Statement of Accounting Policies
for the year ended 30 June 2010
Reporting Entity
These non-departmental schedules and statements present financial information on public funds managed by the Treasury on behalf of the Crown.
These non-departmental balances are consolidated into the Financial Statements of the Government for the year ended 30 June 2010. For a full understanding of the Crown's financial position, results of operations and cash flows for the year, refer to the Financial Statements of the Government.
Basis of Preparation
The non-departmental schedules and statements have been prepared in accordance with the accounting policies of the Financial Statements of the Government, Treasury Instructions and Treasury Circulars.
Measurement and recognition rules applied in the preparation of these non-departmental supplementary financial schedules are consistent with NZ GAAP and Crown accounting policies and are detailed in the Financial Statements of the Government.
The financial information reported in these schedules is consolidated into the Financial Statements of the Government, and therefore readers of these schedules should also refer to the Financial Statements of the Government for the year ended 30 June 2010.
Significant Accounting Policies
Foreign exchange
Foreign exchange transactions are translated into New Zealand dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the schedule of non-departmental income or expenses.
Goods and services tax
All items in the financial statements, including appropriation statements, are stated exclusive of GST. In accordance with Treasury Instructions, GST is returned on revenue received on behalf of the Crown, where applicable. However, an input tax deduction is not claimed on non-departmental expenditure. Instead, the amount of GST applicable to non-departmental expenditure is recognised as a separate expense and eliminated against GST revenue on consolidation of the Financial Statements of the Government.
Commitments
Future expenses and liabilities to be incurred on non-cancellable contracts that have been entered into at balance date are disclosed as commitments to the extent that they are equally unperformed obligations.
Change in Accounting Policies and Comparatives
Fair value movements have been disclosed separately in the Schedule of Revenue in 2009/10 (page 108) to comply with NZ IFRS 7. In previous years, this movement has not been disclosed separately. The 2008/09 comparatives have been restated to separately disclose the movement in fair value for that financial year.
Subsequent Events
Subsequent to 30 June 2010 receivers have been appointed to three of the companies that had been included within the provision for net costs to the Crown: Mutual Finance Limited on 14 July 2010, Allied Nationwide Finance on 20 August 2010 and South Canterbury Finance Limited on 31 August 2010. Appointment of receivers to the companies triggered the Crown guarantee under the deposit scheme.
The net cost to the Crown of the defaults of these three companies is expected to be approximately $745 million including the costs of discounting cash flows to present values. The Crown recognised the inherent risk of these entities and provided $728 million for the net cost of their failure within the 2009 annual accounts. The additional $17 million net cost to the Crown currently estimated had been fully provided for during the year, and is included within the total provision of $748 million. There is no material impact on the provision for the net costs to the Crown as a result of the receiverships.
