Contingent Liabilities
Contingent liabilities are costs that the Government will have to face if a particular event occurs. Typically, contingent liabilities consist of guarantees and indemnities, legal disputes and claims, and uncalled capital. The contingent liabilities facing the Government are a mixture of operating and balance sheet risks, and they can vary greatly in magnitude and likelihood of realisation.
In general, if a contingent liability were realised it would reduce the operating balance and increase net debt. However, in the case of contingencies for uncalled capital, the negative impact would be restricted to net debt.
Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount shown is the amount claimed and thus the maximum potential cost. It does not represent either an admission that the claim is valid or an estimation of the amount of any award against the Crown.
Only contingent liabilities involving amounts of over $10 million are separately disclosed. Contingent liabilities below $10 million are included in the “other quantifiable contingent liabilities” total.
Contingent liabilities have been stated as at 31 October 2009, being the latest set of contingent liabilities received.
Quantifiable Contingent Liabilities
| Guarantees and indemnities | Status [8] | ($ million) |
|---|---|---|
| Air New Zealand - letters of credit and performance bonds | Changed | 32 |
| Cook Islands – Asian Development Bank loans | Changed | 15 |
| Indemnification of receivers and managers - Terralink Limited | Unchanged | 10 |
| Ministry of Transport - funding guarantee | Unchanged | 10 |
Guarantees and indemnities of SOEs and Crown entities |
Changed | 21 |
| Other guarantees and indemnities | Changed | 12 |
| 100 | ||
Uncalled capital |
||
| Asian Development Bank | Changed | 1,070 |
| Bank for International Settlements | Changed | 27 |
| European Bank for Reconstruction and Development | Changed | 16 |
| International Bank for Reconstruction and Development | Changed | 1,121 |
| Other | Changed | 4 |
| 2,238 | ||
Legal proceedings and disputes |
||
| Health - legal claims | Unchanged | 15 |
| Kapiti West Link Road | Unchanged | 25 |
| Tax in dispute | Changed | 1,655 |
| Other legal claims | Changed | 51 |
| 1,746 | ||
Other quantifiable contingent liabilities |
||
| Air New Zealand partnership | Unchanged | 68 |
| Crown Health Financing Agency | Unchanged | 28 |
| Inland Revenue - unclaimed monies | Unchanged | 46 |
| International finance organisations | Changed | 1,561 |
| Kyoto Protocol Units | Changed | 1,871 |
| New Zealand Export Credit Office - export guarantees | Changed | 175 |
| Reserve Bank - demonetised currency | Unchanged | 23 |
| Other quantifiable contingent liabilities of SOEs and Crown entities | Changed | 80 |
| Other quantifiable contingent liabilities | Changed | 24 |
| 3,876 | ||
| Total quantifiable contingent liabilities | 7,960 |
Notes
- [8]Relative to reporting in the 30 June 2009 Financial Statements of the Government of New Zealand.
