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Note 17: Equity Accounted Investments

2016 Forecast Actual
Budget
2016
$m
Budget
2017
$m
30 June
2017
$m
30 June
2016
$m
10,128 12,022 Tertiary Education Institutions 11,972 10,669
1,306 1,415 Kaingaroa Timberlands Partnership 1,593 1,396
1,017 929 Other 645 640
12,451 14,366 Total equity accounted investments 14,210 12,705

NZ GAAP determines the combination bases for entities that make up the Government reporting entity and is used by public benefit entities to determine whether they control another entity.

The Treasury's view is that because the Government cannot determine their operating and financing policies, but does have a number of powers in relation to these entities, it is appropriate to treat them as associates.

Tertiary Education Institutions (TEIs)

TEIs are Crown entities, and the Government has a number of legislative powers with respect to them in the interests of public accountability and has some significant reserve controls in the event of an institution facing financial risk. However, the Government does not determine the operating and financing policies of TEIs, if they are not at financial risk, but rather is committed to safeguarding their academic freedom and autonomy. By so doing, the Government obtains the benefits of an effective tertiary education sector. Their relationship to the Crown is managed by a plan agreed between them and the Tertiary Education Commission.

The applicability of the test for consolidation in accounting standards as it applies to TEIs and the Government is unclear. While new control standards have been issued by the relevant accounting authorities, they are not applicable until the 2019/20 financial year. In the interim the TEIs have been included in the accounts as a 100% equity accounted investment.

Summarised financial information in respect of TEIs is set out below:

2016 Forecast Actual
Budget
2016
$m
Budget
2017
$m
30 June
2017
$m
30 June
2016
$m

Operating Results

 
2,379 2,380 Revenue from Crown 2,349 2,308
2,537 2,761 Other revenue 2,844 2,683
(4,728) (4,967) Expenses (4,955) (4,857)
188 174 Net surplus 238 134

Assets

 
1,792 2,324 Financial assets 1,833 2,221
9,644 10,956 Property, plant and equipment 11,044 9,673
650 1,146 Other assets 1,324 1,036
12,086 14,426 Total assets 14,201 12,930

Liabilities

 
230 501 Borrowings 449 426
1,728 1,903 Other liabilities 1,780 1,835
1,958 2,404 Total liabilities 2,229 2,261
10,128 12,022 Net worth 11,972 10,669

Kaingaroa Timberlands Partnership

The New Zealand Superannuation Funds has a 42% ownership interest (2016 42%) in Kaingaroa Timberlands Partnership (KTP). For the year ended 30 June 2017, KTP recognised revenue of $457 million (2016: 357 million), profit of $688 million (2016: 524 million), assets of $4,055 million (2016 $3,612 million), liabilities of $30 million (2016: $51 million) and equity of $4,026 million (2016 $3,561 million).

New Zealand Local Government Funding Agency (NZLGFA)

The Government holds $5 million of the $25 million paid-up capital of NZLGFA.

For the year ended 30 June 2017, NZLGFA recognised revenue of $321 million (2016: $278 million) and a surplus of $11 million (2016: $10 million). NZLGFA's assets and liabilities were $8,478 million (2016: $6,669 million) and $8,424 million (2016: $6,625 million) respectively. The Crown's share of the net assets is $11 million (2016: $9 million). The Crown is not a guarantor of the NZLGFA and has no share of any contingent liabilities of the NZLGFA.

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