Overview (continued)
Goodwill
Goodwill in relation to Air New Zealand ($258 million) has been tested for impairment at June 2009 based on a value in use discounted cash flow valuation. Cash flow forecasts were prepared for five years using the Air New Zealand Board reviewed business plans. Key assumptions include exchange rates, jet fuel costs, passenger load factors and route yields. These assumptions have been based on historical data and current market information. The cash flow forecasts are particularly sensitive to fluctuations in fuel prices and exchange rates and are extrapolated using an average growth rate of approximately 2%. The cash flow projections are discounted using post-tax discount rate scenarios of 8.8% to 9.6%. The valuation confirmed that there was no impairment required to the goodwill asset.
Government Superannuation Fund (GSF) Unfunded Liabilities
The Government operates a defined benefit superannuation plan for qualifying employees who are members of the GSF. The members' entitlements are defined in the Government Superannuation Fund Act 1956. Members make regular payments to GSF and in return, on retirement, receive a defined level of income. GSF is closed to employees who were not members at 1 July 1992.
The GSF obligation has been calculated by the Government Actuary as at 30 June 2009. A Projected Unit Credit Method, based on balance-date membership data, is used for the valuation. This method requires the benefits payable from GSF in respect of past service to be estimated and then discounted back to the valuation date.
GSF unfunded liability as at 30 June 2009 was $8,988 million (page 99), an increase of $732 million compared with 30 June 2008. This is primarily owing to:
- an actuarial loss recognised in the year (page 92) of $695 million owing to movements in the economic assumptions used in calculating the liability
- contributions made by the Crown against the liability (including taxation) during 2008/09 of $923 million, and
- this has been partially offset by an increase in the additional current service costs and interest expenses (appropriated under Other Expenses to be Incurred by the Crown - GSF Unfunded Liability) (page 93) of $961 million.
The Government expects to make a contribution of $648 million to GSF in the year ended 30 June 2010.
In addition to its obligations to past and present employees, because GSF is liable to income tax under section HJ 1 of the Income Tax Act 2004, the Crown will be required to make additional contributions equivalent to the tax on future investment income. Additional detailed note disclosures required under NZ GAAP for this liability are included in the Financial Statements of the Government.
International Financial Institutions
Contributions of $274 million were made to the IMF for the Financial Transaction Plan lending programme in 2008/09 (page 94) compared with a contribution of $1 million in the 2007/08 year. This reflects the cyclical nature of the IMF lending programme and response by the IMF to the international financial crisis.
Landcorp Protected Land Agreement
The capital expenditure in relation to the Landcorp Protected Land Agreement for 2008/09 was $26 million (page 94) made up of the Crown's ongoing purchase of redeemable preference shares in payment for land transferred into the Protected Land Agreement in 2007/08 of $13 million and $13 million payment for the inclusion of a new farm agreement. Expenditure of $64 million in 2007/08 was for the initial purchase of redeemable preference shares in Landcorp.
Maui Gas Contract
The Crown's revenues from Maui Gas contracts have decreased by $26 million as a result of reduced gas drawn and the contract expiring on 30 June 2009. The decrease in revenues is offset by a reduction in Other Expenses Incurred by the Crown for Maui Gas Contracts of $29 million (page 96).
National Provident Fund (NPF) Defined Benefit Plan (Annuitants) Scheme Provision
The Government has guaranteed superannuation schemes managed by the National Provident Fund (NPF). As at 30 June 2009 the NPF's DBP Annuitants' Scheme was in a net deficit position of $947 million (2008: $907 million), represented by a gross estimated pension obligation of $994 million (2008: $1,020 million) with net investment assets valued at $47 million (2008: $113 million). No additional provision was required in the year for other pension schemes managed by NPF under the Government's guarantee under section 60 of the National Provident Fund Restructuring Act 1990.
The increase in the Crown's liability for the NPF DBP(A) Scheme under Crown guarantee as at 30 June 2009 was primarily owing to:
- the unwinding of the interest expense (appropriated under Other Expenses to be Incurred by the Crown - NPF Schemes - Liability under Crown Guarantee (page 93) of $71 million
- payments made against the liability by the Crown during the year $9 million, and
offset by:
- the actuarial gain recognised for the year (page 96) of $22 million resulting from movements in the economic assumptions used in calculating the provision.
Additional detailed note disclosures required under NZ GAAP are included in the Financial Statements of the Government for this liability.
National Provident Fund (NPF) - Crown Liability for Scheme Deficiency
The Crown is liable for the deficiency in the accounts of NPF schemes established pursuant to section 38A(6) of the National Provident Fund Act 1950, authorised by section 72 of the National Provident Fund Restructuring Act 1990. There was a call against this appropriation for 2008/09 of $34 million to 31 March 2009 and a provision of $7 million for the three months to 30 June 2009 (page 93). There was no expenditure in 2007/08.
New Zealand Debt Management Office (NZDMO) Interest from Investments and Other Income
NZDMO's interest from investments decreased by $373 million primarily owing to lower interest rates and changes in investment activity levels.
NZDMO's other income decreased by $130 million primarily owing to reduced interest income on lending to Housing New Zealand Corporation as interest rates have fallen, and negative fair value revaluations on Crown lending to the Reserve Bank of New Zealand.
Other Expenses - NZDMO
Fair value adjustments on derivatives are disclosed as remeasurements within Other Expenses - NZDMO. These have decreased by $495 million from the 2007/08 year owing primarily to the impact of interest rate movements on the fair value of derivatives.
Other Current Revenue
Other current revenue has increased by $52 million in 2008/09. This primarily relates to gain on sale of investments and estimated recovery of government guarantee payments.
Port Nicholson Block Settlement Trust Loan
This loan of $15 million (page 94) to the Port Nicholson Block Settlement Trust was for the purchase of properties at Shelly Bay, Wellington.
Reserve Bank Surplus
The Reserve Bank's “notional surplus income” payable to the Crown decreased from $193 million to $168 million. The notional surplus income is calculated under section 158 of the Reserve Bank Act 1989. This calculation excludes unrealised gains and losses. As foreign currency loans do not mature on a regular basis, the amount of notional surplus income will vary from year to year, often quite substantially (page 96).
