Note 32: Contingent Liabilities and Contingent Assets
| Actual | ||
|---|---|---|
|
30 June 2009 $m |
30 June 2008 $m |
|
Quantifiable Contingent Liabilities |
||
Guarantees and indemnities |
||
| Air New Zealand - letters of credit and performance bonds | 37 | 21 |
| Cook Islands - Asian Development Bank loans | 16 | 14 |
| Indemnification of receivers and managers - Terralink Limited | 10 | 10 |
| Ministry of Transport - funding guarantee | 10 | 10 |
| Other guarantees and indemnities | 23 | 231 |
| Total guarantees and indemnities | 96 | 286 |
Uncalled capital |
||
| International Bank for Reconstruction and Development | 1,256 | 1,077 |
| Asian Development Bank | 1,198 | 1,081 |
| Bank for International Settlements | 29 | 26 |
| European Bank for Reconstruction and Development | 15 | 14 |
| Other uncalled capital | 8 | 7 |
| Total uncalled capital | 2,506 | 2,205 |
Legal proceedings and disputes |
||
| Tax disputes | 1,661 | 249 |
| Kapiti West Link Road | 25 | - |
| Health - legal claims | 15 | 39 |
| Other legal proceedings and disputes | 53 | 95 |
| Total legal proceedings and disputes | 1,754 | 383 |
Other contingent liabilities |
||
| Kyoto Protocol Units | 1,995 | - |
| International finance organisations | 1,762 | 1,727 |
| New Zealand Export Credit Office | 155 | 37 |
| Air New Zealand partnership | 68 | 39 |
| Inland Revenue Department - unclaimed monies | 46 | 42 |
| Crown Health Financing Agency | 28 | 30 |
| Reserve Bank - demonetised currency | 23 | 23 |
| Other contingent liabilities | 56 | 97 |
| Total other contingent liabilities | 4,133 | 1,995 |
| Total quantifiable contingent liabilities | 8,489 | 4,869 |
Total Quantifiable Contingent Liabilities by Segment |
||
| Core Crown | 8,287 | 4,685 |
| Crown entities | 90 | 86 |
| State-owned Enterprises | 112 | 98 |
| Inter-segment eliminations | - | - |
| Total quantifiable contingent liabilities | 8,489 | 4,869 |
Quantifiable Contingent Assets |
||
| Suspensory loans to integrated schools | 74 | 77 |
| Legal proceedings and disputes | 1,502 | 307 |
| Other contingent assets | 6 | 5 |
| Total quantifiable contingent assets | 1,582 | 389 |
Contingent liabilities are costs that the Crown 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 Crown 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 was realised it would reduce the operating balance and net worth and increase gross sovereign-issued debt. However, in the case of contingencies for uncalled capital, the negative impact would be restricted to gross sovereign-issued 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.
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 Public Finance Act 1989 are disclosed in accordance with Section 26Q(3)(b)(i)(B) of the same Act.
Air New Zealand - Letters of credit and performance bonds
The letters of credit are primarily given in relation to passenger charges, airport landing charges and indemnities provided to financial institutions on limits provided on staff credit cards. The performance bonds are primarily given in respect to Engineering contracts.
$37 million at 30 June 2009 ($21 million at 30 June 2008)
Cook Islands - Asian Development Bank (ADB) loans
Before 1992, the New Zealand Government guaranteed the Cook Islands' borrowing from the ADB. These guarantees have first call on New Zealand's Official Development Assistance.
$16 million at 30 June 2009 ($14 million at 30 June 2008)
Indemnification of receivers and managers - Terralink Limited
The Crown has issued a Deed of Receivership indemnity to the appointed receivers of Terralink Limited against claims arising from the conduct of the receivership.
$10 million at 30 June 2009 ($10 million at 30 June 2008)
Ministry of Transport - funding guarantee
The Minister of Finance has issued a guarantee of $10 million to the Transport Accident Investigation Commission. The guarantee allows the Commission to assure payment to suppliers of specialist salvage equipment in the event of the Commission initiating an urgent investigation of any future significant transport accident.
$10 million at 30 June 2009 ($10 million at 30 June 2008)
