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Notes to the financial statements

Notes to the financial statements

For the year ended 30 June 2009

1. Statement of accounting policies for the year ended 30 June 2009

Reporting entity and statutory basis

Statistics New Zealand (referred to in full or as ‘the department’) is a government department as defined by section 2 of the Public Finance Act 1989. These financial statements, which are prepared pursuant to section 45 of the Public Finance Act 1989, encompass the activities of Statistics New Zealand for the year ended 30 June 2009.

For purposes of appropriation under the Public Finance Act 1989, the department’s outputs are grouped as follows:

Official statistics – multi-class output appropriation (MCOA)

  • Coordination of government statistical activities
  • Population, social, and labour force statistical information services
  • Economic and business statistical information services.

Multi-year appropriation (MYA)

  • 2011 Census of Population and Dwellings.

The primary objective of Statistics New Zealand is to provide services to the public rather than making a financial return. Accordingly, Statistics New Zealand 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 Statistics New Zealand are for the year ended 30 June 2009. The financial statements were authorised for issue by the Government Statistician on 29 September 2009.

Basis of preparation

The financial statements of Statistics New Zealand have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand generally accepted accounting practices (NZ GAAP).

These financial statements have been prepared in accordance with, and comply with, NZ IFRS 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 Statistics New Zealand is New Zealand dollars.

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

One standard that has been revised and is relevant to Statistics New Zealand is NZ IAS 1 Presentation of Financial Statements (revised 2007). It replaces NZ IAS 1 Presentation of Financial Statements (issued 2004) and is effective for reporting periods beginning or after 1 January 2009.

The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics and to introduce a statement of comprehensive income. This will enable readers to analyse changes in equity resulting from transactions with the Crown in its capacity as ‘owner’ separately from ‘non-owner’ changes.

The revised standard gives Statistics New Zealand the option of presenting items in income and expense, and components of other comprehensive income either in a single or in two separate statements (a separate income statement followed by a statement of comprehensive income).

Statistics New Zealand expects it will apply the revised standard for the first time for the year ended 30 June 2010, and is yet to decide whether it will prepare a single statement of comprehensive income or a separate income statement followed by a statement of comprehensive income.

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.

Sale of publications

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

Other income

Revenue from contracted surveys is recognised to the extent that the service has been completed by Statistics New Zealand.

Rental income

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

Capital charge

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

Leases

Operating leases

An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an asset. Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term.

Cash and cash equivalents

Cash includes cash on hand and funds in the bank.

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 changes if relevant.

Impairment of a receivable is established when there is objective evidence that Statistics New Zealand will not be able to collect amounts due according to the original terms of the receivable. The amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate if applicable.

Property, plant, and equipment

Property, plant, and equipment consist of computer equipment, leasehold improvements, furniture and fittings, office equipment, and motor vehicles. All property, plant, and equipment is shown at cost, less accumulated depreciation and impairment losses.

Property, plant, and equipment items are capitalised if their cost is greater than $1,000.

Computer equipment assets are assigned a unique identifier, therefore assets under $1,000 are capitalised in the asset register to assist with the stocktake. The assets are treated as either an individual asset or part of another asset.

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 Statistics New Zealand and the cost of the item can be measured reliably. All items of property, plant, and equipment are recognised at cost.

Disposals

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included 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 Statistics New Zealand and the cost of the item can be measured reliably.

Depreciation

Depreciation is provided on a straight-line basis on all property, plant, and equipment, at rates that will write-off the cost of the assets to their estimated residual value over their useful life.

The useful life and associated depreciation rate of major classes of assets have been estimated as follows:

Furniture and fittings 7 years
Leasehold improvements remaining term of the lease or the estimated remaining useful life of the improvements whichever is the shorter
Motor vehicles 3 to 5 years
Office equipment 5 years
Computer equipment 3 to 5 years

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

Intangible assets

Software acquisition and development

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs associated with maintaining computer software are recognised as an expense when incurred. Costs that are directly associated with the development of software for internal use by Statistics New Zealand are recognised as an intangible asset. Direct costs include the software development, employee, and directly applicable operating costs.

