Page 37 - NZPM Annual Report 2017

‘Capital work in progress’ includes the cost of of goodwill impairment testing is based on a
materials, services, labour and direct production calculated weighted average cost of capital.
overheads. The weighted average cost of capital is based
on the cost of debt and cost of equity weighted
Leased assets accordingly between the relative percentages
of debt and equity. The cost of debt is the actual
Leases under which the Group assumes cost of debt and the cost of equity is calculated
substantially all the risks and rewards of ownership using the capital asset pricing model. These
are classified as finance leases. Upon initial calculations require the use of estimates as to
recognition, the leased assets are measured at future profitability of the relevant business units
amounts equal to the lower of their fair value to which goodwill has been allocated and the
and the present value of the minimum lease choice of a suitable discount rate in order to
payments at inception of the lease. Subsequent calculate the present value of those cash flows.
to initial recognition, the asset is accounted
for in accordance with the accounting policy
applicable to that asset. Payments made Computer software
under finance leases are apportioned between Acquired computer software licences are
the finance expense and the reduction of the capitalised on the basis of the costs incurred to
outstanding liability. The finance cost portion of acquire and bring to use the specific software.
lease payments is expensed to profit or loss over
the lease period. Costs associated with developing or maintaining
computer software are recognised as an expense
Other leases are classified as operating leases as incurred. Costs that are directly associated
and the leased assets are not recognised in with the development of identifiable and unique
the Group’s statement of financial position. software products controlled by the Group, and
Payments made under operating leases (net that will generate probable economic benefit
of any incentives received) are recognised exceeding the costs beyond one year, are
as an expense in the statement of financial recognised as intangible assets. Costs include
performance on a straight-line basis over the term the employee costs incurred as a result of
of the lease. developing software and an appropriate portion
of relevant overheads.
Intangible assets
Intangible assets (other than goodwill) acquired Development expenditure is capitalised only if
separately are measured on initial recognition development costs can be measured reliably,
at cost. Following initial recognition, intangibles the product or process is technically and
(other than goodwill) are carried at cost less any commercially feasible, future economic benefits
accumulated amortisation and accumulated are probable, and the Group intends to and has
impairment losses. sufficient resources to complete development and
to use or sell the asset.
Goodwill
Cash and cash equivalents
Goodwill is recorded at cost less any
accumulated impairment losses. Goodwill is Cash and cash equivalents include cash on
allocated to cash-generating units and is not hand, demand deposits and current accounts
amortised. Goodwill and any other intangible in banks. Bank overdrafts that are repayable on
assets with indefinite useful lives are tested demand and form an integral part of the Group’s
for impairment at each reporting date, either cash management are included in current
individually or at the cash-generating unit liabilities in the balance sheet, unless there is a
level. The discount rate used for the purposes

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