Statement of contingent liabilities
Quantified contingent liabilities
Guarantees and indemnities
Guarantees and indemnities are disclosed in accordance with NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets. In addition, guarantees given under Section 65ZD of the PFA are disclosed in accordance with Section 26Q(3)(b)(i)(B) of the same Act.
Legal proceedings and disputes
The amounts under quantifiable contingent liabilities for legal proceedings and disputes are shown exclusive of any interest and costs that may be claimed if these cases were decided against the Crown.
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 possible amount of any award against the Crown.
Tax in dispute
Tax in dispute represents the outstanding debt of those tax assessments raised, against which an objection has been lodged and legal action is proceeding. When a taxpayer disagrees with an assessment issued following the dispute process, the taxpayer may challenge that decision by filing proceedings with the Taxation Review Authority or the High Court.
$301 million at 31 October 2010 ($295 million at 30 June 2010)
Other quantifiable contingent liabilities
International finance organisations
The Crown has lodged promissory notes with the IMF. Payment of the notes depends upon the operation of the rules of the organisation.
$1,501 million at 31 October 2010 ($1,529 million at 30 June 2010)
Kyoto protocol
The Ministry of Agriculture and Forestry has a liability on behalf of the Crown relating to the 84 million forestry credits. During the first commitment period, the Ministry estimates that 89.1 million tonnes of credits will be generated by carbon removals via forests (2010: 89.1 million tonnes). Of this amount, 5.1 million tonnes has been allocated to foresters through the ETS as at 31 October 2010. To the extent that these forests are harvested (in subsequent commitment periods) and a future international agreement is negotiated, there will be an associated liability generated that will need to be repaid. As the forestry credits have been incorporated when calculating the current position for the first commitment period, the associated obligation of the Crown in respect of future commitment periods has been reported as a separate contingent liability. Using the carbon price as at 31 October 2010 of $NZ19.83, this contingent liability can be measured at $NZ1,665 million ($1,590 million at 30 June 2010)
New Zealand Export Credit Office (NZECO) - export guarantees
NZECO provides a range of guarantee products to assist New Zealand exporters. These NZECO guarantees are recorded by the Crown as contingent liabilities.
$105 million at 31 October 2010 ($133 million at 30 June 2010)
