47
F I N A N C I A L S T A T E M E N T S
2 0 1 5 |
WE L ANNUA L REPOR T
47
3. Critical accounting estimates and judgements (continued)
(f) Determining the nature of the investment in joint venture
The nature of Waikato Networks Limited’s (WNL) investment in Ultrafast Fibre Limited (UFF) is not readily apparent, and requires
significant judgement. On balance the Directors consider that UFF is jointly controlled by WNL and Crown Fibre Holdings Ltd (CFH) for the
following reasons: each shareholder shares in the risks and returns of the arrangement and neither party has the power to affect those benefits
or returns; during the concession period neither WNL nor CFH have the unilateral right to make decisions regarding UFF activities; WNL and
CFH both have the right to appoint three of the seven directors on the UFF Board and neither is able to control the majority of votes
of the Board; and appointment of the independent chairman is a joint decision between both parties.
(g) Assessment of any impairment in the carrying value of the investment in Ultrafast Fibre Limited
In order to assess whether there is any impairment in the carrying value of the investment in Ultrafast Fibre Limited, a fair value must be
estimated. Determination of the fair value requires significant judgement regarding the key assumptions used in a value in use methodology.
In preparing the financial statements for the year ended 31 March 2014 the Directors reviewed a valuation model which was prepared on a
number of assumptions. A key assumption was the forecast rate of uptake of customers connecting to the fibre broadband network.
They provided a sensitivity analysis to indicate the potential impact on the enterprise value of the business based on variances in the
assumed uptake of connections.
In the year ended 31 March 2015 the rate of customer uptake is in line with that modelled for the 2015 year in the 2014 forecasts.
However, as the Directors have gained additional insights into this new industry it is clear that the estimation of the fair value of a fibre
broadband network is complex and a number of assumptions are significant to the valuation of which ‘customer uptake’is only one.
Accordingly, the Directors have not included a sensitivity analysis in the 2015 financial statements as it is impracticable to disclose the
extent of the possible effects of assumptions at 31 March 2015.
The investment in Ultrafast Fibre Limited continues to be carried at cost. The Directors continue to consider cost to be an appropriate
carrying value. As at balance date there are no indications of impairment, however, given the long term nature of the investment, it is
reasonably possible, on the basis of existing knowledge, that future outcomes are different from those assumed and could require a
material adjustment to the carrying value of the investment in Ultrafast Fibre Limited.
Note
Group
2015
($000)
Group
2014
($000)
Parent
2015
($000)
Parent
2014
($000)
4. Revenue
Gross line revenues
114,525
109,115
114,525
109,115
Discount
(18,947)
(19,317)
(18,947)
(19,317)
Net line revenues
95,578
89,798
95,578
89,798
Third party contributions
4,984
6,478
4,984
6,478
Contracting revenue
88,333
63,638
1,323
1,149
Operating lease revenue
2,743
2,717
2,743
2,717
Interest on investments
87
49
3,709
1,622
Other income
3,263
3,210
1,742
2,109
Total revenue
194,988
165,890
110,079
103,873
Operating lease revenue is recognised in relation to a lease agreement with an electricity generation company. The agreement has been
deemed an operating lease and all revenue under the contract is accounted for as lease revenue. The contract expires in November 2035.
The future minimum payments under the term of the contract are variable in nature and therefore not able to be quantified.
5. Other net gains/(losses)
Amortisation of deferred income on Government grants
31
31
31
31
31
31
31
31
