Full Version - Essential Energy

Notes to the Financial Statements
for the year ended 30 June 2005
Notes to tables above
1. AASB 119: Employee Benefits requires a recalculation of defined benefit scheme assets, based on the government bond rate at each
reporting date rather than the long term expected rate of return on the plan assets. Country Energy contributes to four defined benefit
plans and the value of the adjustment disclosed in the table represents the aggregate of the recalculated balances. The superannuation
position has moved from a net asset to a net liability position.
2. AASB 139: Financial Instruments: Recognition & Measurement: requires that ‘available-for-sale financial assets’ be recognised at fair
value. Country Energy’s joint venture investment in the Wind Farm (refer note 30) falls under the definition and as a consequence the
investment has been reclassified from property, plant and equipment to investments. The requirement to disclosure the asset at fair
value results in a write back of accumulated depreciation.
3. Goodwill is not amortised under AEIFRS but is tested for impairment annually. AASB 1 provides that previously amortised goodwill is
not recapitalised. The adjustment as at 30 June 2005 reverses the goodwill charge recognised under AGAAP for the current year.
4. UIG 1017: Developer & Customer Contributions for Construction in a Price Regulated Market: requires developer & customer
contributions (capital contributions) to be recognised when the asset is completed in accordance with the term and conditions of the
contribution. Contributions must be recognised at fair value. The opening balances have been adjusted to ensure that they represent
only revenue receivable (asset) or revenue prepaid (liability), in accordance with the standard.
5. UIG 3: Emission Right states that for traded emission rights, the entity’s allowance to rights should be recognised as an intangible
asset under AAS138: Intangible Assets, and that the obligation to surrender allowances should be recognised as a liability. Country
Energy trades Renewable Energy Certificates (RECs) and NSW Greenhouse Abatement Certificates (NGACs) both of which fall under
the standard’s definition of intangible assets. As at 1 July 2004 the number of certificates held was less than the number required to be
surrendered, therefore a net liability existed. The value of this liability is disclosed separately for each type of certificate. As at 30 June
2005, Country Energy held surplus of RECs at market value relative to the target to surrender.
A net liability position existed for NGACs as the market value of NGACs at balance date had increased.
71
6. A deferred taxation asset arises with the recognition of the net superannuation liability. In this case Country Energy expects that future
contributions will be deductible for tax. The tax effect is calculated at 30% of the reduction in liability of $0.605 million
7. AASB 112: Income Taxes requires a balance sheet approach to tax effect accounting. The net book value of pre-June 2002 capital
contributions of $196.520 million are considered to have no tax base. On transition to AEIFRS, the difference between the accounting
base and the tax base will give rise to a deferred tax liability. The liability is estimated to be $58.955 million at a tax rate of 30%.
8. A deferred taxation asset also arises from the derecognition of capital contributions. The tax effect is calculated at 30% of the $36.673
million deferred income noted in item 4.
9. A deferred tax asset arises as there will be a tax deduction for the purchases of RECs and NGACs in the period to 31 December 2004
(refer item 5).
10. A deferred taxation liability also arises from the assets revalued by the former distributor NorthPower (refer note 19). The liability has
been calculated at 30% of the $313.270 million difference between the tax value and carrying value.
(ii) Financial Instruments
In accordance with NSW Treasury’s indicative mandates, Country Energy will apply the exemption provided in AASB 1 First-time
Adoption of Australian Equivalents to International Financial Reporting Standards not to apply the requirements of AASB 132
and AASB 139 for the financial year ended 30 June 2005.These standards will apply from 1 July 2005. None of the information
provided in the preceding table includes any impacts for financial instruments. However when these Standards are applied, they
are likely to impact on retained earnings (on first adoption) and the amount of volatility of profit. Further, the impact of these
Standards will in part depend on whether the fair value option can or will be mandated consistent with Government Finance
Statistics.
(f) Recognition of Revenue
Revenue relating to Country Energy’s core operations is classified as revenue from operating activities for the purposes of note 2.
All other revenue is classified as revenue outside operating activities for the purposes of note 2.
(i) Sales revenue
Sales revenue comprises revenue earned (net of returns, discounts and allowances) from the provision of products or services and
is recognised when the goods are provided or when the fee in respect of services provided is receivable.
(ii) Revenue from unread meters
Revenue from unread meters is calculated at balance date for those customers who at balance date, did not have their meters
read and invoiced. The calculation is based on their estimated consumption. A change in the method of estimation of this item has
led to an additional $5.146 million being recognised in the current reporting period.
(iii) Interest income
Interest income is recognised on an accrual basis using the interest applicable to the financial asset.
COUNTRY ENERGY ANNUAL REPORT 2004–2005