Amortisation

The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is erecognised. The amortisation charge for each period is recognised in the statement of financial performance. The useful life and associated amortisation rate of major classes of intangible assets have been estimated as follows:

Software 3 to 5 years
Capitalised developments:
Basic infrastructure systems 10 years
Capture and processing systems 5 to 7 years
Output systems 5 years
Dissemination and access systems 3 years
Office automation tools 5 years

Impairment of non-financial assets

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. An intangible asset that is not yet available for use at the balance sheet date is tested for impairment annually.

Property, plant, and equipment and intangible assets that have a finite useful life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

Value in use is depreciated replacement cost for an asset where the future economic benefits, or service potential of the asset, are not primarily dependent on the asset’s ability to generate net cash inflows and where the entity would, if deprived of the asset, replace its remaining future economic benefits or service potential.

If an asset’s carrying amount exceeds its recoverable amount, the asset is impaired and the carrying amount is written down to the recoverable amount.

Creditors and other payables

Creditors and other payables are initially measured at fair value.

Employee entitlements

Short-term employee entitlements

Employee entitlements that Statistics New Zealand expects to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay.

These include salaries and wages accrued up to balance date, annual leave earned but not yet taken at balance date, retiring and long-service leave entitlements expected to be settled within 12 months, and sick leave.

Statistics New Zealand recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent that Statistics New Zealand anticipates it will be used by staff to cover those future absences.

Statistics New Zealand recognises a liability and an expense for bonuses where it is contractually obliged to pay them, or where there is a past practice that has created a constructive obligation.

Long-term employee entitlements

Entitlements that are payable beyond 12 months, such as long-service leave and retiring leave, have been calculated on an actuarial basis. The calculations are based on:

  • likely future entitlements based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement, and contractual entitlements information
  • the present value of the estimated future cash flows. A weighted average discount rate of 3.01 percent and a salary inflation factor of 3.50 percent were used. The discount rate is based on the weighted average of government bonds with terms to maturity similar to those of the relevant liabilities. The inflation factor is based on the expected long-term increase in remuneration for employees.

Superannuation schemes

Defined contribution schemes

Obligations for contributions to the State Sector Retirement Savings Scheme, Kiwisaver, and the Government Superannuation Fund are accounted for as defined contribution schemes and are recognised as an expense in the statement of financial performance as incurred.

Provisions

Statistics New Zealand recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that an outflow of future economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation, using a discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.

Taxpayers’ funds

Taxpayers’ funds is the Crown’s investment in Statistics New Zealand and is measured as the difference between total assets and total liabilities. Taxpayers’ funds is classified as general funds.

Commitments

Expenses yet to be incurred on non-cancellable contracts that have been entered into on or before balance date are disclosed as commitments to the extent that there are equally unperformed obligations.

Cancellable commitments that have penalty or exit costs explicit in the agreement on exercising that option to cancel are included in the statement of commitments at the value of that penalty or exit cost.

Commitments and contingencies are disclosed exclusive of GST.

Goods and services tax (GST)

All items in the financial statements, including appropriation statements, are stated exclusive of GST, except for receivables and payables, which are stated on a GST-inclusive basis. Where GST is not recoverable as input tax, then it is recognised as part of the related asset or expense. The net amount of GST recoverable from, or payable to, Inland Revenue is included as part of receivables or payables in the statement of financial position.

The net GST paid to, or received from Inland Revenue, including the GST relating to investing and financing activities, is classified as an operating cash flow in the statement of cash flows.

Income tax

Government departments are exempt from income tax as public authorities. Accordingly, no charge for income tax has been provided for.

Budget figures

The budget figures are those included in Statistics New Zealand’s Statement of Intent 2008, which are consistent with the financial information in the Main Estimates. In addition, the financial statements also present the updated budget information from the Supplementary Estimates.

Statement of cost-accounting policies

Statistics New Zealand has determined the cost of outputs using the cost allocation system outlined below.

Direct costs are those costs directly attributed to an output. Indirect costs are those costs that cannot be identified, in an economically feasible manner, with a specific output.

Statistics New Zealand has derived the costs of outputs shown in these financial statements using a cost driver to assign indirect costs. The cost drivers employed for assigning direct costs to outputs are based on direct charging and time recording.

