80 Notes to the FINANCIAL STATEMENTS Notes to the Financial Statements FOR THE YEAR ENDED 31 MARCH 2022 1 CORPORATE INFORMATION The financial statements of Mainfreight Limited (the Parent) and its subsidiaries (the Group') for the year ended 31 March 2022 were authorised for issue in accordance with a resolution of the Directors Mainfreight Limited is a company limited by shares incorporated in New Zealand whose shares are publicly traded on the NZX Main Board (New Zealand Stock Exchange 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation The financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand (NZ CAAP) and the requirements of the Companies Act 1993 and the Financial Markets Conduct Act 2013. The financial statements have been prepared On a historical cost basis, except for land, and derivative financial instruments On a CST exclusive basis, except for receivables and payables that are stated inclusive of CST (b) Statement of Compliance The financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards as appropriate for profit-oriented entities. The financial statements comply with International Financial Reporting Standards (IFRS) (c) Basis of Consolidation The consolidated financial statements comprise the financial statements of Mainfreight Limited and its subsidiaries (the "Group") as at 31 March each year las outlined in note 13) Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary Assets, liabilities income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary Control is achieved when the Group is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee The financial statements of subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies. Income and expenses for each subsidiary whose functional currency is not New Zealand dollars are translated at exchange rates which approximate the rates at the actual dates of the transactions Assets and liabilities of such subsidiaries are translated at exchange rates prevailing at balance date. All resulting exchange differences are recognised in the foreign currency translation reserve which is a separate component of equity In preparing the consolidated financial statements, all inter-company balances and transactions income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full (d) Foreign Currency Translation () Functional and Presentation Currency The presentation currency of the Group is New Zealand dollars ($) and all values are rounded to the nearest thousand dollars 15000) Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency 01) Transactions and Balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date All exchange differences in the consolidated financial statements are taken to the income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment and differences arising on translation of a foreign operation. These are recognised in other comprehensive income and accumulated in reserves until disposal of the net investment at which time they are recognised in profit or loss. On disposal of a foreign operation, the cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. (iii) Hedges of a Net Investment Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for by including the gains or losses on the hedging instrument relating to the effective portion of the hedge directly in equity while any gains or losses relating to the ineffective portion of the hedge are recognised in profit or loss. (e) Changes in Accounting Policies The accounting policies applied in the preparation of the consolidated financial statements are consistent with the prior year. The Group has not early adopted any standards, interpretation or amendment that have been issued but are not yet effective. (f) New Accounting Standards and Interpretations The Group has no new material standards that require adoption in future years. (g) Revenue Recognition In relation to freight transactions, the Group considers its sole performance obligation to be the delivery of freight to the final destination. Ancillary services such as customs clearance are not considered to be separate performance obligations. Instead. together with freight they represent a bundle of performance obligations. The Group considers that the performance obligation is satisfied over time, and so will recognise the related revenue as the performance obligation is satisfied. In relation to domestic transport and warehousing the stage of completion is to be measured relative to cost whereas in relation to air and ocean freight it will be measured relative to time. Judgement is involved in determining the measure of cost and time on which to base the recognition of revenues at each reporting date. Revenue has been disaggregated in note 5 by domestic transport, warehousing and air and ocean forwarding 3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group's principal financial instruments, other than derivatives. comprise bank loans and overdrafts, cash and short-term deposits trade creditors and accruals and trade debtors The main purpose of these financial instruments is to raise finance and provide working capital for the Group's operations The Group also enters into derivative transactions, principally interest rate swaps. The purpose is to manage the interest rate risks arising from the Group's operations and its sources of finance. These are not currently hedge accounted The main risks arising from the Group's financial instruments are cash flow interest rate risk. fair value interest rate risk, liquidity risk foreign currency risk and credit risk. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial assets, financial liabilities and equity instruments are disclosed in notes 2 and 4 to the financial statements and other relevant notes. Cash Flow Interest Rate Risk The Group's exposure to cash flow risk through changes in market interest rates relates primarily to the Group's long-term debt obligations with a floating interest rate. The level of debt is disclosed in note 19. The Group's policy is to manage its interest cost using a mix of fixed and variable rate debt. To manage this mix in a cost efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. With the current low interest rate environment the Board decided not to enter into any swaps at this time. At 31 March 2022 none of the Group's borrowings are at a fixed rate of interest (2021: nil). 1) Identify and explain what accounting policies the company has chosen and what accounting judgements and estimates the company has made in measuring their PPE items and intangibles for the current year with reference to NZ IAS 16 and NZ IAS 38