4734

NEW ZEALAND GAZETTE, No. 163

4 DECEMBER 2006

(xi) Research and Development Costs
Research and development costs are normally expensed in the period incurred except that development costs are deferred where future benefits are expected to exceed these costs. Deferred development costs are amortised over future periods on a basis related to expected future revenue.

(xii) Financial Instruments
Northpower and its subsidiary are party to financial instrument arrangements as part of everyday operations. These instruments include bank accounts, accounts receivable, creditors, and short term deposits. Revenues and expenses in relation to all financial instruments are recognised in the Statement of Financial Position. All financial instruments are recognised in the Statement of Financial Position.

Northpower has limited its exposure to credit risk in respect of its investments by only investing in institutions with a high credit rating, and limiting the proportion that can be invested in any one institution. Northpower believes this policy reduces the risk of any loss which could arise from its investing activities.

(xiii) GST
These Financial Statements are prepared on a GST exclusive basis, with the exception of accounts receivable and accounts payable, which are GST inclusive. Where GST is irrecoverable as an input tax, it is recognised as part of the related asset or expense.

(xiv) Employee Entitlements
Provision is made in respect of the group’s liability for annual leave, long service leave and retirement gratuities. Annual leave has been calculated on an actual entitlement basis at current rates of pay, while the other provisions have been calculated on an actuarial basis at current rates of pay.

(xv) Goodwill
Goodwill may arise from the acquisition of a business. An assessment of the economic life of goodwill will be made on a case by case basis and it will be amortised over a period not exceeding five years.

(xvi) Leases
Northpower Group entities lease certain land and buildings. Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the lease items, are included in the determination of the net surplus in equal instalments over the period of the lease.

(xvii) Statement of Cash Flows
Cash means cash balances on hand, held in bank accounts, demand deposits and other highly liquid investments in which Northpower invests as part of its day-to-day cash management.

Operating activities include all activities other than investing and financing activities. The cash inflows include all receipts from the sale of goods and services and other sources of revenue that support Northpower’s operating activities. Cash outflows include payments made to employees, suppliers and for taxes.

Investing activities are those activities relating to the acquisition and disposal of current and non-current securities and any other non-current assets.

Financing activities are those activities relating to changes in equity and debt capital structure of Northpower and those activities relating to the cost of servicing Northpower’s equity capital.

Changes in Accounting Policies:
There have been no changes in accounting policies. The policies have been applied on a basis consistent with previous years.