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A Guide to the Public Finance Act (2005)

Appendix 1 Examples

This appendix provides some examples of transactions and events and indicates the type of appropriation required, if any.

Transaction or event Appropriation required? Yes/No Explanation
Payment of GST on purchases No GST is not an expense and therefore does not require appropriation. Authority to pay GST is provided by section 6(b).
Purchase of a departmental asset Yes – but refer s24 The purchase of a departmental asset is capital expenditure. Capital expenditure must not be incurred unless it is in accordance with appropriation or statutory authority. The purchase or development of assets does not require annual appropriation, if the expenditure is funded by the proceeds of sale or disposal of the department’s assets or from working capital (section 24(1)).
Cash settlement of an existing liability No Cash settlement of a liability does not involve the creation of an expense – this occurs when a liability is created or increased. Hence no appropriation is required. Authority to settle existing liabilities is provided by sections 6(d) and 24(2).
Capital contribution to a department No A capital contribution to a department does not result in the incurrence of an expense or a capital expenditure. However, information on projected capital injections and withdrawals is required to be included in an Appropriation Bill (section 23(2)).
Departmental provision for restructuring Yes Other expenses.
SOE or Crown entity makes loss for year No Excluded from the definition of an expense (section(4)(2)).
Depreciation of departmental asset Yes Output expenses.
Depreciation of non-departmental asset Yes Generally other expenses.
Loss on revaluation of asset (departmental and non-departmental) No As long as the loss met the criteria for being a remeasurement (that is, it was not the result of a government decision), no appropriation would be required.
Foreign exchange loss – departmental No Remeasurement.
Foreign exchange loss – non-departmental No Remeasurement.
Crown land with a market value of $10m and a carrying value of $5m sold for $7m Yes Crown assets are to be revalued to fair value prior to sale. Therefore an appropriation for $3m would be required (other expense).
Crown land with a market value of $10m and a carrying value of $5m sold for $2m Yes Crown assets are to be revalued to fair value prior to sale. Therefore an appropriation for $8m would be required (other expense).
Crown land with a market value of $4m and a carrying value of $5m sold for $2m Yes Crown assets are to be revalued to fair value prior to sale. The change to $4m would not require appropriation because it is a remeasurement. The $2m loss on sale would require an appropriation (other expense).
Forgive a Crown debt Yes Other expense.
Reduce a Crown debt to its recoverable amount No Remeasurement.
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