23 MAY NEW ZEALAND GAZETTE 1407

2.3 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

For the year ended 31 December 2002

1 Statement of accounting policies

Special purpose financial statements
The reporting entity is UnitedNetworks Limited.
These financial statements are made 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.

In these statements UnitedNetworks has adopted the avoidable cost allocation methodology stipulated in the Electricity Information Disclosure Handbook issued on 30th June 2000. The Electricity Lines business is treated as the core business activity and other activities are accounted for through the Gas Lines and Other business unit financial statements.

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.

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

Income tax
These financial statements adopt the liability method of accounting whereby the income tax expense shown in the statement of financial performance is the estimated total liability relating to the income for the period. Deferred taxation is accounted for in respect of items relating to the statement of financial performance, following the liability method, on the comprehensive basis.

Property, plant and equipment
All non reticulation assets are recorded at cost. Reticulation assets are recorded at cost or most recent valuation. Such valuations are conducted on a cyclical basis. A revaluation has not been prepared since the gas assets were acquired and they are currently being carried at cost. The next valuation will occur in 2003.

Financial instruments
The company has financial instruments with off-balance sheet risk for the primary purpose of reducing its exposure to fluctuations in interest rates and foreign exchange rates.

Financial instruments entered into as hedges of an underlying exposure are accounted for on the same basis as the underlying exposure. Accordingly hedge gains and losses are included in the Statement of Financial Performance when the gains or losses arising on the related physical exposures are recognised in the Statement of Financial Performance.

Foreign currencies
Transactions in foreign currencies are translated at the New Zealand rate of exchange ruling at the date of transaction. At balance date foreign monetary assets and liabilities are translated at the closing rate, and exchange variations arising from these translations are included in the statement of financial performance as operating items.

Operating leases
Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the leased items, are included in the determination of the operating surplus in equal installments over the lease term.