Air New Zealand 2009 Annual Report Download - page 48

27. 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
2009
$M
COMPANY
2008
$M
Operating revenue 83 120
Dividend revenue - 150
Finance costs* (37) (34)
Operating expenditure (378) (462)
Included within Operating expenditure (“Other expenses”) are the following amounts:
Impairment of investment in subsidiaries - (357)
Reversal of impairment of investment in subsidiaries 3 26
Reversal of impairment of related party balances - 241
* Finance costs include finance income of $5 million (30 June 2008: $27 million) and finance costs of $42 million (30 June 2008: $61 million).
During the year the Company has undertaken 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 $358 million was recognised by the Company during the year
(30 June 2008: $343 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 10 and 18. Provisions for doubtful debts of $8 million were held by the Company
against outstanding balances from subsidiaries (30 June 2008: $640 million). During the year ended 30 June 2009, the Company forgave a related
party debenture and loan of $632 million from Air New Zealand Australia Pty Limited. The amounts had been fully provided for in prior years.
On transition to NZ IFRS, the Company recognised a provision for impairment on a related party balance owing for Air New Zealand Aircraft
Holdings Limited (a wholly owned subsidiary). 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. During the year ended 30 June 2008,
the Company contributed share capital of $425 million to Air New Zealand Aircraft Holdings Limited. The capitalisation enabled the reversal of the
impairment of the related party receivable ($227 million). The investment in the subsidiary was assessed for impairment as at balance date using a value
in use model. For the year ended 30 June 2008 a provision for impairment of $357 million was recognised. No additional impairment was required as at
30 June 2009. The discount rate applied in the value in use model as at 30 June 2009 was 7.5% (30 June 2008: 6.5%).
In the year ended 30 June 2008, a provision for impairment 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 discount rate applied in the value in use model as at 30 June 2009
was 8.0% (30 June 2008: 8.0%).
In the year ended 30 June 2009, provisions for impairment of investments in subsidiaries were reversed upon settlement of intercompany loans.
The Company has provided guarantees of financial indebtedness to Air New Zealand Aircraft Holdings Limited (refer to Note 25).
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
AIR NEW ZEALAND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AS AT 30 JUNE 2009
46