 years

Buildings 50 years

Motor vehicles 5-10 years

Plant and equipment 5-10 years

(vi) Inventories
Stocks and work-in-progress are stated at the lower of cost and net realisable value.

The cost of stocks is principally determined on a weighted average basis.

The cost of work-in-progress includes materials, and a portion of direct labour and production overhead appropriate to the stage of completion attained.

(vii) Debtors
Debtors are stated at estimated realisable value after providing against debts where collection is doubtful.

(viii) Taxation
The taxation charge against the profit for the year is the estimated liability in respect of that profit after allowance for permanent differences and timing differences not expected to reverse in future periods. This is the partial basis for the calculation of deferred taxation.

The Company follows the liability method of accounting for deferred taxation.

Future taxation benefits attributable to losses carried forward, or timing differences, are recognised in the financial statements only where there is virtual certainty of realisation.

(ix) Research and Development Costs
Research and development costs are normally expensed in the period incurred except that development costs are deferred where future benefits are expected to exceed these costs. Deferred development costs are amortised over future periods on a basis related to expected future revenue.

(x) Financial Instruments
Northpower and its subsidiaries are party to financial instrument arrangements as part of everyday operations. These instruments include bank accounts, accounts receivable, creditors, and short term deposits. Reserves and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance. All financial instruments are recognised in the Statement of Financial Position.

Northpower has limited its exposure to credit risk in respect of its investments by only investing in institutions with a high credit rating, and limiting the amount that can be invested in any one institution. Northpower believes this policy reduces the risk of any loss which could arise from its investing activities.

(xi) GST
These Financial Statements are prepared on a GST exclusive basis, with the exception of accounts receivable and accounts payable, which are GST inclusive.

(xii) Employee Entitlements
Provision is made in respect of the group's liability for annual leave, long service leave and retirement gratuities. Annual leave has been calculated on an actual entitlement basis at current rates of pay, while the other provisions have been calculated on an actuarial basis at current rates of pay.

Changes in Accounting Policies:

Northpower Limited has changed its policy on calculating employee entitlements for long service and retiring leave. These are now calculated on an actuarial basis at current rates of pay. The impact of this change is a charge to the Statement of Financial Performance of $150,000 in the current financial year. In previous financial years these entitlements were not calculated and recorded.