2011-2012 Annual Report - Full Version - PDF - Palmerston North ...

PNCC measures the cost of a business combination as theaggregate of the fair values, at the date of exchange, ofassets given, liabilities incurred or assumed, in exchange forcontrol of the subsidiary.Any excess of the cost of the business combination overPNCC’s interest in the net fair value of the identifiableassets, liabilities and contingent liabilities is recognisedas goodwill. If PNCC’s interest in the net fair value of theidentifiable assets, liabilities and contingent liabilitiesrecognised exceeds the cost of the business combination,the difference will be recognised immediately in the surplusor deficit.Investment in subsidiaries are carried at cost in PNCC’s own“parent entity” financial statements.Joint venturesA joint venture is a contractual arrangement whereby twoor more parties undertake an economic activity that issubject to joint control.Dividends are recognised when the right to receivepayment has been established.Development contributionsDevelopment and financial contributions are recognisedas revenue when PNCC provides, or is able to provide, theservice for which the contribution was charged. Otherwisedevelopment and financial contributions are recognised asliabilities until such time that PNCC provides, or is able toprovide, the service.Development contributions are classified as part of “OtherRevenue”.Borrowing costsPNCC has deferred adoption of NZ IAS 23 Borrowing Costsin accordance with its transitional provisions applicable topublic benefit entities.Consequently, all borrowing costs are recognised as anexpense in the period in which they are incurred.For jointly controlled assets, PNCC recognises in its financialstatements its share of jointly controlled assets, theliabilities and expenses it incurs, its share of liabilities andexpenses incurred jointly, and income from the sale or useof its share of the output of the joint venture.RevenueRevenue is measured at the fair value of considerationreceived or receivable. Where revenue is derived by actingas an agent for another party, the revenue that is recognisedis the commission or fee on that transaction.Rates revenueRates are set annually by a resolution of the Council andrelate to a financial year. All ratepayers are invoiced withinthe financial year to which the rates have been set. Ratesrevenue is recognised when payable.Revenue from water rates by meter is recognised on anaccrual basis. Unbilled usage, as a result of unread metersat year end, is accrued on an average usage basis.Government subsidiesPNCC receives government subsidies from New ZealandTransport Agency, which subsidises part of PNCC’s costs inmaintaining the local roading infrastructure. The subsidiesare recognised as revenue upon entitlement as conditionspertaining to eligible expenditure have been fulfilled.Provision of servicesRevenue from the rendering of services is recognised byreference to the stage of completion of the transaction atbalance date, based on the actual service provided as apercentage of the total services to be provided.Sale of goodsSales of goods are recognised when a product is sold to thecustomer. Sales are usually in cash or by credit card. Therecorded revenue is the gross amount of the sale, includingcredit card fees payable for the transaction. Such fees areincluded in other expenses.Traffic and parking infringementsTraffic and parking infringements are recognised whentickets are issued, less assessed impairment losses.Vested assetsWhere a physical asset is acquired for nil or nominalconsideration the fair value of the asset received isrecognised as revenue. Assets vested in PNCC are recognisedas revenue when control over the asset is obtained.Grant expenditureNon-discretionary grants are those grants that are awardedif the grant application meets the specified criteria and arerecognised as expenditure when an application that meetsthe specified criteria for the grant has been received.Discretionary grants are those grants where PNCC has noobligation to award on receipt of the grant application andare recognised as expenditure when a successful applicanthas been notified of PNCC’s decision.Income TaxIncome tax expense comprises both current tax anddeferred tax, and is calculated using tax rates that havebeen enacted or substantively enacted by balance date.Current tax is the amount of income tax payable basedon the taxable surplus for the current year, plus anyadjustments to income tax payable in respect of prior years.Deferred tax is the amount of income tax payable orrecoverable in future periods in respect of temporarydifferences and unused tax losses. Temporary differencesare differences between the carrying amount of assets andliabilities in the financial statements and the correspondingtax bases used in the computation of taxable surplus.The measurement of deferred tax reflects the taxconsequences that would follow from the manner in whichthe group expects to recover or settle the carrying amountof its assets and liabilities.Deferred tax liabilities are generally recognised for alltaxable temporary differences. Deferred tax assets arerecognised to the extent that it is probable that taxablesurpluses will be available against which the deductibletemporary differences or tax losses can be utilised.Deferred tax is not recognised if the temporary differencearises from the initial recognition of goodwill or from theinitial recognition of an asset and liability in a transactionthat is not a business combination, and at the time of thetransaction, affects neither accounting surplus nor taxablesurplus.Current tax and deferred tax is recognised against thesurplus or deficit for the period, except to the extent thatit relates to a business combination, or to transactionsrecognised in other comprehensive income or directly inequity.Financial Statements Note 1Interest and dividendsInterest income is recognised using the effective interestmethod.Palmerston North City Council Annual Report 2011/12139