Issue 2
Updated November 2010
Accounting Guidance Notes for Revenue
and Capital Expenditure
[Note that this is a Guidance Note and not a Corporate Policy]
© 2010 - Transpower New Zealand Limited
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Issue 2
Updated November 2010
CONTENTS
1
ISSUE DETAILS ...................................................................................................... 4
2
COMPLIANCE REQUIREMENT REFERENCES ..................................................... 4
2.1
2.2
2.3
2.4
Legislation .......................................................................................................................4
Regulations .....................................................................................................................4
Policies ............................................................................................................................4
Guidance Notes ..............................................................................................................4
3
KEY WORDS ........................................................................................................... 4
4
ACCOUNTING GUIDANCE NOTES APPROVAL AND AMENDMENTS ................. 5
5
PURPOSE OF POLICY ............................................................................................ 5
6
INTRODUCTION ...................................................................................................... 5
6.1
7
Overview of Document Layout ........................................................................................5
INITIAL DEFINITIONS ............................................................................................. 5
7.1
7.2
7.3
7.4
Fixed Asset – Definition ..................................................................................................5
Categories and Profiles ..................................................................................................6
Maintenance Expenditure (Revenue Expenditure) .........................................................6
Capital Expenditure.........................................................................................................6
8
GENERAL OVERVIEW OF ASSET LIFE CYCLE .................................................... 7
9
INVESTIGATIONS ................................................................................................... 7
9.1
9.2
9.3
9.4
9.5
9.6
10
Investigation Costs..........................................................................................................8
Distinction Between Types of Investigations ..................................................................8
Determining When An Investigation Ceases ..................................................................8
The Role of the EC and Board ......................................................................................11
Transferring Investigation Costs to Capital ...................................................................11
Limited Ability to Transfer Costs to Capital ...................................................................12
DEVELOPMENT .................................................................................................... 12
10.1
10.2
Development Expenditure – Definition .........................................................................12
Costs to Be Included in Development ..........................................................................12
11
COMMISSIONING .................................................................................................. 13
12
OPERATING .......................................................................................................... 13
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10
12.11
12.12
12.13
12.14
12.15
12.16
Costs Incurred During Asset Operation – Expenditure Activities .................................13
Enhancement – Definition .............................................................................................14
Refurbishment – Definition ...........................................................................................14
Replacement – Definition ..............................................................................................14
Repair – Definition ........................................................................................................14
Dismantling – Definition ................................................................................................14
Fault Repairs – Definition .............................................................................................14
Scheduled Operating – Definition .................................................................................14
Unscheduled Operating – Definition .............................................................................15
Periodic Inspections, Servicing and Testing – Definition ..............................................15
Service Charges – Definition ........................................................................................15
Special Inspections, Servicing and Testing – Definition ...............................................15
Attributes – Definition ....................................................................................................15
Accounting Treatment of Expenditure Activities ...........................................................16
Work on Components of an Asset ................................................................................16
Sub Components Example – Impact on Remaining Life ..............................................16
13
PERIODIC REVIEW ............................................................................................... 17
14
DISMANTLING ....................................................................................................... 17
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PROJECTS WITH IMMATERIAL REVENUE EXPENDITURE ............................... 17
16
ACCOUNTING TREATMENT FOR WORK ON MISCELLANEOUS ASSETS ....... 17
16.1
16.2
16.3
16.4
16.5
17
ACCOUNTING TREATMENT OF COSTS INCURRED BY PROJECTS ................ 19
17.1
17.2
17.3
17.4
17.5
18
Buildings .......................................................................................................................18
Land ..............................................................................................................................18
Roads ............................................................................................................................18
Minor Fixed Assets .......................................................................................................19
Fences and Gates.........................................................................................................19
Introduction ...................................................................................................................19
Charging Salary Costs to Projects ................................................................................19
Backfilling Costs............................................................................................................20
Training Costs ...............................................................................................................20
Incidental Revenue Expenditure ...................................................................................21
IST PROJECTS ...................................................................................................... 21
18.1
18.2
18.3
18.4
General Guidance .........................................................................................................21
IST Investigations .........................................................................................................21
IST Capital and Revenue Flowchart .............................................................................21
Licence Fees .................................................................................................................21
19
ANNUAL REVIEW OF ACCOUNTING TREATMENT OF WORK .......................... 22
20
MONITORING COMPLIANCE WITH THESE GUIDANCE NOTES ........................ 22
21
APPENDIX 1 – EXPENDITURE ACTIVITY DECISION TREE – GRID ASSETS .... 23
22
APPENDIX 2 – ASSET PROFILE LISTING ........................................................... 24
23
APPENDIX 3 – WORK ON EXISTING BUILDINGS ............................................... 30
24
APPENDIX 4 – EXPENDITURE CLASSIFICATIONS – EXISTING LAND ............. 31
25
APPENDIX 5 – EXPENDITURE CLASSIFICATIONS TRANSMISSION ................ 32
26
APPENDIX 6 – EXPENDITURE CLASSIFICATIONS SUBSTATIONS .................. 33
27
APPENDIX 7 – EXPENDITURE CLASSIFICATIONS – MINOR FIXED ASSETS .. 34
28
APPENDIX 8 – EXPENDITURE CLASSIFICATIONS – IST EXPENDITURE ......... 35
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PREFACE
These guidance notes have been developed to provide detailed guidance to Transpower
staff to assist in distinguishing between revenue (i.e. non capital) and capital
expenditure.
1
ISSUE DETAILS
Effective Date:
Immediately following General Manager Corporate
Services Approval
Guidance Notes
Owner:
General Manager Corporate Services
Written By:
Finance Manager
Approved By:
General Manager Corporate Services in November 2010
Revision Authority:
The General Manager Corporate Services and the
Finance Manager have the authority to approve revisions
and amendments to the application of these Accounting
Guidance Notes without the requirement of repeat
approval
Review Frequency:
Biennially
Review Date:
November 2012
2
COMPLIANCE REQUIREMENT REFERENCES
2.1
Legislation
Income Tax Act
Financial Reporting Act
2.2
Regulations
New Zealand Financial Reporting Standards
2.3
Policies
Accounting policies
2.4
Guidance Notes
Accounting guidance notes
3
KEY WORDS
Accounting
Fixed Assets
Investigations
Maintenance
© 2010 - Transpower New Zealand Limited
Capital
Revenue Expenditure
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4
ACCOUNTING GUIDANCE NOTES APPROVAL AND AMENDMENTS
The responsibility for defining Transpower’s Accounting Guidance Notes for revenue and
capital expenditure lies with the General Manager Corporate Services. Definition is to be
completed after appropriate consultation with engineering and management staff. The
Guidance notes are consistent with the Board approved accounting policy.
5
PURPOSE OF POLICY
This document provides an overview of Transpower's accounting policy with respect to
revenue and capital expenditure on fixed assets. It provides a description of the asset
life cycle, detailed guidance on the criteria for distinguishing between revenue (i.e. noncapital) expenditure and capital expenditure, and detailed guidance on the treatment of
Investigations Expenditure. The aim of the document is to enable users to correctly
classify asset related expenditure.
6
INTRODUCTION
This policy is intended to be used a reference document by staff involved in working with
Transpower’s fixed assets.
6.1
Overview of Document Layout
Section 7 defines what is meant by the term ‘Fixed Asset’ in Transpower as well
explaining the distinction between capital and revenue expenditure. Sections 8-14 follow
the typical life-cycle of a self-constructed asset and provide guidance on how various
types of costs should be treated for accounting purposes. The remainder of the
document deals with a variety of specific issues that can arise in connection with fixed
asset accounting, with the aim of ensuring consistency of treatment when common
issues arise.
7
INITIAL DEFINITIONS
Some of the fundamental terms used in these guidance notes are defined below to
provide an explanation of their use within Transpower.
7.1
Fixed Asset – Definition
A Fixed Asset is defined as a tangible item or group of items, with a value in
excess of $500, held for business use and which provide(s) benefits for more than
one year.
A fixed asset is not necessarily a single item. Assets may contain one or more
components that form a group of assets which perform a function. For example, a
transformer could be dis-assembled into many parts such as the housing, winding, bolts,
paper and so forth. However, when a transformer is purchased Transpower does not
analyse the purchase price by component, but rather it records the entire value against
an asset called a transformer.
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7.2
Categories and Profiles
Fixed assets are classified according to ‘Categories’ and “Profiles’ which Transpower
has created for use when recording assets in the FMIS1. Transpower’s assets are
recorded in the following major categories:
Category:
Category Description:
ADMN
Administration
ALAN
Administration Land
CLAN
Communication Land
COMM
Communications
DCLA
HVDC Lines Land
DCTL
HVDC Lines
EASE
Easements and other related costs
HLAN
HVDC Land
HVDC
HVDC
INFR
Trans Lines (Tax Record)
INTG
Intangible Assets (non easements).
