Page 39 - NZPM Annual Report 2017

falls below its carrying value. Impairment losses The Group holds derivative instruments until expiry
directly reduce the carrying amount of assets and except where the underlying rationale from a risk
are recognised in profit or loss. management point of view changes, such as
when the underlying asset or liability which the
Non-financial assets are reviewed at each instrument hedges no longer exists, in which case
reporting date to determine whether there are early termination occurs.
any indicators that the carrying amount may
not be recoverable. If any such indicators exist, Derivative financial instruments are initially
the asset’s recoverable amount is estimated. The recorded at fair value and are then revalued to
recoverable amount is the higher of an asset’s fair value at balance date. The gain or loss on
fair value less costs to sell and value in use. In revaluation is recorded in profit or loss. The fair
assessing value in use, the estimated future values of derivative financial instruments are
cash flows are discounted to their present value determined by applying quoted market prices,
using a discount rate that reflects current market where available, or by using inputs that are
assessments of the time value of money and observable for the asset or liability.
the risks specific to the asset. An impairment
loss is recognised in the statement of financial Non-derivative financial instruments
performance for the amount by which the asset’s
carrying amount exceeds its recoverable amount. Non-derivative financial instruments comprise
For the purposes of assessing impairment, assets investments, trade and other receivables, cash
are grouped at the lowest level for which there and cash equivalents, loans and borrowings
are separately identifiable cash flows (cash- including share capital, and trade and other
generating units). payables.

Financial assets carried at amortised cost are VALUATION OF LIABILITIES
assessed each reporting date for impairment.
If there is objective evidence of impairment, Taxation
the difference between the asset’s carrying Current and deferred taxation are calculated
amount and the present value of estimated on the basis of tax rates enacted or substantively
future cash flows, discounted at the financial enacted at reporting date, and are recognised
asset’s original effective interest rate, where in the statement of financial performance
appropriate, is recognised in the statement of except when the tax relates to items charged
financial performance. or credited to other comprehensive income, in
which case the tax is also recognised in other
comprehensive income.
FINANCIAL INSTRUMENTS
Derivative financial instruments The preparation of the financial statements
requires management to make estimates about
Derivative financial instruments, including foreign
exchange contracts and interest rate swaps, are items that are not known at balance date or
utilised to reduce exposure to market risks. prior to the Group reporting its final result. These
items may ultimately affect the amount of tax
payable by the Group. Judgements are also
The Group treasury policy specifically prohibits the required about the application of income tax
use of derivative financial instruments for trading legislation. These judgements and assumptions
or speculative purposes. All the Group’s derivative are subject to risk and uncertainty, hence there
financial instruments are held to hedge risk on is a possibility that changes in circumstances will
underlying assets, liabilities and forecast and alter expectations, which may impact the amount
committed trading transactions. of deferred tax assets and deferred tax liabilities

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