Air New Zealand 2008 Annual Report Download - page 46

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AIR NEW ZEALAND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AS AT 30 JUNE 2008
26. RELATED PARTIES (CONTINUED)
Transactions between the Company and its subsidiary or associated companies
Subsidiaries
During the year there have been transactions between the Company and its subsidiaries as follows:
COMPANY
2008
$M
COMPANY
2007
$M
Operating revenue 120 139
Finance costs* (34) (27)
Operating expenditure (462) (364)
Included within Operating expenditure (“Other expenses”) are the following amounts:
Impairment of investment in subsidiaries (357) (13)
Reversal of impairment of investment in subsidiaries 26 -
Impairment of related party balances - (4)
Reversal of impairment of related party balances 241 56
* Finance costs include finance income of $27 million (30 June 2007: $23 million) and finance costs of $61 million (30 June 2007: $50 million).
The Company has entered into finance and operating lease arrangements with its wholly owned subsidiaries, Air New Zealand Aircraft Holdings Limited
and Zeal 320 Limited, relating to its aircraft. Lease expense of $343 million was recognised by the Company during the year (30 June 2007:
$377 million).
Related party balances have no fixed settlement dates. Certain balances are non interest bearing and the remainder are subject to interest at current
floating rates. For balances outstanding at year end refer to notes 9 and 17. Provisions for doubtful debts of $569 million were held by the Company
against outstanding balances from subsidiaries (30 June 2007: $810 million).
On transition to NZ IFRS, the Company recognised a provision for impairment on a related party balance owing from Air New Zealand Aircraft Holdings
Limited (a wholly owned subsidiary) of $282 million. The impairment reflected the write-down of aircraft values arising from the application of the
deemed cost exemption and the move to a balance sheet approach in respect of accounting for deferred taxation. In the year ended 30 June 2007,
the provision reversed by $55 million due to operating profits and favourable movements in foreign exchange rates. During the year ended 30 June
2008, the Company contributed share capital of $425 million to Air New Zealand Aircraft Holdings Limited which enabled the reversal of the remaining
impairment of the related party receivable ($227 million). The investment was assessed for impairment at balance date using a value in use model, and a
provision for impairment of $357 million was recognised.
In the year ended 30 June 2008, a provision for impairment of investment in a wholly owned subsidiary, ANNZES Engines Christchurch Limited, of
$26 million was reversed. The reversal was supported by the results of a value in use model.
The Group has a set-off arrangement on certain Bank of New Zealand balances, allowing the offset of overdraft amounts against in-fund amounts.
Interest is earned (or accrued) by Air New Zealand Limited based on the net position across the Group. This interest is not allocated to subsidiary
companies. The following entities are included in the set-off arrangement:
Air Nelson Limited
Air New Zealand Holidays Limited
Air New Zealand Limited
Eagle Airways Limited
Zeal 320 Limited
Mount Cook Airlines Limited
Safe Air Limited
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