NEW ZEALAND GAZETTE, No. 131

21 AUGUST 2008

Notes to the Financial Statements for the Year Ended 31 March 2008

1. Statement of Accounting Policies

Reporting Entity

TSB Community Trust is a public benefit entity domiciled in New Zealand. It was established by trust deed dated 30 May 1988 and adopted a revised deed on 8 February 2001.

The nature of the trust’s operations is investment and application of the trust funds for charitable purposes.

The financial statements of TSB Community Trust comply with the requirements of this deed and the Community Trusts Act 1999.

These financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable financial reporting standards, as appropriate for public benefit entities.

The financial statements were approved by the trustees on 24 June 2008.

Change in Accounting Policies

The trust has adopted NZ IFRS with effect from 1 April 2007. An explanation of how the transition to NZ IFRS affected the reported income statement, statement of recognised income and expense, balance sheet and cash flow statement is provided in Note 15.

The following new standards are not yet effective and have not been applied in the preparation of these financial statements. Adoption of these standards will not have any impact on the trust’s reported profit or financial position.

• NZ IFRS 8 – Operating Segments. NZ IFRS 8 replaces NZ IAS 14 – Segment Reporting. The new standard requires a "management approach", under which segment information is presented on the same basis as that used for internal reporting purposes.
• NZ IAS 1 – Presentation of Financial Statements (Revised Standard) will apply to the trust from 1 April 2009.

Basis of Preparation

The financial statements are prepared on the historical cost basis. The accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transaction or other events is reported.

Presentation Currency and Rounding

The financial statements are presented in New Zealand dollars and are rounded to the nearest whole dollar.

Specific Accounting Policies

The following is a summary of the significant accounting policies adopted by the trust in the preparation of these financial statements:

(a) Revenue

Revenue is recognised to the extent that it is probable that economic benefits will flow to the trust and that the revenue can be reliably measured. The principal sources of revenue are interest and dividends.

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Dividends are recognised on an accrual basis when the trust’s right to receive payment has been established.

(b) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call and other short term highly liquid investments which are subject to insignificant risks of changes in value.

(c) Financial Instruments

Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs.

Subsequent to initial recognition, investments in subsidiaries are measured at cost.

At balance date, the trust had the following categories of financial assets:

(i) Held-to-Maturity
Bonds with fixed or determinable payments and fixed maturity dates that the trust has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective interest basis. Government bonds are designated as held-to-maturity investments.

(ii) Loans and Receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate. Bank deposits of more than 3 months’ duration are included in this classification.

Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or, where appropriate, a shorter period to the net carrying amount of the financial asset.