SLAN
Substations Land
SUBS
Substations (NB: this includes all AC substations)
SOFT
Software
TLAN
Transmission Lines Land TRAN
Transmission Lines (N.B.
this includes all AC lines)
Within each Category, items are further broken down into Profiles. Profile is the lowest
level at which assets are depreciated, and hence Profiles provide Transpower’s
representation of an asset. The reference in the Expenditure Activity Decision Tree to an
asset refers to the Profiles listed in Appendix 2.
7.3
Maintenance Expenditure (Revenue Expenditure)
Maintenance expenditure is expenditure that satisfies one or more of the these criteria:
(i)
It restores an asset to its original expected operating capability or condition;
(ii) It provides only minor or incidental improvement(s) to the features, functionality or
EOL of the asset;
(iii) It maintains an asset in good working condition.
In other words, Maintenance Expenditure enables the asset to achieve its original
expected operational life (EOL) through regular and/or preventive maintenance.
7.4
Capital Expenditure
Capital expenditure is expenditure that satisfies one or more of these criteria:
(i)
It results in the creation of a new asset or assets2;
(ii) It provides a significant improvement to an existing asset with respect to capability
or EOL.
1
Financial Management Information System – Transpower’s accounting system.
In the remainder of this document, the word ‘asset’ should generally be interpreted as including both
singular and the plural meanings.
2
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8
GENERAL OVERVIEW OF ASSET LIFE CYCLE
Investing in assets and planning for the future development of the grid is a major
component of Transpower’s purpose. Accounting correctly and consistently for assetrelated expenditure is vital in order to generate accurate information for the purposes of
asset management and decision making.
The typical ‘life-cycle’ of an asset or group of assets has been adopted as being a useful
framework on which to place the numerous definitions and explanations within this
document. The ‘life-cycle’ for the purposes of this document is expressed as follows:
Investigation – Investigate acquisition of new asset(s) (Section 9)
Development – Acquire new asset / refurbish existing asset (Section 10)
Commissioning – Place new asset in service (Section 11)
Operating – Operate and maintain asset within specifications (Section 12)
Periodic Review – Consider refurbishment or retirement of asset (Section13)
Decommissioning – retire, decommission and dispose of asset (Section14)
These stages of asset development are documented below together with guidance
regarding the appropriate accounting treatment for expenditure activities that may occur
in each stage.
9
INVESTIGATIONS
Determination of whether a project is in investigation or capital phase is a complex area.
The circumstances of particular projects, can determine their ultimate accounting
treatment. While guidance is provided below there is no set of rules that apply to every
project in every possible circumstance. Where there is some ambiguity on whether a
project is capital or an investigation then the Finance Manager should be consulted.
The following guidance is provided by accounting standards (NZ IAS 16) in relation to
what should be regarded as Investigation Costs/Capital Costs:
“The cost of an item of property plant and equipment shall be recognised as an
asset if, and only if:
(a) It is probable that future economic benefits will associated with the item will
flow to the entity; and
(b) The cost of an item can be measured reliably.”
Further guidance is provided under NZ IAS 38 of items that are research in nature and
should be expensed;
(a) activities aimed at obtaining new knowledge;
(b) the search for, evaluation and final selection of, applications of research findings or
other knowledge;
(c) the search for alternatives for materials, devices, products, processes, systems or
services; and
……(d) the formulation, design, evaluation and final selection of possible alternatives for
new or improved materials, devices, products, processes, systems or services.
In summary, the cost of an asset cannot include expenditure incurred while deciding
whether or not to acquire or construct it. In effect, Transpower has effectively defined
Feasibility Studies/Research as Investigations.
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Example – Investigation Costs:
When deciding whether to upgrade or replace an application, IST incur expenses by
deploying resources to review the feasibility of various options and develop appropriate
costings on which the decision can be based. Regardless of the outcome, these
expenses do not form part of the capital cost of either an upgrade or a replacement
project as they were incurred while deciding what should be done.
9.1
Investigation Costs
Many projects within Transpower incur feasibility or investigation costs prior to the
purchase or construction of a fixed asset. Any such costs need to be accounted for
separately as Investigation Costs until time as the purchase or construction of an asset
commences. Examples of such costs include:
Researching the proposed project
Commissioning a report to determine whether there is a need for an upgrade or
replacement of an asset
Issuing Requests for Information (RFI) where the information being requested will
be used to assist in the decision making process
Gaining an understanding of the economic and technical feasibility issues
Investigating the scope of the project
Evaluating the various options, alternatives, methodologies
Determining who will provide the various inputs
Gaining approvals to move forward with the project
Issuing Requests for Proposals (RFP) when the proposals are likely to vary in
scope or outcome, e.g. one proposal may be for a short term solution while
another is for a long term solution. When the proposals are expected to be of a
similar nature, the project may be already in the capital phase (see Section 9.2)
9.2
Distinction Between Types of Investigations
Investigations vary in their nature and accounting treatment depending on the type of
work being undertaken. At one end of the spectrum, where a National Grid Investigation
is taking place to request quotes from different manufacturers for a specific type of
transformer, this is normally regarded as being part of the capital cost of the asset since
the decision has effectively been taken to proceed with the project. In contrast, an RFP
within an IST project could be for significantly different solutions in terms of functionality
and cost, indicating that Investigation (revenue) costs are still being incurred.
9.3
Determining When An Investigation Ceases
Once the investigation phase of a project is complete, the on-going costs of the activity
are not revenue expenses. It is therefore important that a Project Manager can
determine when a project ceases to be an investigation and commences as a capital
project.
Capitalisation should commence when activities that are necessary to bring the
item to working condition for its intended use are in progress; and when
expenditures directly attributable to the item are being incurred;…
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Bearing in mind the guidance shown above, a Project Manager should determine when
the completion of the investigation phase of each project occurs by considering (inter
alia) the following questions:
Has the scope and nature of the project been defined?
Has the final option for proceeding with the project been selected or significantly
progressed? (e.g. 220kV transformer but unsure of brand/supplier)
Has the technical feasibility of the project been confirmed?
Has the economic feasibility of the project been confirmed?
Has a preferred supplier been selected?
Will the outcome of the project produce an enduring benefit to Transpower? (e.g.
provide revenue or reduce costs)
Can the project be completed?
Has approval been given to proceed with the project?
Is it likely that Transpower will be able to secure any necessary access rights such
as easements and resource consents?
Does Transpower have the rights to undertake the project under the Electricity Act
or other relevant legislation?
Is Resource Management Act consent required – if so is it likely to be granted?
Will an asset be created?
When the answer to most of these questions is ‘yes’ the investigation phase is probably
complete. At this point the Project Manager should seek approval for the project, and
this approval is generally the key event in the investigation / capital decision.
In determining whether a project is capital or not the granularity of the possible solutions
should be considered. Further guidance is provided in the diagram below:
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Problem identified and 20
options identified as a
potential solution
Expense
Solution either a lines or a
substation solution
Expense
Bus Solution Selected
Expense
Either a Bus or Bus and a
half solution favoured
Capital
© 2010 - Transpower New Zealand Limited
Either Indoor or outdoor or
AIS or GIS to be selected.
Expense
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Certain types of projects are more likely to be either capital or investigation. The table
below provides some sample guidance on the probable treatment, depending on the
facts that are known () and unknown (x) at the time the determination is made.
Job Type
Voltage MVA Route /
Capacity Configuration Reasonable Probable
Location
(tower/pole)
probability
Treatment
of
construction
within the
next 2-3
years
Customer
Job
n/a
n/a
n/a
n/a
n/a
n/a
Expense
Transformer
replacement

x

x
n/a

Capital
Thermal
Uprating

n/a

x


Capital
Reconductoring

n/a

x


Capital
Example – Changing from Investigation to Capital:
The option of constructing an asset has been investigated during an Investigation
project and a recommendation has been made to the Board that a preferred
supplier be contracted to construct an asset on behalf of Transpower. In this case,
Board approval would normally indicate that the project has switched from being
an investigation to being a capital project and that Transpower will now proceed
with the construction of an asset. All costs incurred prior to receiving Board
approval would be investigation costs and any costs incurred after Board approval
would be related to constructing the new asset and would be capitalised until the
asset is completed, commissioned and available for use by Transpower.
9.4
The Role of the EC and Board
Whether or not a project has been approved by the Electricity Commission or the Board
is of itself not conclusive in the context of deciding whether expenditure is of a revenue
or capital nature. However it would normally be a very strong indicator that the feasibility
stage was over.
Normally approval by either the Board or the EC would mean that it probable that the
asset will be constructed and that the job is capital.
Conversely if Transpower purchased land and then went to the EC for approval which
was denied, the cost of that land would not be treated as Revenue expenditure even
though the asset would not form part of the regulated asset base.
9.5
Transferring Investigation Costs to Capital
On occasion Transpower will acquire fixed assets that are needed for a project that is
still in the investigation phase. Any costs relating to the construction of an asset that
provide enduring benefit to Transpower will need to be transferred to a capital project
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even if they were incurred during the Investigation phase. In such cases guidance
should be sought from the Assets and Projects Team regarding the process required for
transferring such costs to the related capital project.
