28 NOVEMBER NEW ZEALAND GAZETTE 4547

2.3 STATEMENT OF ACCOUNTING POLICIES

Special purpose financial statements

The reporting entity is UnitedNetworks Limited.

These financial statements are prepared pursuant to UnitedNetworks obligations under the Gas (Information Disclosure) Regulations 1997. They are in addition to the company’s financial statements published pursuant to the company’s obligations under the Companies Act 1993 and the Financial Reporting Act 1993.

These financial statements are prepared for the six month period 1 January 2003 to 30 June 2003 as a result of the change in UnitedNetworks financial year end from 31 December to 30 June. Future disclosures will be for the 12 month period of 1 July to 30 June.

UnitedNetworks has followed the avoidable cost allocation methodology stipulated in the Electricity Information Disclosure Handbook issued on 30^th June 2000 for allocating costs between Electricity, Gas and other activities.

General accounting policies

The general accounting policies as recommended by the Institute of Chartered Accountants of New Zealand for the measurement and reporting of financial performance and financial position, under the historical costs method as modified by revaluation of certain assets, have been followed by the company. The reporting currency is New Zealand dollars.

Where a change in the presentational format of the financial statements has been made during the period, comparative figures have been restated accordingly.

Specific accounting policies

The following specific accounting policies which materially affect the measurement of the financial performance and position have been applied:

Income Recognition

Income from the provision of utility services is recognised as services are delivered. Interest and rental income is accounted for as earned. Income from capital contributions is typically recognised on an as-invoiced or percentage of completion basis to match the conditions of the contract.

Income tax

The income tax expense recognised for the period is based on the operating surplus before taxation, adjusted for permanent differences between accounting and tax rules. The impact of all timing differences between accounting and taxable income is recognised as a deferred tax liability or asset. This is the comprehensive basis for the calculation of deferred tax under the liability method.

A deferred tax asset, or the effect of losses carried forward that exceed the deferred tax liability, is recognised in the financial statements only where there is the virtual certainty that the benefit of the timing differences, or losses, will be utilised.

Property, plant and equipment

The cost of purchased property, plant and equipment is the value of the consideration given to acquire the property, plant and equipment and the value of other directly attributable costs, which have been incurred in bringing the property, plant and equipment to the location and condition necessary for the intended service. All feasibility costs are expensed as incurred.

The cost of self-constructed property, plant and equipment includes the cost of all materials used in construction, direct labour on the project, costs of obtaining resource management consents, financing costs that are attributable to the project and an appropriate proportion of the variable and fixed overheads. Costs cease to be capitalised as soon as the property, plant and equipment is ready for productive use and do not include any inefficiency costs.

Subsequent expenditure relating to an item of property, plant and equipment is added to its gross carrying amount when such expenditure either increases the future economic benefits beyond its existing service potential, or is necessarily incurred to enable future economic benefits to be obtained, and that expenditure would have been included in the initial cost of the item had the expenditure been incurred at that time.