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Accounting Policies

The forecast financial statements contained in the published Budget Economic and Fiscal Update 2010 are based on the following accounting policies.

Statement of Compliance

These forecast financial statements have been prepared in accordance with the Public Finance Act 1989 and with New Zealand Generally Accepted Accounting Practice (NZ GAAP). The accounting policies applied in the statements are the same as those applied in the audited, actual financial statements of the Government for the year ended 30 June 2009.

For the purposes of these forecast financial statements, the government reporting entity has been designated as a public benefit entity. The forecast financial statements comply with FRS-42: Prospective Financial Statements and NZ GAAP as it relates to prospective financial statements.

Reporting Entity

The Government reporting entity is defined in section 2(1) of the Public Finance Act 1989 as:

  • the Sovereign in right of New Zealand, and
  • the legislative, executive, and judicial branches of the Government of New Zealand.

Basis of Preparation

These forecast financial statements have been prepared on the basis of historic cost modified by the revaluation of certain assets and liabilities.

The statements are prepared on an accrual basis, unless otherwise specified (for example, the Statement of Cash Flows).

The forecast financial statements are presented in New Zealand dollars rounded to the nearest million, unless otherwise specified.

Judgements and Estimations

The preparation of these forecast financial statements requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. For example, the present value of large cash flows that are predicted to occur a long time into the future, as with the settlement of ACC outstanding claim obligations and Government Superannuation retirement benefits, depends critically on judgements regarding the time value of money, the risk free rate and inflation assumptions. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

More details on these judgements and estimations are available in the Financial Statements of the Government of New Zealand for the year ended 30 June 2009.

Standards and Interpretations Issued But Not Yet Effective

The Government elected to early adopt all NZ IFRSs and Interpretations that had been approved by the New Zealand Accounting Standards Review Board as at 30 June 2009 that are not yet applicable, except:

  • NZ IFRS 7: Financial Instruments: Disclosures (revised) approved by the Accounting Standards Review Board in March 2009. NZ IFRS 7: Financial Instruments: Disclosures (revised) becomes effective for periods commencing on or after 1 January 2009, and results in presentation changes only.

The early adoption of this standard and interpretation would not have a material impact on the forecast financial statements.

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