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notes to the financial Statements
for the year ended 31 March 2012
3. Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the entity’s accounting policies, which are described in note 2, management has
made the following judgements and estimates that have the most significant effect on the amounts recognised
in the Financial Statements.
The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or in the period of the revision and
future periods if the revision affects both current and future periods.
Revenue recognition
Part of the network charges are based on normalisation, where demand is assessed based on historical actual
meter readings. Occasionally the meter reading history data is not consistent and subsequent adjustments are
made to customers’ accounts, where further charges are applied or refunds given. These adjustment amounts
are not significant compared with total network revenue.
Valuation of land and buildings
In accordance with its accounting policy, the Group periodically revalues land and buildings. The valuations,
which are performed by independent valuers, involve estimates as detailed in note 18.
Valuation of network distribution system
The Group estimates the fair value of the distribution network using independent valuers in accordance with
the property, plant and equipment accounting policy. Because of the specialised nature of the network and the
infrequency of network sale transactions, there is a lack of market-based evidence available to determine fair
value. The valuation has therefore been determined using the discounted cash flow method. The major inputs
that are used in the valuation model that require judgment include load growth and discount and inflation
rates as detailed in note 18.
Financial instruments
Note 37 contains information about the assumptions and the risk factors relating to financial instruments
and their valuation, including interest rate swaps, which are valued with reference to the Group’s accounting
policies. Accounting judgments have been made in determining the hedge designation for the different types of
derivatives employed by the Group to hedge risk exposures.
Goodwill
Goodwill relates to the purchase of John Deere Electrical Limited (refer Note 19). The assessment of the on-
going value of the goodwill is based on current profit results plus future forecasts.
Provision against loans to subsidiaries
The provision against loans to subsidiaries in the Parent relates to Clearwater Hydro Limited (refer to Note 34).
The loan from Clearwater Hydro Limited has been impaired to recognise feasibility study and operating costs
that have already been recognised in the financial statements of Clearwater Hydro Limited.
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