Notes to the Financial Statements

for the year ended 30 June 2009

1 - Statement of Accounting Policies

Reporting entity

The Treasury is a government department (the Department) as defined by section 2 of the Public Finance Act 1989 and is domiciled in New Zealand.

In addition, the Department has reported on Crown activities and trust monies which it administers.

The primary objective of the Department is to provide services to the public rather than making a financial return. Accordingly, the Department has designated itself as a public benefit entity for the purposes of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

The financial statements of the Department are for the year ended 30 June 2009. The financial statements were authorised for issue by the Secretary to the Treasury on 30 September 2009.

Basis of preparation

These financial statements have been prepared in accordance with, and comply with, NZ IFRS and other Financial Reporting Standards, as appropriate for public benefit entities.

The financial statements have been prepared on a historical cost basis.

The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of the Department is New Zealand dollars.

Standards, amendments and interpretations that are not yet effective and have not been early adopted

The Treasury has elected to early adopt all NZ IFRSs and Interpretations that had been approved by the New Zealand Accounting Standards Review Board as at 30 June 2009 that are not yet applicable, except NZ IAS 1: Presentation of Financial Statements (revised) approved by the Accounting Standards Review Board in November 2007. This Standard becomes effective for periods commencing on or after 1 January 2009, and was adopted in the forecast financial statements presented with the 2009 Budget, but not those presented with the 2008 Budget, against which these financial statements are compared. The adoption of NZ IAS 1: Presentation of Financial Statements (revised) results in presentation changes only.

The early adoption of these standards did not have a material impact on the financial statements.

Revenue

Revenue is measured at the fair value of consideration received.

Revenue Crown

Revenue earned from the supply of outputs to the Crown is recognised as revenue when earned.

State Sector Retirement Superannuation and KiwiSaver Schemes revenue

This revenue included reimbursements by SSC for contributions made by the Department to the State Sector Retirement Superannuation Scheme and the KiwiSaver Scheme, and tax credits for contributions to KiwiSaver received from IRD.

Rental income

Lease receipts under an operating sub-lease have been recognised as income on a straight line basis over the lease term.

Sale of publications

Sale of publications is recognised when the product is sold to the customer. The recorded revenue is the gross amount of the sale.

Capital charge

The capital charge is recognised as an expense in the period to which the charge relates.

Operating lease

The Department leased office premises during the year ending 30 June 2009. Substantially all the risks and benefits of ownership were retained by the lessor, and therefore these leases are classified as operating leases. Operating lease costs are written off to the Statement of Financial Performance over the period of the lease.

Financial instruments

Financial assets and financial liabilities are initially measured at fair value plus transaction costs unless they are carried at fair value through profit and loss in which case the transaction costs are recognised in the Statement of Financial Performance.

Financial instruments primarily comprise cash and bank balances, accounts receivable and payables. All financial instruments are recognised in the Statement of Financial Position at cost. Revenues and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance.

Cash and cash equivalents

Cash includes cash on hand and funds on deposits with banks.

Debtors and other receivables

Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate, less impairment charges.

Impairment of a receivable is established when there is objective evidence that the Department will not be able to collect amounts due according to the original terms of the receivable.

Property, plant and equipment

Property, plant and equipment consists of leasehold improvements, computer hardware, furniture and fittings and office equipment.

Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. All computer equipment assets costing over $1,000 and all other assets costing more than $5,000 are capitalised.

Additions

The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to the Department and the cost of the item can be measured reliably.

Disposals

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses are recorded in the Statement of Financial Performance.

Subsequent costs

Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to the Department and the cost of the item can be measured reliably.

Depreciation

Depreciation of property, plant and equipment is provided on a straight line basis so as to allocate the cost of property, plant and equipment, less their estimated residual values, over their estimated useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows:

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter.

The residual value and useful life of an asset is reviewed, and adjusted if applicable, at each financial year end.