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F I N A N C I A L S T A T E M E N T S
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WE L ANNUA L REPOR T
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Summary of significant accounting policies (continued)
2.3 Property, plant and equipment
Land and buildings comprise mainly the corporate office, warehouse and substation land, while the electricity distribution network
comprises mainly cables, poles and transformers.
Land and buildings are valued at fair value. Fair value is determined by a periodic independent valuation prepared by external valuers on
the basis of market value for highest and best use. The valuations are performed on at least a triennial period. The fair values are recognised in
the financial statements, and are reviewed at the end of each reporting period to ensure that the carrying value of land and buildings is not
materially different from fair value.
The electricity distribution network is measured at fair value. Fair value has previously been determined on the basis of an independent
valuation prepared by external valuers, based on a depreciated replacement cost methodology. The fair values have been recognised in the
financial statements of the Group and have been reviewed at the end of each reporting period to assess whether the carrying value of the
electricity distribution network is not materially different from fair value. Consideration has been given as to whether the electricity distribution
network is impaired as detailed in note 2.6. From 31 March 2013 onwards fair value has been determined on the basis of an independent
valuation prepared by expert valuers using a discounted cash flow methodology (DCF).
Any revaluation increase arising on revaluation of land and buildings and the distribution network is credited to the asset revaluation
reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense in the income
statement, in which case the increase is credited to the profit and loss account to the extent of the decrease previously charged.
A decrease in carrying amount arising on the revaluation of land and buildings and the distribution system is charged as an expense in the
income statement to the extent that it exceeds the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of
that asset.
All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land.
Depreciation on revalued buildings and the distribution network is charged to the income statement. On subsequent sale or retirement of a
revalued item, the attributable revaluation surplus remaining in the asset revaluation reserve, net of any related deferred taxes, is transferred
directly to retained earnings. Other plant and equipment and leasehold improvements are carried at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. The cost of self-constructed assets includes
the cost of materials and direct labour and an allowance for overheads. Borrowing costs are capitalised in respect of qualifying assets
valued at $500,000 or more and which take three months or more to construct.
Depreciation on buildings and the distribution network is calculated using the straight-line method with other assets depreciated using the
diminishing value basis, to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:
2015
2014
Buildings
3%
3%
Distribution network
1.3% - 16.7% 1.3% - 16.7%
Computer equipment
35%
35%
Furniture, plant and equipment
5% - 50%
5% - 50%
Vehicles
14% - 50%
14% - 50%
The assets’residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount (Note 2.6).
2.4 Fair value estimation
Financial instruments that are measured in the balance sheet at fair value are disclosed by level under the following fair value
measurement hierarchy :
Level 1 - quoted prices (unadjusted) in active markets for the identical asset or liability.
Level 2 - inputs other than quoted prices that are observable for the asset or liability, either directly or derived from level 1 prices.
Level 3 – inputs for the asset or liability that are not based on observable market data.
The Group enters into forward exchange contracts to reduce exposure to foreign exchange movements. These are not traded in an active
market and are measured at their fair value on balance date using valuation techniques. These valuation techniques maximise the use of
observable market data where it is available and rely as little as possible on entity specific estimates. Therefore these derivatives are
classified as Level 2 instruments.
