Asset Valuation

Under subpart 4 of Part 4A (now repealed) of the Commerce Act 1986, the Commission was required to carry out a comprehensive audit of the valuation of the line businesses' system fixed assets. The aim of the comprehensive audits was to ensure valuations reflected a rigorous and accurate application of the ODV method, as set out in the fourth edition of the ODV Handbook (at the time administered by MED).

The audit was a two-step process: an initial assessment of reports by the Commission in late January 2002 (and approval of reports where appropriate); and a further opportunity for businesses to undertake additional work and submit a revised valuation report (considered by the Commission in late March 2002).

Initial valuation reports were considered by the Commission in late January 2002, at which time 8 reports were approved. The remaining 21 lines businesses then had an opportunity, in consultation with the Commission, to submit revised valuation reports, which have been the focus of the Commission's latest decisions.

The Commission indicated in February 2002 it was in the process of auditing Transpower's valuation report to a different timetable to the other lines businesses. The Commission has since completed that audit and approved Transpower's valuation report. By April 2002 the Commission completed its statutory requirement to complete a comprehensive audit of the asset valuations of the 29 lines businesses (including Transpower).

The Commission considers that asset valuations may be relevant to the targeted control and information disclosure regimes under Part 4A, such as during an inquiry by the Commission following a breach of the thresholds set by the Commission, or in the event that the Commission imposes control on a lines business. For lines businesses, the asset base predominantly comprises their system fixed assets.

In addition to being relevant under the Commission's information disclosure regime, asset valuations may be relevant to the targeted control regime, such as during a post-breach inquiry following a breach of the thresholds set by the Commission, or in the event that the Commission imposes control on a lines business.