9.6
Limited Ability to Transfer Costs to Capital
It should be noted that expenditure that has been expensed in a financial year cannot be
re-classified in subsequent years. This may limit the opportunity to transfer costs from
investigation to capital projects where an investigation spans two financial years.
However, certain investigation costs (on investigation projects) can on occasion be
capitalised where the costs do not cross financial years.
Any decision to capitalise an investigation must be on the basis that from a certain point
in time there is a high probability of the capital project proceeding, however the
finalisation of the business case could not occur because further information was being
sought. It is expected that the project would proceed along the lines envisaged through
the investigation. Examples would include where detailed design documentation was
completed on a preferred solution, or some of the investigation was obtaining a more
precise cost on a preferred solution prior to the capital business case being finalised..
10
DEVELOPMENT
10.1 Development Expenditure – Definition
Development‟ is expenditure incurred during the installation of a new asset or
assets in sites or configurations where none previously existed.
Development Expenditure is treated as capital expenditure.
10.2 Costs to Be Included in Development
Once the investigation phase is completed and the process of purchasing or
constructing a fixed asset has begun, the costs of purchasing or constructing the asset
must be accounted for in accordance with IAS 16:
The cost of an item will comprise3;
(a) Its purchase price
(b) Any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by
management
(c) The initial estimate of the costs of dismantling and removing the item and
restoring the site on which it is located.
Where a new asset is purchased or constructed, all costs that are readily identifiable and
associated with creating the new asset are to be capitalised. These include (inter alia)
costs associated with surveying, planning, designing, equipment, compensation,
landscaping, construction, site restoration, installation, commissioning and remedial
work, as well as related finance costs.
3
NZ IAS 16 para 16
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11 COMMISSIONING
The ‘Commissioning Date’ is important for accounting purposes for a number of reasons:
It marks the start date for the charging of depreciation
Costs may continue to be capitalised until the ‘Commissioning Date’
Capitalised interest ceases to be charged at the ‘Commissioning Date’
An asset is commissioned when it is ‘self sufficient in its own right’. The judgement
regarding when an asset is commissioned, either partly or wholly to an acceptable
standard, is made by Engineering or IST staff, subject to the following guidance:
(i)
A transmission line is able to transmit power continuously, reliably, safely and has
been commissioned to an acceptable standard.
(ii) A substation is able to direct power continuously, reliably, safely and has been
commissioned to an acceptable standard.
(iii) A communication system or facility is able to be used continuously, reliably, safely
and has been commissioned to an acceptable standard.
(iv) An IST system is put into a ‘Production’ environment and is available to be
accessed by end users.
During the time that a self-constructed asset is being built, Transpower’s accounting
system (FMIS) will add a monthly charge to the cost of the project representing the
addition of capitalised interest to the total cost. The charging of this capitalised interest
must cease when the asset is commissioned. The Project Manager is responsible for
organising the project status within FMIS to "I" (In Service) to ensure that capitalised
interest ceases and depreciation commences at the correct date.
Where an asset is commissioned in stages and each asset meets the self-sufficiency
tests set out above, cessation of capitalised interest and the commencement of
depreciation may occur at the end of each stage.
Capitalised interest can be suspended during extended periods in which active
development is interrupted. Permission from the Finance Manager must be given prior to
any suspension of capitalised interest.
12
OPERATING
12.1 Costs Incurred During Asset Operation – Expenditure Activities
From the time an asset is commissioned until the time it is retired or removed from
service, various activities are likely to take place in respect of that asset. In planning and
carrying out work on Transpower’s grid assets, engineering and field staff use
‘Expenditure Activity’ headings to describe and categorise the work that is carried out.
The Expenditure Activities and their corresponding definitions and accounting treatments
are set out below.
Table 1 – Expenditure Activities
EXPENDITURE ACTIVITY
ACCOUNTING TREATMENT
Enhancement
Capitalise
Refurbishment
Capitalise
Replacement
Capitalise
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Repair
Expense
Dismantling
Expense (generally, but refer
Section 14 below)
Fault Repairs
Expense
Scheduled Operating
Expense
Unscheduled Operating
Expense
Periodic Inspections, Servicing & Testing
Expense
Service Charges
Expense
Special Inspections, Servicing & Testing
Expense
Definitions of these expenditure activities are shown below.
12.2 Enhancement – Definition
Enhancement is the replacement of an asset, or addition/replacement of a subcomponent of an asset, to improve the „attributes‟ of the asset.
12.3 Refurbishment – Definition
Refurbishment is expenditure on an asset that creates a material extension to the
EOL of the asset. It does not improve its attributes. This is distinct from
maintenance work, which is carried out to ensure that an asset is able to perform
its designated function for its normal EOL.
12.4 Replacement – Definition
Replacement is expenditure to replace substantially all of an asset.
12.5 Repair – Definition
Repair is expenditure on an asset that maintains or restores the design
functionality or attributes of an asset, enabling the asset to perform its intended
function during its EOL.
12.6 Dismantling – Definition
Dismantling is the gross cost of dismantling, decommissioning or otherwise
disposing of assets.
12.7 Fault Repairs – Definition
Fault Repairs are undertaken under fault conditions to restore supply. Expenditure
in this category does not include costs involved in the eventual repair of the
defaulted asset - only the expenditure required to restore supply.
12.8 Scheduled Operating – Definition
This category includes scheduled direct expenditure for stations, area control
centres and control centre operators.
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12.9 Unscheduled Operating – Definition
This category includes unscheduled direct expenditure for stations, area control
centres and control centre operators.
12.10 Periodic Inspections, Servicing and Testing – Definition
This category includes expenditure on patrols, inspections, servicing and asset
testing on a routine basis, including protection settings. Typically, these activities
are conducted at periodic intervals defined for each asset or type of asset. This
work does not involve any repairs other than minor component replacements in the
course of servicing.
12.11 Service Charges – Definition
This category includes charges for services provided to Transpower facilities e.g.
rates, power, water, telephone etc.
12.12 Special Inspections, Servicing and Testing – Definition
This category includes expenditure on patrols, inspections, servicing and testing of
assets which are based on a specific need as opposed to being time-based as with
routine inspections and servicing.
12.13 Attributes – Definition
Attributes are characteristics of an asset that are used to describe its capability to
provide service.
The concept of attributes is used in this document to refer to the overall capability of an
asset to perform a task. Typical attributes are listed follows:
(i) Rating (e.g. 220kV)
(ii) Expected Operating Life (EOL)
(iii) Environmental Compliance
(iv) Physical Security
(v) Safety Compliance
(vi) Security of Supply Characteristics
(vii) Seismic Performance
(viii) Volume (e.g. oil tanks)
Expenditure on existing assets that serves to meaningfully increase the original or
design attributes of the asset in respect of any of the characteristics shown above is
likely to fall within the definition of capital expenditure.
Expenditure on attributes (e.g. physical security at a substation, seismic performance of
structures, resilience of installations to withstand component failure) can be described
with reference to commonly agreed Industry Standards or other reputable sources of
‘Best Practice’ to establish that the expenditure provides a measurable and quantifiable
increase in the specified attribute. Whilst it is not practical to provide a tabular guide to
the degree such expenditure should qualify as capital in every case, Transpower
maintains internal uniformity in the treatment of such expenditure by applying consistent
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classifications to expenditure where that work intended to increase each capability.
Appendix 5 and 6 provide more detailed guidance on expenditure decisions.
12.14 Accounting Treatment of Expenditure Activities
When undertaking expenditure on an asset, it is vital that the expenditure is classified
correctly for accounting purposes. It should normally be possible to identify expenditure
into one of the eleven activities described in Table 1 above.
The process for classifying expenditure by expenditure activity for Grid Assets is
illustrated in the Expenditure Activity Decision Tree in Appendix 1. The following
guidance should be borne in mind:
(i) Where work is carried out on an existing asset by way of an ongoing project that
may span one or more years, the paramount consideration to be used in
classifying such expenditure is whether the ongoing project work in total was
undertaken with a deliberate intention of either:
a. Restoring the asset to its original condition; or
b. Improving the asset’s attributes or extending the EOL
(ii) If improvement or life extension takes place, the expenditure should be classified
in accordance with the decision tree (Appendix 1) or in Appendix 3-7 (depending
on the type of asset concerned).
(iii) The EOL for each Transpower asset class is set out in Appendix 2 for reference.
(iv) Stage 3 of the decision tree applies when classifying expenditure on Grid assets
that is not classified in Appendices 3-7 as being of a capital or revenue nature.
12.15 Work on Components of an Asset
As stated previously, assets are defined according to ‘Categories’ and ‘Profiles’. In a few
cases (such as an Instrument Transformer) the asset referred to by the Profile is a single
physical unit which can be easily identified. However it is more likely that the profile will
refer to an asset that consists of significant sub-components e.g. there is a profile called
Disconnectors (S_DIS_EC) but a disconnector contains significant sub-components
such as support insulators, structural support posts, contacts, headgear etc.
