Tainui Group Holdings
Annual Report
2013
53
2.8 Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that
is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the rate associated
with project related borrowings or the weighted average interest rate applicable to the Group’s outstanding
borrowings during the year.
2.9 Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short‑term, highly
liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank
overdrafts are shown within borrowings in current liabilities in the statement of financial position.
2.10 Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less
provision for doubtful debts.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible
are written off. A provision for doubtful receivables is established when there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms of receivables. The amount of
the provision is the difference between the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the statement
of comprehensive income within expenses.
When a trade receivable is uncollectible, it is written off. Subsequent recoveries of amounts previously written
off are credited against other expenses in the statement of comprehensive income.
2.11 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of inventory is comprised of section
costs and other direct costs using the weighted average cost basis. Net realisable value is the estimated selling
price in the ordinary course of business less estimated costs of completion and the estimated costs necessary
to make the sale.
2.12 Biological assets
Biological assets are measured at fair value less estimated point of sale costs. The fair value of livestock is
determined based on market prices of livestock of similar age, breed and genetic merit. The fair value of trees
is determined annually by independent valuers by calculating the crop expectation and future value discounted
back to the present value, based on the rotation age of the crop and the current market prices of the logs. The
valuation of Redwood trees is based on the current replacement cost method used for young trees.
2.13 Financial assets and liabilities
Recognition and measurement
A financial asset or liability is recognised if the Group becomes party to the contractual provisions of the
instrument. Regular purchases and sales of financial assets and liabilities are recognised on the trade date,
the date on which the Group commits to purchase or sell the asset or liability. A financial asset or liability is
recognised initially at its fair value and in the case of a financial asset or liability measured at amortised cost
includes transaction costs that are directly attributable to the acquisition or issue of the instrument.
Financial assets and liabilities recorded at fair value through the profit and loss are designated at initial recognition.
Financial assets and liabilities measured at amortised cost
Financial assets and liabilities measured at amortised cost are non‑derivative financial assets and liabilities
which meet the following criteria:
a) held within a business model whose objective is to hold an instrument in order to collect contractual cash
flows; and
b) the contractual terms of the instrument gives rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
A gain or loss on a financial asset and liability that is measured at amortised cost and is not part of a hedging
relationship is recognised in profit and loss when the instrument is derecognised, impaired or reclassified and
through the amortisation process.