The cost driver employed to allocate indirect costs to outputs is the proportion of Statistics New Zealand’s internal budget that is assigned to direct outputs. Indirect costs, excluding the costs of survey, compilation, and statistical databases and development projects, accounted for 49 percent of total costs for the year ended 30 June 2009 (2008: 42 percent). The percentage fluctuates from year to year, depending on the amount of direct funding received in relation to the five-yearly cycle of the Census of Population and Dwellings.

There have been no changes in cost accounting policies since the date of the last audited financial statements.

Critical accounting estimates and assumptions

In preparing these financial statements Statistics New Zealand has made estimates and assumptions concerning the future. These estimates and assumptions may differ from subsequent actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed in note 12, which provides an analysis of the exposure in relation to estimates and uncertainties surrounding retirement and long-service leave liabilities.

Critical judgements in applying Statistics New Zealand’s accounting policies

Management has exercised the following critical judgements in applying Statistics New Zealand accounting policies for the period ended 30 June 2009.

Leases

Determining whether a lease agreement is a finance lease or an operating lease requires judgement as to whether the agreement transfers substantially all the risks and rewards of ownership to Statistics New Zealand. Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include renewal options in the lease term, and determining an appropriate discount rate to calculate the present value of the minimum lease payments. Classification as a finance lease means the asset is recognised in the statement of financial position as property, plant, and equipment, whereas with an operating lease no such asset is recognised.

Statistics New Zealand has exercised its judgement on rental leases, and has determined them to be operating leases.

Changes in accounting policies

There have been no major changes in accounting policies since the date of the last audited financial statements. All policies have been applied on a basis consistent with those used in the previous published financial reports.

Comparative numbers in notes 2 and 5 have been restated, to align with category descriptions in the current year, to provide meaningful comparison.

Accounting policies are changed only if the change is required by an accounting standard or interpretation, or if it otherwise provides more reliable and relevant information.

2. Revenue other

2008 Actual 2009 Actual
$000 $000
3,073 Contract survey 3,962
2,338 Sale of publications/customised outputs 1,596
269 Revenue from other Government departments 1,365
934 State Sector Retirement Savings Scheme 928
40 Rental income from sub-lease 14
409 Other 676
7,063 Total revenue other 8,541

3. Gain on sale of assets

During the period, the department disposed of assets with a net gain of $19,110 (a motor vehicle with a net gain of $2,755, furniture and fittings, and computer hardware with a net gain of $16,355) (2008: Nil).

4. Personnel costs

2008 Actual 2009 Actual
$000 $000
51,933 Salaries and wages 54,410
1,307 Employer contributions to defined contribution plans 1,371
373 Increase/(decrease) in employee entitlements 949
481 Other 393
54,094 Total personnel costs 57,123

5. Other operating expenses

2008 Actual 2009 Actual
$000 $000
74 Audit fees for the financial statement audit 68
12 Audit fees for NZ IFRS transition 0
0 Audit related fees for assurance and related services (1) 33
437 Overseas travel 285
1,773 Domestic Travel (includes Australia) 1,573
1,143 Interviewer travel 1,063
890 Postage and freight 933
4,418 Operating lease and other rentals 4,397
2,776 Software licenses 2,832
325 Advertising and publicitity 216
416 Consultancy 931
1,270 Contracted services 2,184
219 Maintenance 160
25 Debt impairment (94)
10,764 Other operating expenses 7,645
24,542 Total 22,226

(1) The audit related fees were for an assurance engagement over Statistics New Zealand's procurement processes.

6. Capital charge

The department pays a capital charge to the Crown on its taxpayers’ funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2009 was 7.5 percent (2008: 7.5 percent).

7. Loss on disposal of non-current assets

During the year, there was a loss on the disposal of non-current assets of $3,242,208 (2008: $121,791), resulting from the disposal of computer hardware ($84,013), library books ($433,053), and internally generated intangible assets ($2,725,142).

8. Debtors and receivables

2008 Actual 2009 Actual
$000 $000
1,120 Debtors 1,007
less:
(99) Provision for doubtful debts (5)
1,021 Total debtors and other receivables 1,002

The carrying value of debtors and other receivables approximates their fair value.

The provision for doubtful debts has been calculated based on expected losses for the department’s debtors.

