Annual Report 2010 - Christchurch City Council

p144.
Annual Report
Christchurch Otautahi
2010
Financial statements
Statement of
accounting policies
(continued)
Notes to financial statements
1. Statement of accounting policies (continued)
Principles of consolidation
(i) Subsidiaries
Subsidiaries include special purpose entities and are those
over which the Council has the power to govern financial and
operating policies, generally accompanying a shareholding
of at least half of the voting rights. Potential exercisable or
convertible voting rights are considered when assessing
whether the Council controls another entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Council and de-consolidated from
the date control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries.
Intercompany transactions, balances and unrealised gains
on transactions are eliminated. Unrealised losses are also
eliminated, unless the transaction provides evidence of the
impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Council.
Minority interests in the results and equity of subsidiaries
are shown separately in the consolidated statement of
comprehensive income and balance sheet.
(ii) Associates
Associates are entities over which the Council has significant
influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for in the parent’s
financial statements using the cost method and in the
consolidated financial statements using the equity method,
after initially being recognised at cost. The Council’s
investment in associates includes goodwill (net of any
accumulated impairment loss) identified on acquisition.
The Council’s share of its associates’ post acquisition profits or
losses is recognised in the profit and loss, and its share of post
acquisition movements in reserves is recognised in reserves.
The cumulative post acquisition movements are adjusted
against the carrying amount of the investment. Dividends
receivable from associates are recognised in the parent’s profit
and loss, while in the consolidated financial statements they
reduce the carrying amount of the investment.
When the Council’s share of losses in an associate equals
or exceeds its interest in the associate, including any other
unsecured receivables, the Council does not recognise further
losses, unless it has incurred obligations or made payments on
behalf of the associate.
Unrealised gains on transactions between the Council and
its associates are eliminated to the extent of the Council’s
interest in the associates. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of
the asset transferred. Accounting policies of associates have
been changed where necessary to ensure consistency with the
policies adopted by the Council.
(iii) Joint Ventures
Joint ventures are those over whose activities the group has
joint control, established by contractual agreement. The
group’s share of the assets, liabilities, revenues and expenses
of any joint venture is incorporated into the group’s financial
statements on a line by line basis using the proportionate
method.
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign
exchange rate ruling on the day of the transaction.
Foreign currency monetary assets and liabilities at the balance date
are translated to NZ dollars at the rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the
profit and loss, except when deferred in equity as qualifying cash
flow hedges and qualifying net investment hedges.
Non-monetary assets and liabilities that are measured in terms
of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to NZ dollars at
rates ruling at the dates the fair value was determined.
Translation differences on equities held at fair value through profit
or loss are reported as part of the fair value gain or loss. Translation
differences on equities classified as available-for-sale financial
assets are included in the fair value reserve in equity.