4 JULY 2011 NEW ZEALAND GAZETTE, No. 91 2571

EASTERN AND CENTRAL COMMUNITY TRUST INC

3. SIGNIFICANT ACCOUNTING POLICIES

The following are the particular accounting policies, which have a material affect on the measurement of results and financial position. They have been applied consistently to all periods presented in these financial statements.

a) Foreign Currency Transactions

Foreign currency balances are converted to NZD at the year end rate of exchange. Transactions completed during the year are converted at the rate applying at the date of the transaction. Any foreign exchange gain or loss on monetary items is included within the statement of comprehensive income as revenue.

b) Financial Instruments

Financial instruments comprise financial assets held for trading, cash and cash equivalents, accrued income, short term advance, term deposits, derivatives and trade and other payables. Financial assets held for trading are initially recognised at fair value, being the fair value of the consideration paid. Subsequent to initial recognition they are measured to fair value through the statement of comprehensive income as revenue. For investments that are actively traded in organised financial markets, fair value is determined by reference to exchange quoted market bid prices at the close of business on the balance sheet day. Cash and cash equivalents comprise cash balances, call deposits and short term deposits but do not include cash held by fund managers. Cash flow from operating activities includes withdrawal of income from managed funds.

A financial instrument is recognised when the Trust becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Trust’s contractual right to the cash flows from the financial assets expire or if the Trust transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset.

The Trust uses derivative financial instruments to reduce exposure to fluctuations in foreign currency denominated assets. Forward exchange contracts are entered into to hedge foreign currency denominated assets. These are converted to the New Zealand dollar rate at balance date with all realised and unrealised gains and losses being recognised in the statement of comprehensive income as revenue.

c) Donations

Donations are recognised as a liability of the Trust when they are approved by Trustees and notified to applicants notwithstanding that the applicants may still have to fulfil some conditions. Donations no longer required, or not fully utilised by donation recipients, are shown separately in note 10 as donations written back.

d) Revenue

Dividends are recognised as income on the date that the Trust’s right to secure payment is established and recorded net of any imputation tax credits. Interest income is recognised on an accruals basis.

e) Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand, cash in banks and short term deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

f) Plant and Equipment

Items of plant and equipment are recorded at cost less accumulated depreciation and impairment losses. The Trust has one class of asset being office furniture and fittings.

g) Depreciation

Depreciation is recognised in the statement of comprehensive income on a straight line basis on all tangible fixed assets at rates calculated to allocate the assets’ cost less estimated residual