Movements in the provision for doubtful debts are as follows:

2008 Actual 2009 Actual
$000 $000
74 Balance at 1 July 99
25 Additional provisions made during the year (note 5) (94)
99 Balance at 30 June 5

As at 30 June 2009 and 2008, all overdue receivables have been assessed for impairment and appropriate provisions applied, as detailed below:

2008 2009
Gross Impairment Net Gross Impairment Net
$000 $000 $000 $000 $000 $000
Not past due 1,017 (15) 1,002 940 (2) 938
Past due 1-30 days 36 (13) 23 46 (1) 45
Past due 31-60 days 17 (20) (3) 20 (1) 19
Past due 61-90 days 1 (4) (3) 0 0 0
Past due >91 days 49 (47) 2 1 (1) 0
Total 1,120 (99) 1,021 1,007 (5) 1,002

9. Creditors and other payables

2008 Actual 2009 Actual
$000 $000
1,452 Creditors 736
679 PAYE payable 605
4,549 Accrued expenses 4,241
6,680 Total creditors and other payables 5,582

Creditors and other payables are non-interest bearing and are normally settled on 30-day terms, therefore the carrying value of creditors and other payables approximates their fair value.

10. Repayment of surplus to the Crown

Under section 22 of the Public Finance Act 1989, no operating surplus can be retained by Statistics New Zealand.

Statistics New Zealand has a provision for repayment to the Crown of $1,278,849 operating surplus (2008: $320,852).

11. Provision for reorganisation

2008 Actual 2009 Actual
$000 $000
Current provision is represented by:
143 Reorganisation 149
143 Total provisions 149
Restructuring
2009 $000
Opening balance at 1 July 143
Additional provisions made 149
Unused amounts reversed (143)
Closing balance at 30 June 149

The provision arises from the reorganisation within the department in 2008/09, and the funds will be utilised within 12 months of the balance sheet date.

12. Employee entitlements

2008 Actual 2009 Actual
$000 $000
Current employee entitlements
3,322 Annual leave 3,554
63 Sick leave 62
94 Retirement and long-service leave 814
3,479 Total current portion 4,430
Non-current employee entitlements:
3,856 Retirement and long-service leave 3,854
3,856 Total non-current portion 3,854
7,335 Total employee entitlements 8,284

The present value of retirement and long-service leave obligations depend on a number of factors that are determined on an actuarial basis using a number of assumptions. Two key assumptions used in calculating this liability include the discount rate and the salary inflation factor. Any changes in these assumptions will impact on the carrying amount of the liability.

Statistics New Zealand has used the actuarial models provided by the Treasury including the appropriate discount rate and salary inflation factor.

If the discount rate were to differ by 1 percent from the department’s estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $289,022 higher or lower.


If the salary inflation factor were to differ by 1 percent from the department’s estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $352,289 higher or lower.

13. Deferred revenue

Deferred revenue is the portion of operating revenue received which relates to future years. It will be recognised as income in the year when the services are provided.

14. Property, plant, and equipment

Motor vehicles Furniture and fittings Office equipment Computer hardware Library Total
Cost $000 $000 $000 $000 $000 $000
Balance at 1 July 2007 23 10,272 1,044 14,412 2,020 27,771
Additions 0 162 33 3,025 77 3,297
Disposals 0 (133) (38) (4,383) 0 (4,554)
Reclassification of asset classes 0 1,574 0 9 0 1,583
Work in progress movements 0 0 0 381 0 381
Balance at 30 June 2008 23 11,875 1,039 13,444 2,097 28,478
Balance at 1 July 2008 23 11,875 1,039 13,444 2,097 28,478
Additions 0 80 7 5,925 0 6,012
Disposals (23) (1) (9) (2,641) (2,097) (4,771)
Reclassification of asset classes 0 0 0 (10) 0 (10)
Work in progress movements 0 144 0 (140) 0 4
Balance at 30 June 2009 0 12,098 1,037 16,578 0 29,713
Accumulated depreciation
Balance at 1 July 2007 17 3,735 568 9,713 1,628 15,661
Depreciation expense 0 960 155 2,556 36 3,707
Eliminate on disposal 0 (74) (38) (4,127) 0 (4,239)
Transfers 0 316 0 4 0 320
Balance at 30 June 2008 17 4,937 685 8,146 1,664 15,449
Balance at 1 July 2008 17 4,937 685 8,146 1,664 15,449
Depreciation expense 0 1,037 136 3,178 0 4,351
Eliminate on disposal (17) 0 (9) (2,557) (1,664) (4,247)
Reclassification of asset classes 0 0 0 (4) 0 (4)
Balance at 30 June 2009 0 5,974 812 8,763 0 15,549
Carrying amounts
At 1 July 2007 6 6,537 476 4,699 392 12,110
At 30 June and 1 July 2008 6 6,938 354 5,298 433 13,029
At 30 June 2009 0 6,124 225 7,815 0 14,164
Carrying amounts at year-end are stated at cost, less accumulated depreciation, and include work in progress relating to furniture and fittings of $145,050 (2008: Nil), and computer hardware of $267,807 (2008: $419,016).

