asset. Purchases and sales of financial assets are accounted for at trade date,
i.e., the date that the Authority commits itself to purchase or sell the asset.
Financial liabilities are derecognised if the Authority’s obligations specified
in the contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the
Authority’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
Instruments at fair value through profit or loss
An instrument is classified as at fair value through profit or loss if it is
held for trading or is designated as such upon initial recognition. Financial
instruments are designated at fair value through profit or loss if the Authority
manages such investments and makes purchase and sale decisions based
on their fair value. Upon initial recognition, attributable transaction costs
are recognised in the statement of comprehensive income when incurred.
Subsequent to initial recognition, financial instruments at fair value through
profit or loss are measured at fair value, and changes therein are recognised
in statement of comprehensive income.
Trade receivables
Trade receivables classified as other non-derivative financial instruments
are stated at amortised cost using the effective interest method, less any
impairment losses.
Trade payables
Trade payables are classified as other non-derivative financial instruments
and are stated at amortised cost.
b) Leased assets
Leases in terms of which the Authority assumes substantially all the risks and
rewards of ownership are classified as finance leases. Upon initial recognition the
leased asset is measured at an amount equal to the lower of its fair value and the
present value of the minimum lease payments. Subsequent to initial recognition,
the asset is accounted for in accordance with the accounting policy applicable to
that asset.
Other leases are operating leases and the leased assets are not recognised on the
Authority’s balance sheet.
c) Impairment
The carrying amounts of the Authority’s assets, are reviewed at each balance
sheet date to determine whether there is any objective evidence of impairment.
An impairment loss is recognised whenever the carrying amount of an asset
exceeds its recoverable amount. Impairment losses directly reduce the carrying
amount of assets and are recognised in profit or loss.
i) Impairment of loans and receivables
Impairment losses on an individual basis are determined by an evaluation
of the exposures on an instrument by instrument basis. All individual
instruments that are considered significant are subject to this approach.
For trade receivables which are not significant on an individual basis,
collective impairment is assessed on a portfolio basis based on numbers
of days overdue, and taking into account the historical loss experience in
portfolios with a similar amount of days overdue.
The recoverable amount of the Authority’s loans and receivables carried at
amortised cost is calculated as the present value of estimated future cash
flows, discounted at the original effective interest rate (i.e., the effective
interest rate computed at initial recognition of these financial assets).
Receivables with short duration are not discounted.
If, in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring after
the impairment was recognised, the previously recognised impairment
Waikato River Authority Annual Report
2012
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