When refurbishment of a significant sub-component occurs, consideration needs to
given to the extent (if any) to which such expenditure increases the EOL of the entire
asset. The general approach to this issue is outlined in the example below.
12.16 Sub Components Example – Impact on Remaining Life
Assume that the contacts of a disconnector have an EOL of 55 years when new. In this
situation, replacing the contacts of a disconnector could theoretically increase the EOL
of the disconnector (i.e. the entire asset) by 55 years if all of the other major
components were deemed to be in a sufficiently good condition. However, if another
component such as the headgear was deemed to have only 5 years of life remaining,
the life increase of the entire asset resulting from the disconnector replacement would be
limited to a maximum of 5 years. In essence, the sub-component with the shortest
remaining life constrains the life increase of the entire asset.
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In cases where refurbishment work occurs on sub-components, the assumptions that
underpin the proposed EOL change should be documented so that they are available for
independent review if required.
13 PERIODIC REVIEW
During a periodic review of an asset or assets, the most likely item of expenditure would
be an Investigation to determine the possible costs/benefits of refurbishment,
enhancement or dismantling. The accounting treatment of costs in respect of such an
Investigation will match the procedure described Section 9 of These guidance notes.
14 DISMANTLING
The costs of dismantling an asset and disposing of scrap is generally a revenue
expense. These are gross asset write-offs. Scrap disposal proceeds are not booked to
the dismantling project.
Where an asset is purchased with the intent of dismantling it for the construction of some
other asset then the purchase and dismantling cost should be capitalised to the ultimate
asset created. For example if a building was purchased with the intent that it was going
to be destroyed to put a tower in its location then the cost of the building and dismantling
costs should be charged to the ultimate asset (the tower or easement in this instance).
If however there is an existing asset on site that is now out of date and replacement is
required then that removal should be expensed (where material). Immaterial dismantling
costs should be included in the capital costs of the new assets
Where an asset is constructed and there is an expectation that it will be dismantled then
the estimated dismantling costs should be estimated and capitalised. This should only
occur with the approval of the Finance Manager. Given the long life of Transpower’s
assets, examples of capitalising disposal costs are expected to be rare.
15 PROJECTS WITH IMMATERIAL REVENUE EXPENDITURE
It is sometimes inevitable that there will be some small element of maintenance costs in
carrying out a capital project, where these costs are immaterial they should be included
in the capital cost of the project. Where material then they should be split out as a
separate project.
16 ACCOUNTING TREATMENT FOR WORK ON MISCELLANEOUS ASSETS
This section of the policy addresses accounting treatment of work carried out
on:
Buildings
Land
Roads
Minor Fixed Assets e.g. plant, motor vehicles, furniture, equipment and tools
Fences and gates
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16.1 Buildings
Buildings are defined as office buildings, control buildings, depots, stores, garages,
workshops and radio repeater stations that exist either on their own or as part of a
transmission line, communications facility, or substation complex.
Buildings may be subject to the following work:
(i)
Making installations, additions or extensions.
(ii) Making alterations.
(iii) Making repairs.
(iv) Making replacements.
Where work of the above nature is made, the decision as to whether the costs should be
expensed or capitalised is to be made in accordance with the information contained in
Appendix 3.
16.2 Land
Purchases of land and easements will be capitalised and recognised at the date of
purchase.
Further explanation of the accounting treatment of land purchases is covered in
Accounting Guidance Notes.
Once purchased, land may be subject to the following work:
(i)
Initial landscaping comprising:
vegetation clearance
earthworks and drainage
grassing
planting
paving and fencing
(ii) Subsequent work comprising (i) above and vegetation maintenance and control.
The work in either (i) or (ii) may be completed over one or more years. Where work of
the above nature is carried out, the decision as to whether the costs should be
capitalised is to be made in accordance with the LAND table in Appendix 4.
16.3 Roads
Roads may be subject to the following work:
(i)
Initial Establishment comprising:
grading
metalling and surfacing
sealing
kerbing and channelling
drainage and culverting
(ii) Subsequent work involving either re-establishment work to maintain road in a
usable condition or extensions to established roads.
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In general, work that creates either a new road or extends significantly an existing road
is to be capitalised. Work that maintains an existing road or provides minor improvement
is to be treated as maintenance.
16.4 Minor Fixed Assets
Minor Fixed Assets (MFA) are non electricity supply facility plant and equipment, for
example, plant, motor vehicles, furniture, equipment and tools.
Once purchased, these assets may be subject to the following work:
(i)
Making additions or extensions.
(ii) Making alterations.
(iii) Making repairs.
(iv) Making replacements.
Where work of the above nature is made, the decision as to whether the costs should be
capitalised or expensed is to be made in accordance with the information set out in
Appendix 7.
16.5 Fences and Gates
Where the proposed expenditure is required to repair damage or maintain
functionality the cost should be treated as Repair (expense). If the proposed work will
extend the remaining life of the entire asset by at least ten years (approximately 20%)
the cost should normally be treated as Refurbishment (capital) and an appropriate
adjustment should be made to the life of the entire asset. If it is not possible to determine
any life extension in respect of the entire asset, but the expenditure amounts to 20% or
more of the gross book value of the asset, the expenditure should be treated as
Refurbishment (capital) with no adjustment being made to the life of any other assets.
This approach is acceptable where Transpower has a clear intention to occupy the site
for the foreseeable future. Expenditure below these thresholds should be treated as a
Repair.
Where an electronic/remote control gate is being replaced the cost of this item should be
recorded as a separate asset (with an appropriate allocation of relevant indirect costs) at
the time that the total expenditure is being capitalised.
If a departure from these guidelines is deemed appropriate, the reasons should be
stated on the relevant project approval documentation.
17
ACCOUNTING TREATMENT OF COSTS INCURRED BY PROJECTS
17.1 Introduction
This section provides specific guidance regarding the correct treatment of various costs
that are commonly incurred during the life of a project. Guidance should always be
sought from Finance where the correct treatment of a cost or activity is not certain.
17.2 Charging Salary Costs to Projects
Where an employee spends in excess of two hours per week or eight hours per month
working on a project, it is necessary to charge the cost of that time to the project. This is
achieved using Transpower’s Time Recording system.
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In order to be able to charge time to a project a staff member will need to be added to
the project team in the FMIS system.
17.3 Backfilling Costs
Costs attributable to a resource engaged to ‘backfill’ a salaried employee should be
coded directly to the cost centre of the employee concerned, and the employee’s time
should be charged to the project using Transpower’s Time Recording system.
In a situation where there is a material difference (greater than say 20%) between the
cost of employing a ‘backfill’ resource and the cost of the relevant employee, the
difference in cost can be charged to the capital or investigation project by way of an
accounting adjustment. Requests for adjustments should be directed to the appropriate
Business Services Account Manager.
17.4 Training Costs
In many projects training costs will be incurred. Project related training can be split into
two distinct categories: Project Enabling Training and Project Delivered Training. Any
training that does not fit into either of these categories cannot be charged to the project.
‘Project Enabling Training’ is specific training that is required so that staff can complete
activities necessary to implement a particular capital project. It expressly excludes staff
development (personal) training.
Example – Project Enabling Training:
If an Application Analyst who can already develop a particular system, has to be
trained on new tools to upgrade the system, this is Project Enabling Training.
Training a Project Manager in project planning so he can work on the project is not
Project Enabling Training.
All costs (including the development of the training, running the training, the
trainee‟s time and any associated travel and incidental expenses) should be
capitalised to the project. Training costs incurred after the project has closed are
not Project Enabling Training.
‘Project Delivered Training’ is training that is required during a project to allow the proper
use and support of what is being delivered by the project. As with Project Enabling
Training, it does not include staff development (personal) training.
Examples – Project Delivered Training:
(1) The development of a training programme that will be used to train staff in a
new application is Project Delivered Training, as is the running of the course
during the project to train existing staff. Running the course once the project has
finished, in order to train new staff, is not Project Delivered Training.
(2) During an upgrade project, the development and running of training in the
support and use of the upgraded system or associated procedures that have
changed is Project Delivered Training. Training of staff in the „base‟ system, or
procedures that are unchanged, is not.
All costs associated with the provision of Project Delivered Training (training
development costs, trainer costs including travel and associated costs) should be
capitalised to the project. All costs associated with the trainee (time, travel and any other
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costs) are not charged to the project but to the cost centre for that member of staff.
Within Time Recording this cost should be attributed to the appropriate Business
Process. For example, in the implementation of HRIS the costs of the trainers and the
training materials were Project Delivered training and therefore capitalised. However,
Transpower staff (i.e. the trainees) learning how to use the system could not charge the
cost of their time to the project.
