4200 NEW ZEALAND GAZETTE, No. 143 30 NOVEMBER 2012

Accounts Receivable

Trade and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated cash flows, discounted using the effective interest method.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and deposits held on call with banks.

Inventories

Inventories are valued at the lower of cost or net realisable value after making provision for damaged or obsolete items. Cost is determined by the weighted average method of valuation.

The amount of any write-down for the loss of service potential or from the cost to net realisable value is recognised in the profit and loss statement in the period of the write-down.

Investments

Investments in advances, loans and receivables, and bank deposits held to maturity are recognised at cost plus accrued interest.

Property Plant and Equipment

Property, plant and equipment are initially recorded at cost. The initial cost of property, plant and equipment includes the purchase consideration and those costs that are directly attributable to bringing the asset into the location and condition necessary for its intended purpose. Subsequent expenditure that extends the assets service potential is capitalised.

In most instances, an item of property, plant and equipment is recognised at its cost. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value as at the date of acquisition.

For those assets that are revalued, the change in valuation is credited or debited to the asset revaluation reserve for each asset. Where this results in a debit balance in the asset revaluation reserve, this balance is expensed in the statement of comprehensive income. Any subsequent increase on revaluation that offsets a previous decrease in value recognised in the statement of comprehensive income will be recognised first in the statement of comprehensive income up to the amount previously expensed then credited to the revaluation reserve for that class of asset. Additions subsequent to revaluations are recorded at cost.

The gas distribution network and gas measurement systems are valued at optimised depreciated replacement cost, adjusted by additions (at cost), disposals and depreciation. Revaluations are carried out every three years and are independently reviewed. The Company assesses the carrying value of its revalued assets annually to ensure that they do not differ materially from the assets’ fair values. If there is a material difference, then the official assets are revalued.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the statement of comprehensive income. When revalued assets are sold, the amount included in the revaluation reserves in respect of those assets are transferred to retained earnings.

Other assets are recorded at cost less accumulated depreciation.

Depreciation

Depreciation is provided on a straight line basis on all property, plant and equipment at rates calculated to allocate the asset’s cost, or depreciated replacement cost, less estimated residual life, over their estimated useful lives.

Major depreciation rates are:

• Mains & Services 1-15% S.L
• Condition Renewals 2% S.L
• Meters & Customer Station Repulsids 1-10% S.L
• Vehicles, Plant, Office Equipment & Furniture and Fittings 5-33% S.L
• Computer Hardware & Software 10-33% S.L
• Leasehold Improvements 2-20% S.L