Pursuant to Part 4 of the Commerce Act 1986, the Commerce Commission gives the following notice:
N o t i c e
1. Title-(1) This notice is the Commerce Act (Transpower Thresholds) Amendment Notice 2011.
(2) In this notice, the Commerce Act (Transpower Thresholds) Notice 2008 (Supplement to the New Zealand Gazette, 27 June 2008, No. 106, page 2793) is referred to as the "Principal Notice".
2. Effective date-This notice is deemed to take effect on
1 July 2008 (the commencement date of the Principal Notice).
3. Amendment to Principal Notice-Clause 7(1) of Schedule 1 of the Principal Notice is revoked and is substituted with the following:
"7(1) Transpower is to receive a return of capital through a depreciation charge based upon the life of
the underlying assets. Subject to clause 7(1A), the calculation of the depreciation charge and any asset write off must be consistent with GAAP and the depreciated historical cost valuation methodology, and must include "depreciation" relating to operating leases and pseudo assets."
New clause 7(1A) is inserted in Schedule 1 of the Principal Notice immediately after clause 7(1):
"7(1A) Any net loss arising from foreign exchange and commodity hedges relating to capital expenditure that is expensed under GAAP must be treated as capital expenditure and must be fully depreciated in the year incurred. Any net gain arising from foreign exchange and commodity hedges relating to capital expenditure that is recognised as income under GAAP must be applied as a reduction in depreciation in the year it is realised."
Dated at Wellington this 4th day of August 2011.
COMMERCE COMMISSION.
Explanatory Note
In May 2008, the Commerce Commission set thresholds for the declaration of control in relation to Transpower
New Zealand Limited under Part 4A of the Commerce Act 1986 ("the Act") and published those thresholds in a Supplement to the New Zealand Gazette, 27 June 2008,
No. 106, page 2793, as the Commerce Act (Transpower Thresholds) Notice 2008 (the "Principal Notice").
Further detail regarding the thresholds can be found in a Decision Paper "Decision and Reasons for not Declaring Control of Transpower New Zealand Limited & Decision
to Reset Transpower’s Thresholds", published by the Commerce Commission on 13 May 2008.
The majority of the provisions of Part 4A of the Act were repealed by the Commerce Amendment Act 2008.
On 28 July 2011, the Commerce Commission and Transpower agreed that the Administrative Settlement should be amended to allow Transpower to treat hedge losses relating to capital expenditure as capital expenditure, rather than as operating expenditure under GAAP.
Under the amendment, the hedge losses must be treated as additional depreciation in the year that the loss is incurred. Any hedge gains must be treated as a reduction in capital expenditure and the allowance for depreciation must be reduced in the year that the gain is realised.