Annual Report 2011 - Watercare

Watercare Services Limited
2011 ANNUAL REPORT
STATEMENT OF ACCOUNTING POLICIES (continued)
FOR THE YEAR ENDED 30 JUNE 2011
3. Integration of Retail Business
The group has adopted the public benefit entity exemption from NZ IFRS 3 available for local authority reorganisations where no consideration
has been transferred. The group therefore, is not required to measure assets and liabilities at their fair value at acquisition date and no
consideration was paid for the net assets acquired. At 1 November 2010 the net assets acquired were recorded at the accounting book value of
the previous local network operators (deemed cost) in the company’s financial statements and where necessary, adjustments were made to the
carrying value of the assets and liabilities being recognised in the company’s opening balance sheet to achieve consistency in the accounting
policies. The contribution value of the net assets has been recorded separately in the capital reserve. See note 11, page 86 for
additional information.
4. Goods and Services Tax (GST)
The statement of comprehensive income and the statement of financial position are stated excluding GST, with the exception of receivables
and payables, which include GST. The net amount of GST recoverable from or payable to the Inland Revenue Department is included as part
of receivables or payables in the statement of financial position.
5. Operating Revenue
The group measures revenue at the fair value of the amounts received or receivable, net of returns, trade allowances, duties and taxes paid.
It accounts for revenue for the major activities as follows:
Water and wastewater revenue
Water revenue comprises the amounts received and receivable, including estimated amounts of unread meters at balance date for water supplied
to customers in the ordinary course of business. Wastewater revenue is a combination of fixed charge and a percentage of water used. Both are
shown net of prompt payment discounts and leak remissions.
Provision of services
Sales of services are recognised at fair value of the amounts received or receivable as the services are rendered or to reflect the percentage
completion of the related services where rendered over time.
Interest income
Interest income is recognised using the effective interest method.
Dividend income
Dividend income is recognised on the date when the group’s right to receive payment is established.
Development contributions, financial contributions and infrastructure growth charge
Development contributions, financial contributions and infrastructure growth charges received towards the construction of property,
plant and equipment are recognised at the time an application is approved and invoiced.
6. Grant Expenditure
The company provides funding to its subsidiary (Metrowater Community Trust) in the form of grants, which is treated as expenditure in the
company’s books and as income in the Trust’s books. On consolidation this expenditure is offset by the income in the Trust’s books whilst the
actual expenditure is recognised in the group accounts when the Trust incurs the expenditure.
7. Finance Costs
Finance costs directly attributable to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. All other finance costs are expensed in the period
they occur. Finance costs consist of interest and other costs that are incurred in connection with the borrowing of funds.
8. Business Integration Costs
Costs associated with planning the integration of the water and the wastewater businesses in the Auckland region are expensed in the period
in which they are incurred, except for related capital projects.
9. Leases
The group leases certain property, plant and equipment where the lessor effectively retains substantially all the risks and benefits of ownership.
Amounts payable under the terms of these leases are recognised as an expense spread evenly over the term of the lease.
10. Research and Development
Research costs are expensed as incurred. Development expenditure on individual projects is capitalised and recognised as an asset when it meets
the definition and criteria for capitalisation as an asset and it is probable that the group will receive future economic benefits from the asset.
Assets which have finite lives are stated at cost less accumulated amortisation and are amortised on a straight-line basis over their useful lives.
PAGE 75
2011 Financial Report
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