Page 41 - NZPM Annual Report 2020

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

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost
is calculated using the weighted average cost method. Net realisable value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling and distribution.

Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party
to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction
costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases
or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or
convention in the marketplace.
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the
classification of the financial assets.
Financial assets are measured at amortised cost if:

• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash
flows; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
All other financial assets that do not meet the criteria for being measured at amortised cost or fair value through other
comprehensive income (FVTOCI) are measured subsequently at fair value through profit or loss (FVTPL).

(i) Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income
over the relevant period. For financial assets the effective interest rate is the rate that exactly discounts estimated future cash receipts,
excluding expected credit losses.

(ii) Financial assets at FVTPL
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised
in profit or loss to the extent they are not part of a designated hedging relationship.

Foreign exchange gains and losses
The carrying amount of financial assets that are denominated in a foreign currency is determined in that foreign currency and
translated at the spot rate at the end of each reporting period.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses (ECL) on investments in debt instruments that are measured at
amortised cost and trade receivables. The amount of expected credit losses is updated at each reporting date to reflect changes
in credit risk since initial recognition of the respective financial instrument. The Group always recognises lifetime ECL for trade
receivables.
The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss
experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current
as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

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NZPM GROUP LIMITED ANNUAL REPORT 2020