NEW ZEALAND GAZETTE

No. 111

(v) Depreciation
Depreciation is charged on a straight line basis so as to write off the cost or valuation of the fixed assets to their estimated residual value over their expected economic lives. The estimated economic lives are as follows:-

Distribution system:

• Lines/transformers/substations 45-70 years
• Distribution switchgear 35-55 years
• Communication/SCADA 15 years
• Buildings 50 years
• Motor vehicles 5-10 years
• Plant and equipment 3-20 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
The Line Company is party to financial instrument arrangements as part of everyday operations. These instruments include bank accounts, accounts receivable, creditors, and short term deposits. Revenues 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) Employees Entitlements
Provision is made in respect of the Line Company’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:
There have been no changes in accounting policies. The policies have been applied on a basis consistent with previous years.