17.5 Incidental Revenue Expenditure
In most projects there will be ‘incidental revenue expenditure’ in respect of the effort
required to put in place a capital asset. In most cases such expenditure will be
immaterial in relation to the overall cost of the asset and should be included in the capital
cost of the asset and depreciated over its expected operational life. Examples of such
expenditure include (inter alia) stationery costs, courier charges and catering costs for
meetings. Such costs would not normally amount to more than around 1-2% of the entire
project budget, and guidance should be sought if (at the planning stage) such costs are
likely to exceed this threshold.
18
IST PROJECTS
18.1 General Guidance
The concepts in these guidance notes are applicable to all of Transpower’s expenditure,
and this entire document should be read by staff who are required to account for IST
expenditure. The ‘IST Software and Hardware Systems’ section is included to provide
guidance specific to IST expenditure but it must be read in conjunction with the rest of
the policy.
18.2 IST Investigations
Expenditure incurred in deciding whether an IST asset should be acquired or
constructed should be expensed in accordance with the guidance set out in the
Investigations Section (9) above. This means all expenditure incurred during the
‘Initiation’ phase of the Transpower Solution Life Cycle (TPSLC) that leads to the
identification of Business Requirements together with the establishment of solution
options and option assessment.
18.3 IST Capital and Revenue Flowchart
The flowchart in Appendix 8 may be used to assist in determining whether or not costs
incurred in respect of IST software and systems should be treated as expense or capital.
IST Hardware is generally included within the category of MFA ‘Equipment’ and the
appropriate treatment of such purchases is described in both Appendix 7 and Appendix
8.
18.4 Licence Fees
Where licence fees are incurred during the construction phase of an asset, they will
generally have a shorter life than that of the underlying asset. Licence fees should be
capitalised to the project up to the time of the next licence renewal date (where that is
less than one year). For example; A project purchases a licence fee in November 2011
for a software licence that applies from November 2011 to October 2012. The Project
goes live in February 2012. The project incurs the full cost of the licence until October
2012. The next renewal period (from November) becomes Operating Expenditure.
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Where licence or warranty fees are included in the cost of an item and not separately
disclosed then they would normally be included in the capital cost of the item.
19 ANNUAL REVIEW OF ACCOUNTING TREATMENT OF WORK
In order to ensure that all Transpower expenditure is classified correctly in accordance
with these guidance notes, the expenditure contained in Transpower’s draft annual
Business Plan will be reviewed by suitability qualified personnel. Corporate Services will
co-ordinate the carrying out of this review. In carrying out any review of ongoing projects
spanning several years, regard will be given to the primary intention of this project work
as described in Transpower’s 10 year Asset Management Plan. The intention will assist
in determining whether to expense or capitalise such expenditure.
Any requests from Transpower staff for a review of the Accounting Guidance Notes
should be referred to Transpower’s Finance Manager for consideration.
20 MONITORING COMPLIANCE WITH THESE GUIDANCE NOTES
Corporate Services will monitor compliance with the provisions of these guidance notes.
Employees involved in expenditure planning with regard to Transpower’s assets are
responsible for the correct application of these guidance notes, and for seeking
assistance when in doubt.
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21
APPENDIX 1 – EXPENDITURE ACTIVITY DECISION TREE – GRID ASSETS
Stage 1 - Development Capital
IN
Expenditure over $500?
NO
REPAIR (Expense)
Pooled Asset
YES
YES
New Asset Where None
Previously Existed?
YES
Is the value below
$2,000?
NO
DEVELOPMENT (Capital)
NO
Go to
Stage 2
Stage 2 - Replacement, Refurbishment, Enhancement and Repair
IN
Replace a Complete
Asset?
YES
REPLACEMENT
(Capital)
NO
Expenditure Type
Described In Accounting
Policy Appendix?
YES
Follow Treatment Set Out
In Accounting Policy
Appendix
ENHANCEMENT (Capital)
NO
Will This Expenditure:
1. Enhance or Create Any Attribute(s)?
2. Enhance The Asset's Original Service Potential?
3. Increase The Asset's Remaining Life?
Go to
Stage
3
YES
REFURBISHMENT (Capital)
NO
REPAIR (Expense)
Stage 3 - Expenditure Of A Type Not Described In An Appendix To The Policy
IN
Is This Expenditure On An
Asset At An Existing Site?
NO
Create or Enhance An
'Attribute'?
NO
YES
Does Expenditure Create
An Increase In Service
Potential Or Life?
YES
Are You Sure It Is Capital
Expenditure?
Contact
Finance
Mgr
YES
DEVELOPMENT (Capital)
NO
Refer To Section 12.2 In
The Policy
NO
NO
YES
Will This Work Create a
Major Increase In Service
Potential?
YES
NO
Will This Work Create a
Major Increase In
Expected Useful Life?
YES
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APPENDIX 2 – ASSET PROFILE LISTING
22
Transpower’s defined assets are listed below.
TRANSPOWER ASSETS
Category
Profile
Profile Description
Expected
Operating Life
(EOL) Yrs
ADMIN
A_ACON
Admin Air Conditioning
10
ADMIN
A_BLDG
Buildings not at sub
50
ADMIN
A_CBL
Cables not at sub
55
ADMIN
A_CELL_MS
Cell Phone Metering Systems
10
ADMIN
A_CONDUC
Conductors (non Grid)
55
ADMIN
A_CRANES
Cranes & Lifting Gear
50
ADMIN
A_D_SEWAGE
Admin Drainage & Sewerage
55
ADMIN
A_DECOD_MS
Decoders Metering Systems
4
ADMIN
A_E_SUPPLY
Electricity Supply not at sub
55
ADMIN
A_EDPE_NS
EDPE - non specified
3
ADMIN
A_EDPE_S
EDPE – specified
3
ADMIN
A_F_ALARM
Fire Alarm System not at sub
10
ADMIN
A_F_G
Fences & Gates -_not at sub
40
ADMIN
A_FAX_CTCH
Fax Catcher Metering Systems
4
ADMIN
A_FLOORING
Floor Coverings
10
ADMIN
A_GEN_STRU
General Structures not at sub
55
ADMIN
A_INSULAT
Insulators not at sub
55
ADMIN
A_LAND
Land not at sub
ADMIN
A_LIMP
Leasehold Fixtures & Fittings
10
ADMIN
A_LS_TFR
Local Service Trans not at sub
40
ADMIN
A_MIS_P_M
Misc Plant & Machinery
10
ADMIN
A_MODEM_MS
Modem Metering System
4
ADMIN
A_MTR_OTHR
Meter Other Metering Systems
8
ADMIN
A_MTR_TOU
TOU Meters Metering Systems
