22 DECEMBER 2004
NEW ZEALAND GAZETTE, No. 172
4299

HORIZON ENERGY DISTRIBUTION LIMITED – Lines Business
Financial Statements for the purposes of the
Electricity Information Disclosure Requirements 2004

Notes to the Financial Statements
for the year ended 31 March 2004

1 STATEMENT OF ACCOUNTING POLICIES
These financial statements have been prepared in accordance with the Electricity Information Disclosure Requirements 2004.

A General Accounting Policies
The general accounting policies recognised as appropriate for the measurement and reporting of financial performance, cashflows and financial position have been followed in the preparation of these financial statements under the historical cost method, as modified by the revaluation of certain assets. Reliance has been placed on the fact that the lines business and undertakings of Horizon Energy Distribution Limited are a going concern.

B Particular Accounting Policies
The following particular accounting policies, which significantly affect the measurement of financial performance, cashflows and financial position, have been applied:

i) Revenue
Revenue shown in the statement of financial performance comprises amounts received and receivable for goods and services supplied to customers in the ordinary course of business. Line access revenue is based on actual and assessed readings plus an allowance for unread meters at balance date. Revenue is stated exclusive of Goods and Services Tax collected from customers.

ii) Depreciation
Depreciation is charged to write off the cost of fixed assets to their estimated residual value over their remaining useful lives.

iii) Fixed Assets
The cost of purchased fixed assets is the value of the consideration given to acquire the assets and the value of other directly attributable costs which have been incurred in bringing the assets to the location and condition necessary for their intended service.

The cost of assets constructed by the Company includes the cost of all materials used in construction, direct labour on the project, and financing costs that are directly attributable to the project. Costs cease to be capitalised as soon as the asset is ready for productive use and do not include any inefficiency costs.

Distribution System Assets are valued using modified historical cost. Assets are carried at the latest valuation prepared on a depreciated replacement cost basis (latest valuation 31 March 2004), adjusted for subsequent additions, disposals and depreciation. Distribution assets are revalued at least every three years on the basis of depreciated replacement cost.

iv) Accounts Receivable
Accounts receivable are stated at estimated realisable value after providing for debts where collection is considered doubtful.

v) Taxation
The Group follows the liability method of accounting for deferred taxation.
The taxation charge against the surplus for the year is the estimated liability in respect of that surplus after allowance for all permanent differences. This is the comprehensive basis for the calculation of deferred taxation.

Future taxation benefits attributable to timing differences or losses carried forward are recognised in the financial statements only where there is virtual certainty that the benefit of the timing differences will be utilised by the Group.

vi) Statement of Cash Flows
The following are the definitions of the terms used in the statement of cash flows:

a) Cash is considered to be cash on hand, short term deposits and current accounts in banks, net of bank overdrafts.

b) Investing activities are those activities relating to the acquisition, holding and disposal of fixed assets and investments. Investments can include securities not falling within the definition of cash.

c) Financing activities are those activities which result in changes in the size and composition of the capital of the group. This includes both equity and debt not falling within the definition of cash. Dividends paid in relation to the capital structure are included in financing activities.

d) Operating activities include all transactions and other events that are not investing or financing activities.

vii) Financial Instruments
Financial instruments with off-balance sheet risk, have been entered into for the primary purpose of reducing exposure to fluctuations in foreign exchange rates and interest rates. While financial instruments are subject to