✨ Financial Statements Notes
700 NEW ZEALAND GAZETTE, No. 25 29 FEBRUARY 2012
Critical accounting estimates and judgements
In the process of applying the Division’s accounting policies, management has made no judgements that have had a significant effect on the amounts recognised in the financial statements.
The key assumptions concerning the future and other key sources of estimation uncertainty at 30 June 2011, that have had a significant risk of causing a material adjustment to the carrying amount of assets and liabilities, are discussed below:
ACAM
The Division uses ACAM method to allocate revenues, costs, assets and liabilities between regulated activities. This requires judgement as to the method and basis to be used to derive these values. This judgement affects all the balances disclosed in these financial statements.
Useful lives of property, plant and equipment
The Division reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. In this financial year it was deemed that no change to the estimated useful lives was needed. The carrying value of property, plant and equipment is disclosed in Note 7: Property, Plant and Equipment.
Impairment of network assets
Determining whether the network assets are impaired requires an estimation of the value in use of the cash-generating units to which the networks have been allocated. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The total carrying value of network assets is disclosed in Note 7: Property, Plant and Equipment.
Basis of preparation
The financial statements have been prepared on the historical cost basis, except for certain borrowings and financial instruments. Financial derivatives are carried at fair value and borrowings which have effective fair value hedges are carried at amortised cost adjusted for the fair value of the hedged risk covered by the effective hedge. The principal accounting policies adopted are set out below:
a) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the profit or loss component of the Statement of Comprehensive Income in the period in which they are incurred.
b) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, cash at banks and investments in overnight money market instruments. Bank overdrafts are shown within borrowings in current liabilities in the Balance Sheet.
c) Derivative financial instruments
Financial derivatives are initially recognised in the Balance Sheet at fair value on the date a derivative contract is entered into and are subsequently measured at their fair value on each reporting date, though the method of recognising the resulting gains and losses is dependent on
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NZ Gazette 2012, No 25
✨ LLM interpretation of page content
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Critical accounting estimates and judgements for Powerco Gas Division
(continued from previous page)
🏭 Trade, Customs & IndustryFinancial Statements, Accounting Policies, ACAM, Property Plant Equipment, Network Assets
🏭 Basis of preparation for financial statements
🏭 Trade, Customs & IndustryFinancial Statements, Accounting Policies, Borrowing Costs, Cash Equivalents, Derivative Instruments