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Note 27:  Provisions

Note 27: Provisions
Forecast Actual
Original
Budget
$m 		Estimated
Actuals
$m 		30 June 2010
$m 		30 June 2009
$m

By type

 
2,369 2,522 Provision for employee entitlements 2,836 2,580
173 93 Provision for ETS credits 74 17
-  875 Provision for future retail deposit guarantee scheme payments 748 831
919 922 Provision for National Provident Fund guarantee 1,007 954
1,018 1,087 Other provisions 1,319 1,171
4,479 5,499 Total provisions 5,984 5,553

By source

 
2,231 3,059 Core Crown 3,424 3,081
1,496 1,612 Crown entities 1,695 1,598
798 876 State-owned enterprises 925 919
(46) (48) Inter-segment eliminations (60) (45)
4,479 5,499 Total provisions 5,984 5,553

By maturity

 
1,989 2,200 Expected to be settled within one year 2,741 2,650
2,490 3,299 Expected to be outstanding for more than one year 3,243 2,903
4,479 5,499 Total provisions 5,984 5,553

Provision for employee entitlements

 
Opening provision 2,580 2,220
Additional provisions recognised 1,872 1,568
Provision used during the period (1,387) (1,163)
Reversal of previous provision (228) (74)
Unwind of discount rate (1) 29
Closing provision 2,836 2,580

The provision for employee entitlements represents annual leave, accrued long service leave and retiring leave, and sick leave entitlements accrued by employees. Probability assumptions about continued future service affecting entitlements accrued as at reporting date have been made using previous employment data. For entitlements that vest over a period exceeding one year discount rates between 3% and 6% have been used.

Note 27: Provisions (continued)

Actual
30 June 2010
$m 		30 June 2009
$m

Provision for ETS credits

 
Opening provision 17 - 
New provision recognised during the period 80 17
Provision used during the period (23) - 
Closing provision 74 17

The Emissions Trading Scheme (ETS) was established to encourage a reduction in New Zealand's greenhouse gas emissions. The ETS creates a limited number of tradable units (the NZ Unit) which the Government can allocate freely or sell to entities. The allocation of NZ Units creates a provision (and an expense if allocated for free). An expense is recognised in relation to the allocation of free units on the receipt of a complete application that meets the established criteria. The provision is reduced, and revenue recognised, as NZ Unit are surrendered to the Crown by emitters. Emitters can also use international Kyoto units to settle their emission obligation.

The Government has adopted a phased approach for sectoral entry in the ETS. As at 30 June 2010 only the forestry sector had entered into the Scheme.

Note 27: Provisions (continued)
Actual
30 June 2010
$m 		30 June 2009
$m

Provision for future retail deposit guarantee scheme payments

 
Opening provision 831 - 
New provision recognised during the period -  831
Provision used during the period (47) - 
Reversal of previous provision (36) - 
Closing provision 748 831

Refer to note 30 for discussion on the Deposit Guarantee schemes.

Note 27: Provisions (continued)

Actual
30 June 2010
$m 		30 June 2009
$m

Provision for National Provident Fund guarantee

 
Opening provision 954 907
Additional provisions recognised 28 6
Provision used during the period (77) (9)
Reversal of previous provision (6) - 
Unwind of discount rate and effect of changes in discount rate 108 50
Closing provision 1,007 954

The Government has guaranteed superannuation schemes managed by the National Provident Fund (NPF) (refer to note 32 for details of the guarantee). Included in the provision is the NPF's DBP Annuitants' Scheme deficit position of $1,003 million (2009: $947 million), represented by a gross estimated pension obligation of $1,053 million (2009: $994 million) with net investment assets valued at $50 million (2009: $47 million).

Note 27: Provisions (continued)
Actual
30 June 2010
$m 		30 June 2009
$m

Other provisions

 
Opening provision 1,171 1,064
Additional provisions recognised 524 386
Provision used during the period (385) (273)
Reversal of previous provision (14) (13)
Unwind of discount rate and effect of changes in discount rate 23 7
Closing provision 1,319 1,171
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