NEW ZEALAND GAZETTE, No. 184

28 NOVEMBER 2011

TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS

1. Statement of accounting policies

Reporting entity and statutory base

These financial statements are for the lines business of Transpower New Zealand (the Lines Business). The Lines Business is a national entity comprising the parts of the Transpower Group (‘Transpower’) that supply electricity transmission services. The financial statements are in New Zealand dollars.

Nature of operations

Transpower is the owner and operator of New Zealand’s national electricity grid. Transpower is a for-profit entity for the purposes of NZ IAS 1 "Presentation of Financial Statements".

Basis of preparation

The financial statements are presented in accordance with the State-Owned Enterprises Act 1986, the Financial Reporting Act 1993 and the Electricity Information Disclosure Requirements 2004. The Financial Reporting Act 1993 requires compliance with generally accepted accounting practice (GAAP) in New Zealand.

The financial statements comply with New Zealand Equivalents to International Financial Reporting Standards. The financial statements comply with International Financial Reporting Standards (IFRS).

The Electricity Information Disclosure Handbook has been followed in the preparation of these financial statements.

The avoidable cost allocation methodology (ACAM) is used for allocating costs and assets and liabilities between the Lines business and Other businesses.

The financial statements are derived by taking the Transpower Group annual report figures and then deducting non-lines companies or divisions and adding back intercompany items that relate to the Lines Business.

Measurement basis

The measurement basis adopted in the preparation of these financial statements is historical cost except as modified for certain investments, held for sale assets, investment property, financial assets and financial liabilities as identified in specific accounting policies below.

Specific accounting policies

a) Basis of consolidation
The Transpower Lines Business financial statements consolidate the financial statements of transmission lines related subsidiaries as at and for the year ended 30 June 2011. Subsidiaries are those entities controlled, directly or indirectly, by the Parent. All significant intercompany accounts and transactions are eliminated on consolidation. In the Parent’s financial statements, investment in subsidiaries is carried at cost.

b) Goodwill
Goodwill, representing the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired, is recognised as an asset and not amortised, but tested for impairment annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. The Transpower Lines Business had no goodwill in the period.

c) Revenue
The Transpower Lines Business recognises revenue as it provides services or delivers products to customers.

Agreements between the Transpower Lines Business and customers regarding the construction of network assets are recognised over the contract period or asset life with revenue shown on a yield to maturity basis grossed up for an imputed interest expense.

Certain transactions relating to the operation of the electricity market, specifically wholesale market related ancillary services and losses and constraint payments, are "passed-through" and are therefore not recorded in profit or loss. This pass-through occurs