✨ Financial Statements Notes
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2003
(f) Fixed Assets (continued)
Infrastructure Asset - Transmission Lines
The infrastructure accounting methodology is applied to the infrastructure asset. The infrastructure asset consists of the individual asset components that form the network of transmission lines comprising the National Grid. These individual components are regarded together as a single asset. All other assets are classified as non-infrastructure assets.
The Transpower Lines Business intends to maintain the operating capability of the transmission line network into the foreseeable future.
Operating capability refers to the output of service of the infrastructure asset at a point in time and is determined by reference to attributes such as physical output capacity, associated operating costs and quality of output.
Transpower’s asset management practices result in the infrastructure asset having an extremely long life. Having regard to the life and residual value of the infrastructure asset, the Directors consider that the depreciation of the asset is immaterial. Accordingly, no depreciation is charged on the infrastructure asset.
Expenditure incurred to maintain the operating capability of the infrastructure asset is treated as an expense in the Statement of Financial Performance. Expenditure on the infrastructure asset that enhances or develops the operating capability of the asset is capitalised.
Service potential refers to the ability of the asset to provide a satisfactory level of operating capability into the future. If, in any year, the level of expenditure required to maintain the operating capability of the infrastructure asset is insufficient to preserve the service potential of the asset, the net book value of the infrastructure asset is reduced and the Statement of Financial Performance is charged with this shortfall. This is called the “infrastructure asset service potential adjustment”. Expenditure in subsequent periods to redress this shortfall and bring the infrastructure asset back to the requisite level of service potential increases the net book value of the infrastructure asset.
Effective 1 July 2003, Transpower will fully comply with FRS 3 and will no longer use infrastructure accounting.
Capital Work in Progress
Capital work in progress is recorded at cost. Cost is determined by including all costs directly associated with bringing the fixed assets to their location and condition. Finance costs incurred during the period of time that is required to complete and prepare the fixed asset for its intended use are capitalised as part of the total cost for capital work in progress.
The finance costs capitalised are based on the actual costs directly attributable to the construction of the asset. Where this is not clearly identifiable, Transpower’s weighted average cost of capital is used.
Assets are transferred from capital work in progress to fixed assets as they become operational and available for use.
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2003, No 162
Gazette.govt.nz —
NZ Gazette 2003, No 162
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Transpower New Zealand Limited Lines Business Notes to the Financial Statements
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🏭 Trade, Customs & IndustryFinancial statements, Accounting policies, Fixed assets, Depreciation, Capital work in progress, Infrastructure accounting