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Note 21: Provisions

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

By type

 
3,492 3,505 Provision for employee entitlements 3,582 3,604
1,169 2,082 Provision for ETS credits 2,028 2,250
797 873 Provision for National Provident Fund guarantee 856 918
Aircraft Lease Return Costs 266 295
1,461 1,916 Other provisions 1,809 1,645
6,919 8,376 Total provisions 8,541 8,712

By longevity

 
3,547 3,794 Expected to be settled within one year 3,932 3,785
3,372 4,582 Expected to be outstanding for more than one year 4,609 4,927
6,919 8,376 Total provisions 8,541 8,712
For the year ended 30 June 2017 Employee
entitlements
$m
ETS
$m
NPF
guarantee
$m
Aircraft
lease
return costs
$m
Opening Provision 3,604 2,250 918 295
Additional Provision 1,835 295 89
Provision Utilised (1,706) (444) (61) (96)
Reversal of previous provision (176) (111) (17)
(Gains) / Losses on NZ Units (73)
Other Movements 25 110 (5)
Closing Provision 3,582 2,028 856 266
For the year ended 30 June 2016 Employee
entitlements
$m
ETS
$m
NPF
guarantee
$m
Aircraft
lease
return costs
$m
Opening Provision 3,533 855 893 253
Additional Provision 1,735 163 -   84
Provision Utilised (1,492)  (271)  (67)  (34)
Reversal of previous provision (172) (27)
(Gains) / Losses on NZ Units 1,503
Other Movements -   119  (8)
Closing Provision 3,604 2,250 918 295

Other liabilities and provisions are recorded at the best estimate of the expenditure required to settle the obligation.  Liabilities and provisions to be settled beyond 12 months are recorded at the present value of their estimated future cash outflows.

Employee entitlements

The provision for employee entitlements represents annual leave, accrued long service leave, 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 applied rise from 1.97% (2016: 2.12%) next year to 4.75% (2016: 4.75%) in later years.

Emissions Trading Scheme

The Emissions Trading Scheme (ETS) was established to encourage a reduction in New Zealand's greenhouse gas emissions. The carbon price used to calculate the ETS provision at 30 June 2017 is $NZ17.20 (2016: $NZ17.75). The ETS provision represents the tradeable NZ units outstanding, that will be accepted by the government as emitters honour the emissions obligations under the ETS. The carbon price used by the Ministry for the Environment is determined by the quoted NZU spot price at the end of the reporting date as published by OM Financial Limited on their website: https://www.commtrade.co.nz

National Provident Fund guarantee

The Government has guaranteed superannuation schemes managed by the National Provident Fund (NPF). Included in the provision is the NPF's DBP Annuitants Scheme unfunded liability position of $856 million (2016: $918 million), represented by a gross estimated pension obligation of $892 million (2016: $955 million) with net investment assets valued at $36 million (2016: $37 million).

Aircraft lease return costs

Where a commitment exists to maintain aircraft held under operating lease arrangements, a provision is made during the lease term for the lease return obligations specified within those lease arrangements. The provision is based upon historical experience, manufacturers' advice and, where appropriate, contractual obligations.

Other provisions

Other provisions are recognised where there is a present obligation, a result of a past event, where it is probable that this obligation will be settled. Other provisions include rehabilitation and restoration provisions.

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