3826

NEW ZEALAND GAZETTE, No. 155

29 NOVEMBER 2004

2.3 STATEMENT OF ACCOUNTING POLICIES

Special purpose financial statements
The reporting entity is Vector Limited ("Vector" or "the company").

These financial statements are prepared pursuant to Vector’s 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.

Vector has followed the avoidable cost allocation methodology stipulated in the Electricity Information Disclosure Handbook issued on 31 March 2004 for allocating costs between electricity, gas and other activities.

General accounting policies
The financial statements have been prepared on the basis of historical cost modified by the revaluation of certain items of property, plant and equipment as identified in specific accounting policies.

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

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.

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

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.

Distribution systems and some land and buildings are revalued by independent experts on the basis of depreciated replacement cost, while land and buildings are valued by reference to market information.