15. Intangible assets

Software Internally generated assets Total
Cost $000 $000 $000
Balance at 1 July 2007 5,560 42,706 48,266
Additions 713 4,335 5,048
Disposals (1,492) (2,927) (4,419)
Work in progress movements 11 (730) (719)
Transfers (12) (1,603) (1,615)
Balance at 30 June 2008 4,780 41,781 46,561
Balance at 1 July 2008 4,780 41,781 46,561
Additions 1,104 3,621 4,725
Disposals (227) (7,253) (7,480)
Reclassification of asset classes 228 (218) 10
Work in progress movements (11) 1,726 1,715
Balance at 30 June 2009 5,874 39,657 45,531
Accumulated amortisation
Balance at 1 July 2007 4,442 23,541 27,983
Amortisation expense 462 3,981 4,443
Eliminate on disposal (1,468) (2,885) (4,353)
Transfers (5) (315) (320)
Balance at 30 June 2008 3,431 24,322 27,753
Balance at 1 July 2008 3,431 24,322 27,753
Amortisation expense 558 3,821 4,379
Eliminate on disposal (229) (4,526) (4,755)
Reclassification of asset classes 222 (218) 4
Balance at 30 June 2009 3,982 23,399 27,381
Carrying amounts
At 1 July 2007 1,118 19,165 20,283
At 30 June and 1 July 2008 1,349 17,459 18,808
At 30 June 2009 1,892 16,258 18,150

Carrying amounts at year-end are stated at cost, less accumulated amortisation, and include work in progress relating to internally generated assets of $4,228,007 (2008: $2,501,686).

16. Taxpayers’ funds

2008 Actual

2009 Actual

$000

$000

General funds

39,978

Balance at 1 July

47,753

321

Net surplus/(deficit)

1,279

7,775

Capital contribution from the Crown

2,509

(321)

Provision for repayment of surplus to the Crown

(1,279)

47,753

Total taxpayers' funds

50,262

17. Reconciliation of net surplus/(deficit) to net cash from operating activities

2008 Actual

2009 Actual

$000

$000

321

Net operating surplus/(deficit)

1,279

Add non-cash items

8,150

Depreciation

8,730

184

Increase/(decrease) in non-current employee entitlements

(2)

8,334

Total non-cash items

8,728

Working capital movements

(133)

Decrease/(increase) in debtors and receivables

19

25

Decrease/(increase) in provision of bad debts

0

(135)

Decrease/(increase) in advances and prepayments

(236)

(309)

Increase/(decrease) in payables

(1,093)

253

Increase/(decrease) in GST payable

(150)

538

Increase/(decrease) in employee entitlements

951

(27)

Increase/(decrease) in deferred revenue

50

(344)

Increase/(decrease) in restructure provision

6

395

Increase/(decrease) in provision - debtor Crown

766

263

Net working capital movements

313

Investing activity items

122

(Gain)/loss on sale of fixed assets

3,223

9,040

Net cash flows from operating activities

13,543

18. Related-party transactions and key management personnel

Related-party transactions

The department is a wholly owned entity of the Crown. The Government significantly influences the roles of the department as well as being its major source of revenue.

The department enters into transactions with other government departments, Crown entities, and state-owned enterprises on an arm’s length basis. Those transactions that occur within a normal supplier or client relationship, on terms and conditions no more or less favourable than those which it is reasonable to expect the department would have adopted if dealing with that entity at arm’s length in the same circumstance, are not disclosed.

There are no other related-party transactions.

