✨ Financial Statements Notes
Critical Accounting Estimates and Assumptions
In preparing these financial statements the Group has made estimates and assumptions concerning the future which on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
At each balance date the Group reviews the useful lives and residual values of its property, plant and equipment. Assessing the appropriateness of useful life and residual value estimates of property, plant and equipment requires the Group to consider a number of factors such as the physical condition of the asset, expected period of use of the asset, and expected proceeds from the sale of the asset.
An incorrect estimate of the useful life or residual value will impact on the depreciable amount of an asset, therefore impacting on the depreciation expense recognised in the profit and loss statement, and carrying amount of the asset in the balance sheet. The Group minimises the risk of this estimation uncertainty to its infrastructure assets by:
- an annual review by an independent contractor to determine if any material changes exist
- physical inspection of assets
- asset replacement programmes
- review of second hand market prices for similar assets
- analysis of previous assets sales, and
- completing a revaluation of the infrastructure assets every third year.
The Group has not made significant changes to past assumptions concerning useful lives and residual values.
The carrying amounts of property, plant and equipment are disclosed in note 4.
The Group’s customer acquisition programme has incurred unprecedented costs during the year relating to the marketing and switching activities. Accordingly the Group has chosen to value these customers as an intangible asset at the cost of acquisition less amortisation at the rate of 20% per annum.
An incorrect estimate of the residual value will impact on the amortisation amount of an intangible asset on the amortisation expense recognised in the profit and loss statement and the carrying amount of the intangible asset in the balance sheet. The Group minimises the risk of this estimation uncertainty to its intangible assets by:
- an annual review of the value of its intangible assets to determine if any material changes exist
- a review of any prices for trades of similar intangible assets,
- an annual review of the appropriateness of the amortisation rate, and
- analysis of prior intangible asset sales.
Changes in Accounting Policies
There have been no changes in accounting policy. All policies have been applied on bases consistent with those used in the previous period.
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NZ Gazette 2009, No 182
✨ LLM interpretation of page content
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Notes to the Financial Statements
(continued from previous page)
💰 Finance & Revenue3 December 2009
Financial Statements, Accounting Policies, Estimates, Assumptions, Depreciation, Intangible Assets