8
ADMIN
A_MV_FBT
Motor vehicles - FBT
5
ADMIN
A_MV_X_FBT
Motor vehicles - no FBT
5
ADMIN
A_NS_LGT_F
Non standard light fittings
55
ADMIN
A_O_CM_EQ
Other Comms Equipment
10
ADMIN
A_OE
Office equipment
5
ADMIN
A_OE_NS
Office equip - non spec
5
ADMIN
A_OFF
Office furniture and fittings
10
ADMIN
A_PHONE_EQ
Telephone Equipment
10
ADMIN
A_PROT_R_P
Protection Relays & Panels
15
ADMIN
A_REC_MS
Recorders Metering Systems
8
ADMIN
A_ROAD
Roads - other
40
ADMIN
A_SEC_EQT
Security Equipment - not at sub
10
ADMIN
A_SOFTWARE
Software
3
ADMIN
A_SY_CIVIL
Admin Switchyard Civil Works
55
ADMIN
A_TEST_EQT
Test Equipment
7
ADMIN
A_TL_STRUC
Admin Lines Struc - Non network
55
ADMIN
A_WATER_S
Water supply
15
COMM
C_ACON
Comms Air Conditioning
10
COMM
C_ANT
Antennas & Networking Eqmt
4
COMM
C_BLDG
Communications Buildings
50
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TRANSPOWER ASSETS
Category
Profile
Profile Description
Expected
Operating Life
(EOL) Yrs
COMM
C_CONT_CBL
Comms control cable
25
COMM
C_CONT_PNL
Control Panels
25
COMM
C_DC_SYS
Communication DC Systems
8
COMM
C_E_SUPPLY
Comms Elec supply
55
COMM
C_EASEMENT
Communications Easements
COMM
C_EX_COM_L
External Comms lines
25
COMM
C_F_OPTIC
Comms Fibre Optics
25
COMM
C_LAND
Communications Land
COMM
C_MULTIPLX
Multiplexing & Interfacing Eqt
10
COMM
C_O_COM_EQ
Comms: Other Comms Eqt
10
COMM
C_O_PANEL
Other Panels
25
COMM
C_PHONE_EQ
Telephone equipment
10
COMM
C_PLC
Powerline Cable Carrier
15
COMM
C_PROT_R_P
Protection Relays & Panels
15
COMM
C_RAD_TOWR
Radio Towers & Earthing
25
COMM
C_RADIOS
Radios
10
COMM
C_ROADS
Communications Roads
40
COMM
C_SCAD_RCE
SCADA & Remote Control Eqmt
10
COMM
C_SOFTWARE
Communication Software
3
COMM
C_SPARES
Communication Spares
25
COMM
C_SY_CIVIL
Comms Switchyard Civil Works
55
COMM
C_WATER_S
Communications Water supply
15
HVDC
H_ACON
HVDC Air Conditioning
15
HVDC
H_ARRESTOR
HVDC Arrestors
30
HVDC
H_BLDG
HVDC Wooden Framed Bldg
30
HVDC
H_C_BANKS
HVDC Capacitor banks
30
HVDC
H_CB
HVDC Circuit Breakers
30
HVDC
H_CBL
HVDC Low voltage Cables
30
HVDC
H_CKS_CBL
HVDC Cook Strait Cables
30
HVDC
H_CONDUC
HVDC Conductors
30
HVDC
H_CONT_CBL
HVDC Control Cables
30
HVDC
H_CONT_PNL
HVDC Control Panels
30
HVDC
H_CONV_S_E
HVDC Converter Support Enclo
30
HVDC
H_CONV_TFR
HVDC Converter Transformers
30
HVDC
H_CUR_TFR
HVDC Current Transformers
30
HVDC
H_CVT
HVDC Capacitive Voltage TFRS
30
HVDC
H_D_SEWAGE
HVDC Drainage & Sewerage
55
HVDC
H_DC_SYS
HVDC DC Systems
8
HVDC
H_DIS_ES
HVDC Disconnectors & E Sw
30
HVDC
H_E_SUPPLY
HVDC Electricity supply
30
HVDC
H_F_ALARM
HVDC Fire Alarm Systems
30
HVDC
H_F_G
HVDC Fences & Gates
40
HVDC
H_FILTER_B
HVDC Filter Bank
30
HVDC
H_FLOORING
HVDC Floor Coverings
30
HVDC
H_GEN_STRU
HVDC General Structures
30
HVDC
H_INSULAT
HVDC HVDC Insulators
30
HVDC
H_LAND
HVDC Land
HVDC
H_LS_TFR
HVDC L S Transformers
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TRANSPOWER ASSETS
Category
Profile
Profile Description
Expected
Operating Life
(EOL) Yrs
HVDC
H_MIS_P_M
HVDC Misc Plant & Machinery
30
HVDC
H_NS_LGT_F
HVDC Non standard light fit
30
HVDC
H_O_PANEL
HVDC: Other panels
30
HVDC
H_OTH_C_E
HVDC Other Comms Eqt
30
HVDC
H_PLC
HVDC Powerline Cable Carrier
30
HVDC
H_POW_TFR
HVDC Power Transformers
30
HVDC
H_PROT_R_P
HVDC Prot Relays & Panels
20
HVDC
H_REACTORS
HVDC Reactors
30
HVDC
H_RES_REAC
HVDC Resistor Reactors
30
HVDC
H_RESISTOR
HVDC Resistors
30
HVDC
H_ROAD
HVDC Roads non Infra
40
HVDC
H_SCAD_RCE
HVDC Scada & Rce
20
HVDC
H_SEC_EQT
HVDC Security Equipment
15
HVDC
H_SPARES
HVDC Spares
30
HVDC
H_SURG_ARR
HVDC: Surge Arrestor
30
HVDC
H_SY_CIVIL
HVDC SY Civil Works
30
HVDC
H_SYN_COND
HVDC Sync Condensers
30
HVDC
H_T_BLDG
HVDC Temp Buildings
30
HVDC
H_TEST_EQT
HVDC Test Equipment
30
HVDC
H_THYR_VAL
HVDC Thyristor Valves
30
HVDC
H_TRANSDUC
HVDC Transducers
30
HVDC
H_TRAVERS
HVDC Traverser Tracks
30
HVDC
H_VAL_COOL
HVDC Valve Cooling Eqt
30
HVDC
H_VAL_DAMP
HVDC Valve Damp Resis
30
HVDC
H_VALVE
HVDC Valves
30
HVDC
H_VOLT_TFR
HVDC Voltage Transformers
30
HVDC
H_W_BUSH
HVDC Wall Bushings
30
HVDC
H_WATER_S
HVDC Water supply
55
INFRA
I_BRIDGE
R & R Bridges & Culverts
INFRA
I_CONDUC
R & R Conductors
INFRA
I_F_G
R & R Fences & Gates
INFRA
I_INSULAT
R & R Insulators
INFRA
I_ROADS
R & R Roads Infrastructure
INFRA
I_STRUCTUR
R & R Structure
SUBS
S_ACON
SUBS Air Conditioning
10
SUBS
S_AIR_COMP
SUBS Air compressors
15
SUBS
S_AVR_PNL
SUBS AVR Panel
55
SUBS
S_BLDG
SUBS Wooden Framed Bldg
55
SUBS
S_BRIDGE
SUBS Bridges & Culverts
55
SUBS
S_BUSBAR
SUBS Busbar Systems
55
SUBS
S_BUSZ_PTN
Bus Zone Protection
15
SUBS
S_C_BANKS
SUBS Capacitor banks
30
SUBS
S_CAPB_PTN
Capacitor Bank Prot
30
SUBS
S_CB
SUBS Circuit Breakers
35
SUBS
S_CB_AB
SUBS Circuit Breakers AB
35
SUBS
S_CB_B11
SUBS Circuit Breakers B11
55
SUBS
S_CB_BO
SUBS Circuit Breakers BO
45
SUBS
S_CB_FO
SUBS Frequently Operated CB’s
20
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TRANSPOWER ASSETS
Category
Expected
Operating Life
(EOL) Yrs
Profile
Profile Description
SUBS
S_CB_GIS
SUBS Circuit Breakers GIS
40
SUBS
S_CB_MO
SUBS Circuit Breakers MO
25
SUBS
S_CB_SF6
SUBS Circuit Breakers SF6
35
SUBS
S_CB_VAC
SUBS Circuit Breakers VAC
40
SUBS
S_CBFL_PTN
CB Fail Protection
15
SUBS
S_CBL
SUBS High/Low voltage cables
55
SUBS
S_CONT_CBL
SUBS Control Cables
15
SUBS
S_CONT_PNL
SUBS Control Panels
15
SUBS
S_CRANE
SUBS Cranes & Lifting Gear
55
SUBS
S_CUR_TFR
SUBS Current Transformers
35
SUBS
S_CVT
SUBS Capacitive Voltage TRFR
40
SUBS
S_D_SEWAGE
SUBS Drainage & Sewerage
55
SUBS
S_DATA_LOG
SUBS Data Logger/Evt rec
55
SUBS
S_DC_ALM
SUBS DC & Alarms Panel
55
SUBS
S_DC_SYS
SUBS Station DC System
8
SUBS
S_DEMR
SUBS Demand Recorders
25
SUBS
S_DIS_ES
SUBS Disconnectors & E Sw
55
SUBS
S_DIST_REC
SUBS Disturbance Record
55
SUBS
S_DRPP_PTN
Dynamic Reactive Pwr plant
25
SUBS
S_E_SUPPLY
SUBS Electricity supply
55
SUBS
S_F_G
SUBS Fences & Gates
40
SUBS
S_FDR_PTN
Feeder Protection
15
SUBS
S_FILTER_B
Substation: Filter bank
30
SUBS
S_FIRE_PRO
SUBS Fire Protection Sys
30
SUBS
S_GEN_STRU
SUBS General Structures
55
SUBS
S_GENER
SUBS Standby Generators
55
SUBS
S_GIS_SG
SUBS GIS Metalclad SwitchG
55
SUBS
S_JUNCTION
SUBS Junction Boxes
15
SUBS
S_LAND
SUBS Land
SUBS
S_LANDSCAP
SUBS Landscaping
SUBS
S_LINE_PTN
Line Protection
15
SUBS
S_LS_TFR
SUBS L S Transformer
55
SUBS
S_MIS_P_M
SUBS Misc Plant & Machinery
55
SUBS
S_MIS_PNL
SUBS Misc Panel
15
SUBS
S_NS_LGT_F
SUBS Switchyard Lighting
55
SUBS
S_O_PANEL
SUBS Other Panels
15
SUBS
S_OFF
