✨ Financial Statements Notes
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2004
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
(i) Financial Instruments
Derivative financial instruments include foreign exchange contracts, forward rate agreements, foreign exchange options, cross currency interest rate swaps, interest rate swaps and interest rate options which are entered into for the purpose of reducing exposure to fluctuations in interest rates and foreign exchange rates. While these financial instruments are subject to the risk that market rates will change subsequent to acquisition, such changes would generally be offset by an opposite effect on the items being hedged.
For interest rate swaps, the differential to be paid or received is accrued as interest rates change and is recognised as a component of interest and expended over the life of the swap. Premiums paid on interest rate options are amortised over the period to maturity. The settlement cash flows on the maturity of forward rate agreements are amortised over the period of the underlying asset or liability that the financial instrument is hedging.
Foreign exchange contracts and cross currency interest rate swaps entered into as hedges of foreign currency assets and liabilities are valued at exchange rates prevailing at balance date. Any unrealised gains and losses are offset against foreign currency gains or losses on the related asset or liability.
Additional information about financial instruments to which the Transpower Lines Business is a party is provided in Note 20.
(m) Reclassifications
Certain reclassifications of prior year balances have been made to conform with current year classifications.
Changes in Accounting Policies:
Historical cost
The measurement base for fixed assets has changed from modified historical cost to historical cost. The carrying value of assets as at 10 June 2003 has been used as the opening value for historical cost accounting.
This change in accounting policy has been adopted on the basis that annual revaluations have not been material relative to the asset base.
Based on the latest valuation this change in accounting policy had the effect of reducing by $95 million the Transfer from Asset Revaluation Reserve and the Operating Surplus after Tax shown in the Statement of Financial Performance, and the carrying value of Fixed Assets in the Statement of Financial Position.
Infrastructure Accounting
In accordance with FRS-3 Transpower has ceased using infrastructure accounting, with effect from 1 July 2003. As a result in this change in accounting policy Depreciation has increased by $31 million, the Infrastructure asset service potential adjustment (SPA) has ceased resulting in a decrease of expenses for SPA of $11 billion. Asset operation and maintenance costs have decreased by $17 million. The effect on the Net Surplus from Operations is a reduction of $3 million.
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2004, No 171
Gazette.govt.nz —
NZ Gazette 2004, No 171
✨ LLM interpretation of page content
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Financial Performance of Transpower New Zealand Limited Lines Business
(continued from previous page)
🏭 Trade, Customs & Industry22 December 2004
Financial Statements, Derivative Instruments, Reclassifications, Accounting Policies, Historical Cost, Infrastructure Accounting