Vector AR’19 ― notes to the financial statements (continued)
2. Summary of significant accounting policies CONTINUED New accounting standards adopted
On 1 July 2018 the following accounting standards were adopted: i) NZ IFRS 15: Revenue from Contracts with Customers ii) NZ IFRS 16: Leases NZ IFRS 15: Revenue from Contracts with Customers
NZ IFRS 15 Revenue from Contracts with Customers provides an entity with guiding principles on when, how, and how much revenue to recognise in an entity’s financial statements in any given reporting period. The standard and its subsequent amendment replace all existing IFRS guidance for revenue recognition. The most relevant to Vector are: NZ IAS 18 Revenue , NZ IAS 11 Construction Contracts , NZ IFRIC 8 Transfers of Assets from Customers . Refer to Note 5 for details of accounting policies and impact from adoption of NZ IFRS 15. NZ IFRS 16: Leases The group has elected to early adopt NZ IFRS 16 Leases , effective from 1 July 2018. The group applied NZ IFRS 16 using the modified retrospective transition approach. Comparative information and opening equity are therefore not restated and continue to be reported under NZ IAS 17 Leases and IFRIC 4 Determining whether an arrangement contains a lease . Refer to Note 15 for details of accounting policies and impact from adoption of NZ IFRS 16. NZ IFRS 9: Financial Instruments NZ IFRS 9 Financial Instruments is mandatory for the group effective from 1 July 2018. The group has previously completed the adoption of NZ IFRS 9 by electing to early adopt NZ IFRS 9 (2013) Financial Instruments in the year ended 30 June 2015 (initial application 1 July 2014) and NZ IFRS 9 (2014) Financial Instruments in the year ended 30 June 2017 (initial application 1 July 2016). Over-recovery of electricity revenue On 7 July 2017, Vector and the Commerce Commission (“the Commission”) agreed the settlement of an over-recovery of electricity revenue by Vector during the regulatory years ended 31 March 2014 and 31 March 2015. The settlement is effected through a $13.9 million (including accumulated interest of $3.8 million) price adjustment for the regulatory years ending 31 March 2019 and 31 March 2020, impacting the group’s reported revenues and interest costs for the financial years ended 30 June 2018 (3 months), and financial years ending 30 June 2019 (12 months) and 2020 (9 months). The impact in the current year ended 30 June 2019 is a $4.8 million (2018: $1.0 million) decrease in revenue and a $1.7 million (2018: $0.4 million) increase in interest costs. Breaches of electricity network quality measures Vector have breached the electricity network reliability targets, set by the Commission, for the regulatory years ended 31 March 2017, 2018 and 2019. The breaches are in large part expected results from Vector’s work safety policy to perform electricity line work in a de-energised state. The policy was effective for a full year in 2018 and 2019, and a portion of 2017. Should the Commission seek penalty charges Vector will face up to $15.0 million in liability ($5.0 million per year of breach). For similar breaches in regulatory years 2015 and 2016, the Commission brought a total penalty charge of $3.6 million. Significant transactions and events that have occurred during the year ending 30 June 2019:
New standard effective and previously adopted
3. Significant transactions and events
The Commerce Commission
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