3644 NEW ZEALAND GAZETTE No. 135

1.4 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.

1.5 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.

1.6 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. Duc allowance is made for damaged and obsolete inventory. Work in progress comprises the cost of direct materials and labour together with chargeable overheads.

1.7 Fixed Assets and Depreciation
Marlborough Lines' fixed assets are recorded at cost. The Network assets of OtagoNet, included through the consolidation process, have been valued at depreciated replacement cost in compliance with FRS 3. The cost of assets constructed by the company includes all materials used in construction, direct labour and direct overheads. 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 - 3.6% 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
• Metering and control equipment: 10 - 14.4% on diminishing value
• Plant: 10 - 62.5% on diminishing value
• Motor vehicles, office, communications: 18 - 48% on diminishing value

1.8 Research and Development Expenditure
Research and investigation costs are charged to expense in the year in which they are incurred. Development expenditure is capitalised to the extent that future benefits are expected to accrue.

1.9 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.

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

1.11 Changes in Accounting Policies
All policies have been applied on a basis consistent with previous years.

2. INCOME TAX

Income Tax Expense is represented by:

• Tax (refund) / payable in respect of the current year: (281) | (144)
• (Deferred Tax) / Future income tax benefits: 1,035 | (17)