The Treasury

Global Navigation

Personal tools

Provisions and contingencies

Provisions (liability): $6.0 billion

Quantified contingent assets: $0.6 billion

Quantified contingent liabilities: $6.4 billion

Unquantified contingent assets and liabilities: Disclosed in notes to the financial statements


Provisions are liabilities of uncertain timing or amount. As liabilities, provisions are recorded in the balance sheet. The recorded liability is estimated based on the amount of liability which is probable.

Contingent assets and liabilities are not recorded on the balance sheet but must be disclosed separately in the financial statements. They represent:

  • a possible binding obligation dependent on uncertain future events, or
  • a present obligation which cannot be measured with reliability for inclusion on the balance sheet.

Composition - provisions

Provisions over time are shown in Figure 30. It shows:

  • The largest provision is for employee entitlements such as annual and sick leave to which existing public sector employees are entitled.[1]
  • The guarantee of NPF's pension liability is the next largest item.
  • New Zealand's emissions profile and carbon pricing impacts on the Government position under the Kyoto protocol. A provision for a net liability existed over 2005 to 2008, but reversed to an asset position following revised estimates.
  • The most significant recent development in terms of provisioning has been the advent of retail deposit guarantee schemes. On 12 October 2010, the original scheme put in place during the global financial crisis expired. It was replaced with a new one which has tighter eligibility criteria and pricing which better reflects the risk profile of guaranteed financial institutions, expiring on 31 December 2011.

As at 30 June 2010, 73 financial institutions had joined the former scheme with guarantees on deposits totalling $133 billion. This was the Crown's maximum contingent liability and did not include any offset resulting from the recovery of the remaining assets of the financial institution in the event the guarantee is called upon. The provisions for the estimated net losses (after recoveries) for those entities considered more likely than not to default was $748 million as at 30 June 2010. After 30 June 2010, three entities covered by the Crown guarantee (including South Canterbury Finance) defaulted, triggering the Crown's obligation under the guarantee. The Treasury currently expects that the provisions will be adequate to cover the final net cost under the guarantee scheme.

As at 31 October 2010, the Crown determined that no provision was required in relation to its contingent liability under the extended guarantee scheme.

Figure 30 - Provisions, 2003 to 2010
Figure 30 - Provisions, 2003 to 2010.
Source:  The Treasury
Figure 31 - Quantifiable contingent liabilities, 30 June 2010
Figure 31 - Quantifiable contingent liabilities, 30 June 2010.
Source:  The Treasury

Composition - contingencies

Figure 31 shows the quantified contingent liabilities as at 30 June 2010 which total $6.4 billion (excluding the wholesale and retail deposit guarantee schemes). The largest is for international financial organisations such as the Asian Development Bank, which is mostly uncalled capital relating to New Zealand's membership. A contingent liability relating to the Kyoto protocol for forestry units depends on the extent of harvesting and the nature of future international negotiations. The New Zealand Export Credit Office is a commercially-oriented entity which provides guarantees to exporters for trade credit or insurance.

Quantified contingent assets are comparatively small at $572 million as at 30 June 2010, mostly relating to legal proceedings and disputes.


  • [1]Note that obligations under GSF are accounted for separately.
Page top