Otago Community Trust

Notes to the financial statements

Significant accounting polices (continued)

(k) Donation Expenditure

The entity makes discretionary donations. The donations are recognised as expenditure when the Trustees approve to award the applicant a donation.

(l) Statement of cash flows

For the purpose of the statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. The following terms are used in the statement of cash flows:

• Operating activities are the principal revenue producing activities of the Group and other activities that are not investing or financing activities;
• Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents; and
• Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowing of the entity.

(m) New standards adopted and interpretations not yet adopted

Certain new accounting standards have been published that are not mandatory for the current reporting period. It is not expected that these standards will have any material impact on the financial statements.

The change in policy follows reassessment of the group’s interpretation of NZIAS 1 ‘Presentation of Financial Statements’ with respect to recognition of donations.

(n) Changes in Accounting Policy

During the period the group changed its accounting policy to recognise the donations as part of the operating surplus before taxation, rather than directly through the Statement of Changes in Trust Funds.

4. Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(a) Investment property

An external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Group’s investment property on an annual basis. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion. The discounted cash flow technique is also applied as a cross-check of the valuation.

(b) Investments in equity and debt securities

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 Statement of Financial Position date. Investments in pooled funds are valued at the unit exit price determined by the Fund Manager at the close of business on the Balance Sheet date.

(c) Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.