Subsequent to initial recognition, investments in subsidiaries are measured at cost in accordance with NZ IAS-27. Other financial assets are classified into one of four categories; financial assets at fair value through profit or loss; held to maturity investments; available for sale financial assets; or loans and receivables. At balance date the Division had the following classes of financial assets:

Financial assets at fair value through profit or loss

Other financial assets relate to outstanding derivatives at year end. All derivative assets are measured at fair value through profit or loss, except for derivatives that are designated effective cash flow hedges. Effective cash flow hedges are measured at fair value with the movement on these assets recorded directly in the hedging reserve in the Statement of Changes in Equity. Refer to (c) for the accounting policy on derivative financial instruments.

Loans and receivables

Cash and cash equivalents and trade and other receivables are recorded at amortised cost using the effective interest rate method, less impairment.

g) Financial liabilities

Financial liabilities are recognised when the Division becomes party to the contractual provisions of the instrument.

The Division derecognises financial liabilities when and only when the Division’s obligations are discharged, cancelled or expire.

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

Financial liabilities at fair value through profit or loss

Other financial liabilities relate to outstanding derivatives at year end. All derivative liabilities are measured at fair value through profit or loss, except for derivatives that are designated effective cash flow hedges. Effective cash flow hedges are measured at fair value with the movement on these liabilities recorded directly in the hedging reserve in the Statement of Changes in Equity. Refer to (c) for the accounting policy on derivative financial instruments.

Other financial liabilities

Trade and other payables, other current liabilities and borrowings are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

h) Impairment

Intangible assets that have indefinite useful lives are not subject to amortisation and are assessed for impairment at each reporting date. If the estimated recoverable amount of an asset is less than its carrying amount, the asset is written down to its estimated recoverable amount and an impairment loss is recognised in the Income Statement.

A cash-generating unit is the smallest division of assets for which there are separately identified cash flows.

At each reporting date, the Division reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Division estimates the recoverable amount of the cash-generating unit to which the asset belongs.