Page 38 - NZPM Annual Report 2020

NZPM GROUP LIMITED
Notes to the Consolidated Financial Statements for the year ended 31 March 2020

Sales of plumbing and related products

The Group sells to both trade customers and directly to retail customers through its own retail outlets. Sales-related warranties
associated with plumbing and related products cannot be purchased separately and they serve as an assurance that the products
sold comply with agreed-upon specifications. Accordingly, the Group accounts for warranties in accordance with IAS 37 Provisions,
Contingent Liabilities and Contingent Assets consistent with its previous accounting treatment.
For sales to trade customers, revenue is recognised when control of the goods has transferred, being at the point when the customer
collects the goods or the goods are dispatched. Following the transfer of control, the customer has full discretion over the manner of
use and price to sell the goods, has the primary responsibility when on selling the goods and bears the risk of obsolescence and loss
in relation to the goods. A receivable is recognised by the Group when the goods are dispatched to the customer as this represents
the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is
due.

For sales of goods to retail customers, revenue is recognised when control of the goods has transferred, being at the point the
customer purchases the goods at the retail outlet or the goods are dispatched to the customer. Payment of the transaction price is
due immediately at the point the customer purchases the goods.

Under the Group’s standard contract terms, customers have a right of return. At the point of sale, a refund liability and a
corresponding adjustment to revenue is recognised for those products expected to be returned. At the same time, the Group has a
right to recover the product when customers exercise their right of return so consequently recognises a right to returned goods asset
and a corresponding adjustment to cost of sales. The Group uses its accumulated historical experience to estimate the number of
returns on a portfolio level using the expected value method.

‘Max-Points’ customer loyalty programme
The Group operates a ‘Max-Points’ loyalty programme through which trade customers accumulate points on purchases of plumbing
and related products that entitle them to redemptions from a third party supplier at the Group’s cost. These points provide a benefit
to customers that they would not receive without purchasing the plumbing and related products. The promise to provide the benefit
to the customer is therefore a separate performance obligation. The transaction price is allocated between the product and the
points on a relative stand-alone selling price basis. Points are earned based on total monthly spend. Points are valid for 3 years from
issue date, after which they expire. A contract liability is recognised for revenue relating to the loyalty points at the time of the initial
sales transaction.

Government grants
Government grants are recognised as income in the profit or loss over the period necessary to match them with the related costs,
for which they are intended to compensate, on a systematic basis. A grant receivable is recognised on the date of the entitlement to
receive cash, and is presented as deferred income.

Foreign currencies

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting
date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated. Exchange differences are recognised in profit or loss in the period in which they arise.

Borrowing costs
Borrowing costs are recognised in profit or loss in the period in which they are incurred.

Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, and annual leave in the period the related
service is rendered at the amount of the benefits expected to be paid in exchange for that service. Liabilities recognised in respect of
short-term employee benefits are measured at the amount of the benefits expected to be paid in exchange for the related service.
Liabilities recognised in respect of other long-term employee benefits are measured at the amount of the benefits expected to be
made by the Group in respect of services provided by employees up to the reporting date.

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NZPM GROUP LIMITED ANNUAL REPORT 2020