1 AUGUST 2014

NEW ZEALAND GAZETTE, No. 85

2383

Otago Community Trust

Notes to the financial statements

For the year ended 31 March 2014

Significant accounting policies (continued)

(i) Income tax expense (continued)

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(j) Donation Expenditure

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

(k) Statement of cashflows

For the purpose of the statement of cashflows, 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.

(l) 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.

(m) Changes in Accounting Policy

All accounting policies have been applied on a basis consistent with those used in previous years.

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) 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.

(b) 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.

(c) Derivatives

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.