Description of Contingent Liabilities
Quantifiable contingent liabilities over $100 million
Uncalled capital
As part of the Crown's commitment to a multilateral approach to ensure global financial and economic stability, New Zealand, as a member country of the organisations listed below, contributes capital by subscribing to shares in certain institutions.
The capital (when called) is typically used to raise additional funding for loans to member countries, or in the case of the quota contributions, to directly finance lending to members. For New Zealand and other donor countries, capital contributions comprise both “paid in” capital and “callable capital or promissory notes”.
The Crown's uncalled capital subscriptions are as follows:
Asian Development Bank
$2,904 million at 31 October 2012 ($2,988 million at 30 June 2012)
International Bank for Reconstruction and Development
$999 million at 31 October 2012 ($1,039 million at 30 June 2012)
International Monetary Fund - arrangements to borrow
$1,051 million at 31 October 2012 ($1,081 million at 30 June 2012)
International Monetary Fund - promissory notes
$1,141 million at 31 October 2012 ($1,174 million at 30 June 2012)
Legal proceedings and disputes
Tax in dispute
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. The contingent liability represents the outstanding debt of tax assessments raised against which an objection has been lodged and legal action is proceeding.
$398 million at 31 October 2012 ($365 million at 30 June 2012)
Other quantifiable contingent liabilities
Kyoto Protocol
The Government has a contingent liability relating to 57.6 million forestry credits. During the first commitment period, the Net Kyoto Position of the Crown estimates that 92.2 million tonnes of carbon credits will be generated by carbon removals via forests. To the extent that these forests are harvested in subsequent commitment periods there will be an associated liability generated that will need to be repaid. The New Zealand ETS transfers a portion of the potential future liability to forest owners. As at 31 October 2012 approximately 34.6 million tonnes has been transferred to forest owners in the form of New Zealand Units. The Crown's contingent liability is calculated as the remaining credits the Crown is potentially liable for (57.6 million tonnes). Using the carbon price as at 31 October 2012, this contingent liability can be measured at $100 million.
$100 million at 31 October 2012 ($349 million at 30 June 2012)