SUBS Office furn & fittings
10
SUBS
S_OIL_CON
SUBS Oil con/Intercept tank
45
SUBS
S_OTHR_PTN
Other Protection
15
SUBS
S_PLC
SUBS: Power Line Cable Carrier
55
SUBS
S_POW_TFR
SUBS Power Transformers
55
SUBS
S_PROT_R_P
SUBS Prot Relays & Panels
15
SUBS
S_REA_PWRC
SUBS Reactive Pwr Cont
25
SUBS
S_REACTORS
SUBS Reactors
50
SUBS
S_RES_REAC
SUBS Resistor Reactors
30
SUBS
S_RESISTOR
SUBS Resistors
55
SUBS
S_REVM
SUBS Revenue Metering
15
SUBS
S_ROAD
SUBS Roads non Infrastructure
55
© 2010 - Transpower New Zealand Limited
27
Issue 2
Updated November 2010
TRANSPOWER ASSETS
Category
Profile
Profile Description
Expected
Operating Life
(EOL) Yrs
SUBS
S_SCS
SUBS Station Control Sys
55
SUBS
S_SEC_EQT
SUBS Security Equipment
15
SUBS
S_SPARES
Substation Spares
55
SUBS
S_SPARES_P
Protection Spares
25
SUBS
S_STRUCTUR
SUBS Structure
55
SUBS
S_SURG_ARR
SUBS Surge Arrestor
55
SUBS
S_SY_BUND
55
SUBS
S_SY_CABLE
SUBS Switchyard Bunding
SUBS Switchyard Cable
Ducts/Tren
SUBS
S_SY_CIVIL
SUBS Switchyard Civil Works
55
SUBS
S_SY_CURB
SUBS Switchyard Curbing
55
SUBS
S_SY_EGRID
55
SUBS
S_SY_EWORK
SUBS Switchyard Earth Mats/Grid
SUBS Switchyard
Earthwrks/Landsc
SUBS
S_SY_FOUND
SUBS Switchyard Foundations
55
SUBS
S_SY_METAL
SUBS Switchyard Metalling
55
SUBS
S_SYN_COND
SUBS Sync Condensers
30
SUBS
S_T_BLDG
SUBS Temp Buildings
55
SUBS
S_TEST_EQT
SUBS Test Equipment
15
SUBS
S_TF_SOUND
SUBS TFMR SOUND ENCL
55
SUBS
S_TFMR_PTN
Transformer Protection
55
SUBS
S_THYR_VAL
SUBS: Thyristor Valve
30
SUBS
S_TRAVERS
SUBS Traverser Tracks
55
SUBS
S_VAL_COOL
SUBS: Valve Cooling
30
SUBS
S_VOLT_PTN
Voltage Selection Prot
55
SUBS
S_VOLT_TFR
SUBS Voltage Transformers
40
SUBS
S_WATER_S
SUBS Water supply
55
TRAN
T_BRIDGE
D & E Bridges & Culverts
10
TRAN
T_CONDU_HC
TRANS Conductors - Heavy Coast
35
TRAN
T_CONDU_IL
TRANS Conductors - Inland
75
TRAN
T_CONDU_MX
TRANS Conductors - Mixed
50
TRAN
T_CONDU_SC
TRANS Conductors - Semi Coasta
45
TRAN
T_CONDU_TR
TRANS Conductors - Typical Rural
60
TRAN
T_CONDUC
D & E Conductors
TRAN
T_EASEMENT
D & E Easements
TRAN
T_EW_HC
30
TRAN
T_EW_HW_HC
TRANS Earthwire - Heavy Coastal
TRANS Earthwire HW - Heavy
Coa
TRAN
T_EW_HW_IL
TRANS Earthwire HW - Inland
30
TRAN
T_EW_HW_MX
25
TRAN
T_EW_HW_SC
TRANS Earthwire HW - Mixed
TRANS Earthwire HW - Semi
Coas
TRAN
T_EW_HW_TR
TRANS Earthwire HW - Typical R
30
TRAN
T_EW_IL
TRANS Earthwire - Inland
75
TRAN
T_EW_MX
TRANS Earthwire - Mixed
50
TRAN
T_EW_SC
TRANS Earthwire - Semi Coastal
35
TRAN
T_EW_TR
TRANS Earthwire - Typical Rural
60
TRAN
T_F_G
D & E Fences & Gates
40
TRAN
T_INSUL_HC
TRANS Insulators - Heavy Coast
20
TRAN
T_INSUL_IL
TRANS Insulators - Inland
45
© 2010 - Transpower New Zealand Limited
55
55
20
25
28
Issue 2
Updated November 2010
TRANSPOWER ASSETS
Category
Profile
Profile Description
Expected
Operating Life
(EOL) Yrs
TRAN
T_INSUL_MX
TRANS Insulators - Mixed
30
TRAN
T_INSUL_SC
TRANS Insulators - Semi Coastal
25
TRAN
T_INSUL_TR
TRANS Insulators - Typical Rural
35
TRAN
T_INSULAT
D & E Insulators
TRAN
T_LAND
TRAN Land
TRAN
T_POL_F_HC
TRANS Pole Foundations - HC
30
TRAN
T_POL_F_IL
TRANS Pole Foundations - IL
65
TRAN
T_POL_F_MX
TRANS Pole Foundations - MX
50
TRAN
T_POL_F_SC
TRANS Pole Foundations - SC
45
TRAN
T_POL_F_TR
TRANS Pole Foundations - TR
55
TRAN
T_POLES_HC
TRANS Poles - Heavy Coastal
30
TRAN
T_POLES_IL
TRANS Poles - Inland
65
TRAN
T_POLES_MX
TRANS Poles - Mixed
50
TRAN
T_POLES_SC
TRANS Poles - Semi Coastal
45
TRAN
T_POLES_TR
TRANS Poles - Typical Rural
55
TRAN
T_ROADS
D & E Roads Infrastructure
10
TRAN
T_SPARES
Transline Spares
55
TRAN
T_STRUCTUR
D & E Structure
TRAN
T_TOWER_HC
TRANS Towers - Heavy Coastal
25
TRAN
T_TOWER_IL
TRANS Towers - Inland
70
TRAN
T_TOWER_MX
TRANS Towers - Mixed
50
TRAN
T_TOWER_SC
TRANS Towers - Semi Coastal
45
TRAN
T_TOWER_TR
TRANS Towers - Typical Rural
55
TRAN
T_TWR_F_HC
TRANS Towers Foundations - HC
50
TRAN
T_TWR_F_IL
TRANS Towers Foundations - IL
60
TRAN
T_TWR_F_MX
TRANS Towers Foundations - MX
50
TRAN
T_TWR_F_SC
TRANS Towers Foundations - SC
50
TRAN
T_TWR_F_TR
TRANS Towers Foundations - TR
50
TRAN
T_TWR_P_HC
TRANS Towers Paint –HC
10
TRAN
T_TWR_P_HC
TRANS Towers Paint –SC
12
TRAN
T_TWR_P_HC
TRANS Towers Paint – Mixed
15
TRAN
T_TWR_P_HC
TRANS Towers Paint –TR
18
TRAN
T_TWR_P_HC
TRANS Towers Paint –Inland
20
© 2010 - Transpower New Zealand Limited
29
Issue 2
Updated November 2010
23
APPENDIX 3 – WORK ON EXISTING BUILDINGS
Ancillary Plant
e.g. lifts, heating
systems etc
Inner Fixtures
(as part of the
building proper
e.g. partitions)
Building Proper
Installations,
additions and
extensions
Capitalise
Capitalise
Capitalise
Alterations
If less than $20,000,
expense.
Expense
If less than $20,000,
expense.
Type of
Expenditure
If greater than $20,000
consider capitalising if
significant improvement
is involved; otherwise
expense.
Repairs
Expense
If greater than $20,000
consider capitalising if
significant improvement
is involved; otherwise
expense.
Expense
Expense
NOTE:
If purchasing a building
which requires
dilapidation repairs to
bring it up to an
acceptable standard,
repair costs should be
capitalised.
Replacement
Of parts less than
$20,000, expense.
Of parts greater than
$20,000, continue to
expense unless
significant improvement
is involved.
Replacement of a total
asset (e.g. a lift system)
should be capitalised.
© 2010 - Transpower New Zealand Limited
Of parts less than
$20,000,
expense.
Of parts greater
than $20,000,
continue to
expense unless
significant
improvement is
involved.
Of parts less than
$20,000, expense.
Of parts greater than
$20,000, continue to
expense unless
significant improvement
is involved.
30
Issue 2
Updated November 2010
24
APPENDIX 4 – EXPENDITURE CLASSIFICATIONS – EXISTING LAND
LAND
Type of Expenditure
Initial Work Within A
Capital Project
Vegetation Clearance
Expense
Earthworks and Drainage
Expense - Capital if
significant improvement
Treat Cost As Capital
Grassing
Expense
Planting
Expense
Paving and Fencing
Expense
Vegetation Maint. and Control
(i)
(ii)
Subsequent Landscaping
Work
N/A
Expense
Initial Work refers to the work required when a substation, transmission line,
communications facility, etc is initially established. Such costs are included in the
project budget for that capital work.
Subsequent Landscaping Work refers to activity required when facilities have
already been established. Such costs are generally directed towards either
maintaining initial landscaping work or carrying out minor improvements and are
therefore expensed.