No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

Key management personnel compensation

2008 Actual 2009 Actual
$000 $000
2,173 Salaries and other short-term employee benefits 1,665
0 Post-employment benefits 0
0 Other long-term benefits 0
0 Termination benefits 0
2,173 Total key management personnel compensation 1,665
Key management personnel includes the Chief Executive and the seven members of the Senior Management Team, which forms the Board (2008: Key management personnel included the Chief Executive and the 13 members of the Corporate Management Committee from 1 July 2007 to 18 November 2007. The Board was formed from 19 November 2007 due to reorganisation and included the Chief Executive and the seven members of the Senior Management Team).

19. Events after the balance sheet date

There were no significant events after the balance sheet date.

20. Financial instrument risks

The department’s activities expose it to a variety of credit risk and liquidity risks.

Credit risk

A credit risk is the risk that a third party will default on its obligation to the department, causing the department to incur a loss. In the normal course of its business, credit risk arises from debtors.

The department is not permitted to invest any funds; this function is managed by the New Zealand Debt Management Office (NZDMO). The department’s maximum credit exposure is represented by the total carrying amount of cash and cash equivalents, and net debtors (note 8).

Liquidity risk

Liquidity risk is the risk that the department will encounter difficulty raising liquid funds to meet commitments as they fall due. In meeting its liquidity requirements, the department closely monitors its forecast cash requirements with expected cash drawdown from the NZDMO. The department maintains a target level of available cash to meet liquidity requirements. The table below analyses the department’s financial liabilities that will be settled, based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed are undiscounted and based on the contractual cash flows.

Less than 6 months Between 6 months and 1 year Between 1 and 5 years
$000 $000 $000
2008
Creditors and other payables (note 9) 6,680 0 0
2009
Creditors and other payables (note 9) 5,582 0 0

21. Capital management

The department’s capital is its taxpayers’ funds, which comprise general funds.

Equity is represented by net assets.

The department manages its revenues, expenses, assets, liabilities, and general financial dealings prudently.

The department’s equity is largely managed as a by-product of managing income, expenses, assets, liabilities, and compliance with the Government Budget processes and with the Treasury Instructions.

The objective of managing the department’s equity is to ensure the department effectively achieves the goals and objectives for which it has been established, while remaining a going concern.

22. Explanations of major variances against budget

Explanations for major variances from the department’s estimated figures in the forecast financial statements are as follows:

Statement of financial performance

Revenue other

Other revenue earned was $0.902 million less than anticipated, mainly due to third-party contracted surveys which did not eventuate during the year.

Personnel

An underspend of $1.849 million is mainly due to lower than expected full-time equivalent (FTE) employee numbers during the year.

Other operating expenses

An underspend of $2.989 million mainly relates to training, prior year refunds on building rates, and for services provided by Inland Revenue relating to implementation of the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06).

Depreciation

Variance of $1.416 million is mainly due to some deferred capital projects and underspends in capital projects.

Loss on disposal of property, plant, and equipment, and intangible assets

The variance against budget arising from the $3.242 million loss on disposal of property, plant, and equipment, and intangible assets is a result of reviews of assets that have taken place during 2008/09. These reviews were completed subsequent to the budget setting process and, therefore, the loss on disposal of non-current assets had not been anticipated in the budget.

Statement of financial position

Employee entitlements

An increase of $1.387 million mainly relates to long-service leave and retiring leave, due to a lower discount rate. The long-service leave and retiring leave liability was calculated using an updated actuarial model provided by the Treasury.

Property, plant, and equipment

The carrying value of property, plant, and equipment was $3.773 million higher than budgeted, as the budget assumed an opening carrying balance that was $2.282 million lower than the actual opening carrying value of property, plant, and equipment. Additions for the year ended 30 June 2009 were $1.810 million higher than budgeted and the depreciation expense was $0.205 million lower, which was partially offset by the $0.524 million unbudgeted decrease in carrying value arising from disposals of computer hardware and library books.

Intangible assets

The carrying value of intangible assets was $10.222 million lower than budgeted, as the budget assumed an opening carrying balance that was $5.917 million higher than the actual opening carrying value of intangible assets. Additions for the year ended 30 June 2009 were $2.791 million lower than budgeted, which was partially offset by $1.211 million lower depreciation expense. In addition, there was a $2.725 million unbudgeted decrease in carrying value arising from disposals of internally generated assets.

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