29 FEBRUARY 2012 NEW ZEALAND GAZETTE, No. 25 705

m) Contributed capital

Contributed capital represents the funds allocated by Powerco Limited to the Powerco Gas Division.

n) Taxation

The amount recognised for current tax is based on the net profit for the period as adjusted for non-assessable and non-deductible items. It is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred income tax is provided, using the Balance Sheet liability method, on all temporary differences at the Balance Sheet date between the tax base of the assets and liabilities and their carrying amounts in the Financial Statements.

The temporary differences relating to investments in subsidiaries where the Division is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future are not provided for.

The carrying amount of deferred income tax assets is reviewed at each Balance Sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax to be utilised.

Deferred income tax assets and liabilities are measured at tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the Balance Sheet date.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow the manner in which the Division expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Division entity intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax is recognised as an expense or income in the profit or loss component of the Statement of Comprehensive Income, except when it relates to items credited or debited to other comprehensive income, in which case the deferred tax or current tax is also recognised in other comprehensive income, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

o) Term debt

All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. Subsequent to initial recognition, loans and borrowings are carried at amortised cost. Borrowing costs are recognised as an expense when incurred, except to the extent that they are capitalised in accordance with (a) above.

All interest bearing loans and borrowings are measured at amortised cost using the effective interest rate method which allocates the cost through the expected life of the borrowing. Amortised cost is calculated taking account of issue costs, and any discounts or premiums on draw-down.

After initial recognition for those interest-bearing loans and borrowings where hedge accounting is applied, the loan balance is adjusted for the change in the hedged risk only. The Division policy is to hedge the interest/foreign currency risk associated with term debt with financial instruments on matched terms.