594 NEW ZEALAND GAZETTE, No. 27 18 FEBRUARY 2008

MARLBOROUGH LINES LIMITED - LINES BUSINESS

Financial Statements Prepared in Accord with the Electricity Information Disclosure Requirements 2004

NOTES TO THE FINANCIAL STATEMENTS

For The Year Ended 31 March 2007

1. STATEMENT OF ACCOUNTING POLICIES
   These financial statements have been prepared in accordance with, and for the sole purpose of, requirement 6 of the Electricity Information Disclosure Requirements 2004. Accordingly these financial statements are only for the Line Business activities of Marlborough Lines Limited. Marlborough Lines’ contracting and investments business, with their associated revenue and costs, have been removed from these Financial Statements in accordance with the Requirements. These accounts are not comparable with the consolidated financial statements prepared and published with the Company’s Annual Report. These accounts cannot and should not be used to assess the actual performance of the Company as they are prepared for the sole purpose of complying with the requirements. The contracting and other business activities which are removed from these accounts are required to function separately and produce commercial rates of return but will continue to be a core part of Marlborough Lines’ activities.

The financial statements have been prepared on the basis of historical cost with the exception of certain items for which specific accounting policies are identified.

1.1 Goods and Services Tax (GST)
The statement of financial performance and statement of cash flows have been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of GST except for receivables and payables which include GST.

1.2 Operating revenue
Revenue comprises the amounts received and receivable for goods and services supplied to customers in the ordinary course of business.
Discounts paid to electricity consumers connected to the Company’s network are shown separately in the Statement of Financial Performance.

1.3 Income Tax
Income tax expense recognises the current obligations and all amounts arising from differences between the accounting results and assessable income for the period. This is the liability method applied on a comprehensive basis. Deferred tax assets are carried forward to the extent that there is virtual certainty of realisation.

1.4 Receivables
Receivables are stated at the amount they are expected to realise. A provision for doubtful debts is made and bad debts are written off during the year in which they are identified.

1.5 Inventories and Work in Progress
Inventories predominantly comprise network system spares and materials and are valued on the basis of the lower of cost and net realisable value. In these disclosure accounts the value of those spares which are included in the ODV are included in System Fixed Assets, not in inventory. Cost is determined on the basis of weighted average of purchase costs. Due allowance is made for damaged and obsolete inventory. Work in progress comprises the cost of direct materials and labour together with direct overheads.

1.6 Plant, Property and Equipment and Depreciation
Distribution system assets are valued at depreciated replacement cost and revalued on a cyclical basis. Subsequent additions are recorded at cost. Land and buildings are valued at net current value. All revaluation surpluses are transferred directly to the asset revaluation reserves. Decreases in value are debited directly to the revaluation reserve to the extent that they reverse previous surpluses within the class of asset concerned and are otherwise recognised as expenses in the Statement of Financial Performance.

From time to time distribution assets are vested in the Company in return for the Company assuming maintenance responsibility for these assets. Such assets are capitalised at fair value (replacement cost) and the equivalent value credited to revenue. All other Company plant, property and equipment are recorded at cost.