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Half Year Economic and Fiscal Update 2014

Accounting Policies

The forecast financial statements contained in the published Half Year Economic and Fiscal Update 2014 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) as defined in the Financial Reporting Act 2013.

Forecasts have been prepared in accordance with Public Sector PBE Accounting Standards (PBE Standards). The actual for the 2013/14 year has been prepared in accordance with NZ equivalents to International Financial Reporting Standards as appropriate for public benefit entities (NZ IFRS (PBE)). The impact of moving from NZ IFRS (PBE) to PBE Standards is not significant. This is due to a strong degree of convergence between the two suites of standards.

For the purposes of these forecast financial statements, the government reporting entity has been designated as a public benefit entity (PBE). Public benefit entities (PBEs) are reporting entities whose primary objective is to provide goods or services for community or social benefit and where any equity has been provided with a view to supporting that primary objective rather than for a financial return to equity holders. The forecast financial statements comply with PBE FRS-42: Prospective Financial Statements and NZ GAAP as it relates to prospective financial statements.

Reporting entity

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

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

The description “consolidated financial statements for the Government reporting entity” and the description “financial statements for the Government of New Zealand” have the same meaning and can be used interchangeably.

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, and 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 separately identified.

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 future cash flows, including inflation assumptions and the risk free discount rate used to calculate present values. A further area of uncertainty relates to the estimation of the claims and provisions arising from the Canterbury earthquakes.

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.

Where these judgements significantly affect the amounts recognised in the forecast financial statements they are described below.

Early adoption of standards and interpretations

The New Zealand Accounting Standards Board has issued a new suite of accounting standards (called Public Sector PBE Accounting Standards) that apply to the Financial Statements of Government for the financial year beginning 1 July 2014.

The Government has adopted all Public Sector PBE standards and interpretations issued to date for the 2014/15 year.

Reporting and forecast period

The reporting periods for these Forecast Financial Statements are the years ended 30 June 2015 to 30 June 2019.

The “2014 Actual” figures reported in the statements are the audited results reported in the Financial Statements of Government for the year ended 30 June 2014. The “2015 Previous Budget” figures are the original forecasts to 30 June 2015 as presented in the 2014 Budget.

Where necessary, the financial information for state-owned enterprises and Crown entities that have a balance date other than 30 June has been adjusted for any transactions or events that have occurred since their most recent balance date and that are significant for the Government's financial statements. Such entities are primarily in the education sector.

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