Full Version - Essential Energy

Notes to the Financial Statements
for the year ended 30 June 2005
(iv) Asset sales
The gross proceeds of sale of assets is recognised as revenue and is brought to account when control of the asset passes
to the buyer.
(v) Capital contributions
Capital contributions are monies paid by customers, or prospective customers, seeking an augmentation of the electricity and gas
distribution systems in circumstances where, in the ordinary course of events, such augmentation would not be undertaken by
Country Energy.
Capital contributions are recognised as revenue in proportion to the stage of completion of the related augmentation works.
Assets that are contributed to Country Energy by customers, are treated as capital contributions and are valued at fair value (refer
note 1(h)(vi)).
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(g) Valuation of Current Assets
(i) Cash assets
For the purposes of the Statement of Financial Position, cash assets include cash on hand and investments at call (refer note 7).
For the purposes of the Statement of Cash Flows, cash includes cash assets net of bank overdraft (refer note 21).
(ii) Receivables
Trade debtors are carried at amounts due. Collectability of debt is assessed at balance date. A general provision is determined
after having considered the ageing of the debt and the credit risk of the debtors (refer note 8).
(iii) Investments
Investments are recorded at cost. Any change in market value is recognised as revenue.
(iv) Inventories
Inventories have been valued at the lower of cost and net realisable value. Cost is determined using the average purchase price of
each item and comprises the cost of purchase including the cost of bringing the inventories to their appropriate location. The major
components of inventories are capital stores and consumables used in the maintenance of the distribution network.
(h) Valuation of Property, Plant and Equipment
(i) System assets
The network system assets were valued as at 30 June 2005 by Sinclair Knight Merz an “Optimised Depreciated Replacement
Cost” (ODRC) methodology.
Theses assets were also valued by PricewaterhouseCoopers (PWC) using a “Discounted Cash Flow” (DCF) Methodology”.
The carrying values of the system assets at balance date are supported by the independent valuations.
Included as components of the system assets are generation assets. These assets are separately identifiable and their future cash
flows can be reasonably determined. PWC carried out a DCF valuation of these assets resulting in the carrying value being written
down by $1.470 million to the Statement of Financial Performance.
(ii) Land and buildings
The 30 June 2005 land and building asset values of Country Energy were valued by Colliers International Consultancy and
Valuation Pty Limited (Colliers) using a “Fair Value” methodology. Colliers determined that the fair value was $88.633 million.
In accordance with the Colliers valuation the carrying value of the assets has been increased by $14.658 million. The increase has
been recorded in the asset revaluation reserve.
(iii) Other plant and equipment.
Country Energy’s other non-current physical assets comprise of non-specialised assets with short useful lives. Examples are
motor vehicles, office equipment and computer equipment. These assets are disclosed at fair value which is equivalent to their
depreciated historical cost. For this class of asset depreciated historical cost is an acceptable measure for fair value because the
difference between theses valuations is unlikely to be material. The cost of obtaining an accurate fair value is not justified with
regard to the potential benefits received.
COUNTRY ENERGY ANNUAL REPORT 2004–2005