© 2010 - Transpower New Zealand Limited
31
Issue 2
Updated November 2010
25
Asset
Towers
Towers
Towers
Poles
Poles
Towers
Towers
Towers
Towers
Towers
Conductors
Conductors
Conductors
Conductors
Conductors
Conductors
Conductors
Conductors
Conductors
Conductors
Conductors
Earthwire
Earthwire
Tower Foundations
Tower Foundations
Tower Foundations
Tower Foundations
Tower Foundations
Tower Foundations
Tower Foundations
Tower Foundations
Pole Foundations
Pole Foundations
Pole Foundations
Insulators
Insulators
Insulators
Insulators
Insulators
Access
Access
Access
Access
Access
Structures
Conductors
Earthwire
Foundations
Insulators
APPENDIX 5 – EXPENDITURE CLASSIFICATIONS TRANSMISSION
Asset Detail
Replace minor steelwork, strengthening
Replace bolts, retorquing
Steelwork strengthening for increased
capacity
Replace one or two wood poles
Replace crossarm
Tower Painting
Tower Painting - Recoat
Tower Painting - Touch up
Relocate
Install Anti-climbs
Replace conductor (ME) - all phases in a span
Replace conductor (urban copper) - all
phases in span
Replace conductor with increased capability
Replace conductor - one or two phases in a
span
Install Vibration Dampers
Replace Vibration Dampers
Install Spacers and/or Interphase Spacers
Replace Spacers and/or Interphase Spacers
Investigations, testing, scoping
Install Spacer Dampers
Replace Vibration Dampers
Replace Earthwire/Earthwire Hardware, Fibre
Optics
Repair Earthwire/Earthwire Hardware, Fibre
Optics
Replace grillage all legs
Refurbish grillage all legs
Concrete over grillage
Grillage on leg
Grillage interface
Strengthening
Base Plate repairs/refurbishment
Stubs repairs/refurbishment
Replace plies or wailings
Repair plies or wailings
Protection Works
Replace all strings on a structure increased
capability
Replace all strings on a structure
Replace less than all strings
Replace discs
Replace or repair hardware
Associated with development capital project
Associated with enhancement capital project
Associated with refurbishment capital project
Associated with replacement capital project
Not associated with capital project
New asset
New asset
New asset
New asset
New asset
© 2010 - Transpower New Zealand Limited
Category
Expense
Expense
Activity
Repair
Repair
MMS
Update Equipment
Update Equipment
Capital
Capital
Capital
Capital
Capital
Expense
Expense
Expense
Capital
Enhancement
Replacement
Replacement
Refurbishment
Refurbishment
Repair or routine
Repair or routine
Repair or routine
Replacement
Update Equipment
New Equipment
Update Equipment
Update Equipment
Capital
Capital
Replacement
Enhancement
New Equipment
New Equipment
Expense
Capital
Expense
Capital
Expense
Expense
Capital
Expense
Repair or routine
Enhancement
Repair or routine
Enhancement
Repair or routine
Repair or routine
Enhancement
Repair or routine
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Capital
Replacement
New Equipment
Expense
Capital
Capital
Capital
Expense
Expense
Expense
Expense
Expense
Capital
Expense
Expense
Repair or routine
Replacement
Refurbishment
Refurbishment
Repair or routine
Repair or routine
Repair or routine
Repair or routine
Repair or routine
Replacement
Repair
Repair
Update Equipment
New Equipment
Update Equipment
94_003226 or 003222
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
New Equipment
Update Equipment
Update Equipment
94_005224 or 005221
94_005224 or 005221
94_005224 or 005221
94_005224 or 005221
94_005224 or 005221
Capital
Capital
Expense
Expense
Expense
Capital
Capital
Capital
Capital
Expense
Capital
Capital
Capital
Capital
Capital
Enhancement
Replacement
Repair or routine
Repair or routine
Repair or routine
Development
Enhancement
Refurbishment
Replacement
Repair or Routine
Development
Development
Development
Development
Development
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
Update Equipment
New Equipment
MMS Budget
94_002227 or 002220
94_002227 or 002220
94_002227 or 002220
94_002227 or 002220
94_002227 or 002220
94_003226 or 003222
94_003226 or 003222
94_003226 or 003222
94_003226 or 003222
94_003226 or 003222
94_004225 or 004223
94_004225 or 004223
94_004225 or 004223
94_002260 or 002261
New equipment
New equipment
New equipment
New equipment
New equipment
32
Issue 2
Updated November 2010
26
APPENDIX 6 – EXPENDITURE CLASSIFICATIONS SUBSTATIONS
Asset
Profile
Buswork
S_BUSBAR
Buswork
Buswork
Buswork
Asset Detail
Category
Activity
Capital
Refurbishment
S_BUSBAR
S_BUSBAR
S_BUSBAR
Fully encapsulate air-insulated tertiary
buswork
Replace all bus insulation
Replace all hardware in a bay
Replace single dropper
Capital
Capital
Expense
Refurbishment
Refurbishment
Repair
Capacitor bank
S_C_BANKS
Replace < 50% of capacitor units
Expense
Capacitor bank
S_C_BANKS
Replace all capacitor units
Circuit breaker
S_CB_***
Circuit breaker
S_CB_***
Replace one pole or porcelain
Replace mechanism box of very
frequent operating circuit breaker
Disconnectors
Disconnectors
S_DIS_ES
S_DIS_ES
Disconnectors
S_DIS_ES
Disconnectors
S_DIS_ES
Disconnectors
S_DIS_ES
Fences & Gates
S_F_G
Fences & Gates
S_F_G
Fences & Gates
S_F_G
General Structures
S_GEN_STRU
General Structures
S_GEN_STRU
Outdoor Junction Box
Capital
Repair or
routine
Refurbishment
Expense
Repair
Capital
Refurbishment
Replace all support insulators
Replace all structural support posts
Capital
Capital
Replace contacts (no rating change)
Expense
Refurbishment
Refurbishment
Repair or
routine
Replace contacts (>20% rating
increase)
Replace complete headgear with
refurbished set
Capital
Enhancement
Capital
Refurbishment
Replace complete substation fence
Capital
Replace switchyard entrance gate
Expense
Replacement
Repair or
routine
Provide crushed rock perimeter strip
outside fence for step and touch
potential safety hazard mitigation
Install fall arrest system on roof
structures
Nature of
Enhancement
Rating
Capital
Enhancement
Safety
Capital
Enhancement
Safety
Seismic Strengthening of Structures
Capital
Enhancement
Seismic
Performance
S_JUNCTION
Replace complete ODJB
Capital
Replacement
Power Cable
Power Cable
S_CBL
S_CBL
Replace one phase or core
Replace all cores/phases
Expense
Capital
Repair
Replacement
Power Transformer
Power Transformer
S_POW_TFR
S_POW_TFR
Uprating by 20% or more
Mid-life overhaul
Capital
Expense
Enhancement
Repair
Structures
S_STRUCTUR
Replace/refurbish all earthpeaks on
station gantry
Capital
Refurbishment
Surge Arrestors
SUBS_SURG_ARR
Install surge arrestors to protect
existing power transformer from surges
Capital
Development
Synchronous Condenser
S_SYN_COND
Replace evaporative cooling tower
Capital
Refurbishment
Transformer Sound Encl
S_TF_SOUND
Install acoustic noise barriers
Capital
Enhancement
© 2010 - Transpower New Zealand Limited
Rating
Environmental
Performance
33
Issue 2
Updated November 2010
27
APPENDIX 7 – EXPENDITURE CLASSIFICATIONS – MINOR FIXED ASSETS
MINOR FIXED ASSETS
Type of
Expenditure
Plant
Motor
Vehicles
Furniture Equipment
Additions and
extensions
Capitalise
Capitalise
-
-
-
Alterations
Capitalise
Capitalise
-
-
-
Repairs
Expense
Expense
Expense
Expense
Expense
Replacements Of parts less
than $2,000
= Pooled
Asset
(expense).
If greater
than $2,000
consider
capitalising if
improvement
to the total
asset occurs
Of parts less Capitalise Capitalise
than $2,000
= Pooled
Asset
(expense). If
greater than
$2,000
consider
capitalising if
improvement
to the total
asset occurs
© 2010 - Transpower New Zealand Limited
Tools
Capitalise
34
Issue 2
Updated November 2010
28
APPENDIX 8 – EXPENDITURE CLASSIFICATIONS – IST EXPENDITURE
Capital vs. Expense Flowchart
Start
Is it either a significant
enhancement such that
the service potential or
life has increased above
what was expected at
commissioning or a new
piece of equipment?
No
Minor enhancement or
patch update or bug fix
or new report.
Yes
Expense to an
Operational Expenditure.
Account Code
Expense to Computer
Peripherals
Yes
Yes
Is it less than $200?
Account: 552001
EDP/Consumables
Eg: Purchase a mouse
No
Expense to IT Pooled
Asset
Is it a stand alone
asset?
Yes
Is it between $500 &
$2,000
No
No
Capital Project
Capital Asset – MFA
(Minor Fixed Asset)
Asset or assets
constructed or purchase,
there is sufficient
grouping of costs in the
make up of these assets
such that it is more
effective to amalgamate
these costs using a
project code. eg: HRIS
This is a stand alone
asset(s) normally
purchased with no, little
installation costs, no
construction, typically paid
for using one purchase
order.
Yes
Account: 564001
Eg: More memory for a
PC
Eg: Purchase a laptop.
Code to account: 137004
© 2010 - Transpower New Zealand Limited
35