Bay of Plenty Community Trust Incorporated

Notes to the financial statements (continued)

3 Significant accounting policies

There have been no changes in accounting policies. All policies have been applied on bases consistent with those used in the previous year.

(a) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency at exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date and is recognised in profit or loss.

(b) Financial instruments

Financial Assets

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held to maturity’ investments, ‘available for sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets at fair value through profit or loss

The Trust classifies its investments as financial assets at fair value through profit or loss. These financial assets are designed by management at fair value through profit or loss at inception.

Financial assets designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Trust’s Statement of Investment Policies and Objectives and information is provided internally to key management personnel on that basis.

Regular-way purchases and sales of investments are recognised on the trade date, being the date on which the Trust commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investment have expired or the Trust has transferred substantially all risks and rewards of ownership.

Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in profit or loss. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value are presented in profit or loss in the period in which they arise. Interest income from financial assets at fair value through profit or loss is recognised in profit or loss within interest income using the effective interest method. Dividend income from financial assets at fair value through profit or loss is recognised in profit or loss within dividend income when the Trust’s right to receive payment is established.

Available for Sale Financial Assets

Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any other categories. The investment in Te Kete Putea Limited Partnership (TKPLP) is classed as an ‘available for sale’ financial asset. The investment represents the Trust’s share of an integrated donations and financial management system, owned collectively by 11 Community Trusts. TKPLP is stated at fair value.

The fair value of TKPLP is determined using an appropriate valuation technique.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with an original maturity of 3 months or less (note 12).