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Annual Enterprise Survey: 2008 financial year (provisional)
Embargoed until 10:45am  –  02 October 2009
Commentary

Introduction

The Annual Enterprise Survey (AES) is New Zealand’s most comprehensive source of financial statistics and provides annual financial performance and financial position information about industry groups operating within New Zealand. The industries covered in the survey contribute approximately 90 percent of New Zealand’s gross domestic product (GDP). AES is an important source of data for GDP as it is used to calculate detailed annual national accounts.

Data used in this survey is collected from a number of sources, including:

  • administrative data from Inland Revenue (IR 10)
  • central government data from the Treasury's Crown Financial Information System (CFIS)
  • superannuation data from the New Zealand Companies Office (Ministry of Economic Development)
  • local government data from Statistics New Zealand's local authority statistics
  • a sample survey of business financial data representing the rest of the population.

Statistics NZ would like to thank respondents for their contribution to this survey. We also acknowledge the cooperation of Inland Revenue, the Treasury, and the New Zealand Companies Office for providing administrative data that enables us to lower the size of the postal sample and thereby reduce compliance costs on the business community.

Overview of results

  • Total income for all industries for the 2008 financial year increased by 7.1 percent, to $560,763 million. In 2008, all 16 industry groups recorded increases in income.
  • Total expenditure for the 2008 financial year increased by 10.6 percent, to $513,302 million.
  • Surplus before income tax, which is total income less total expenditure (excluding salaries and wages to working proprietors), across all industries was $53,516 million. This is a decrease of $11,950 million from the 2007 financial year.
  • Salaries and wages paid to employees across all industries increased by $6,319 million (8.7 percent) in the 2008 financial year. This compares with increases of 6.8 percent in 2007, and 7.7 percent in 2006.
  • The total value of fixed assets grew by 10.1 percent, to $455,690 million in the 2008 financial year, slightly lower than the 11.2 percent increase in 2007.
  • The current ratio, which measures current assets to current liabilities, was 83.4 percent in the 2008 financial year. This is down on the 83.6 percent recorded in 2007.
  • Wholesale trade recorded the strongest increase in total income, at $6,269 million (or 9.3 percent) in 2008. This is higher than the $2,310 million (3.5 percent) increase in the wholesale industry in 2007.
  • The second-biggest total income increase in 2008 was in the agriculture industry. This sector’s total income increased by $5,093 million or 20.1 percent. The agriculture industry’s results are discussed in more detail under ‘Agriculture industry 2008 results'.
  • The manufacturing industry was the third-biggest contributor to the overall total income increase in AES 2008. Total income in the manufacturing industry grew by $4,755 million, up 5.6 percent.

 

Graph, Increase intotal income

New industrial classification

This is the second official publication of AES results using the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06) that replaces the 1996 version of this classification (ANZSIC96). Back-cast values have been calculated for AES 2005 and AES 2006.

The development of a new version of ANZSIC was driven by changes in the structure, composition, and organisation of industrial and business activities in Australia and New Zealand. Significant technological changes since ANZSIC96 was developed have affected the way industry and businesses operate. In addition, industries undertaking new activities have emerged, requiring a review of ANZSIC96 and the development of a more contemporary version of the classification to better reflect the new economy. More information about ANZSIC06 is available on our website.

For information on the process used to convert the survey to the new classification and to backdate to 2005, please refer to the technical notes section of this release.

With the introduction of ANZSIC06, Statistics NZ has also developed New Zealand Standard Industrial Output Categories (NZSIOC) to assist in standardising outputs. Further information on NZSIOC is available on our website.

AES 2008 has been published at NZSIOC level one (essentially ANZSIC division level), and at NZSIOC level three. In some cases NZSIOC level three industries have been combined to preserve respondent confidentiality.

Detailed industry data availability

Data collected in the AES is available at various levels of detail. The tables included in this release are at NZSIOC level one (16 industries), and a further disaggregation is contained in the supplementary tables, available on the Statistics NZ website (49 industries). A finer level is available on request, subject to confidentiality and quality constraints. Depending on the detail and type of analysis required, there are a number of available options. Statistics NZ will advise on the most appropriate data to suit a user's needs. The focus of the remainder of this commentary is information to help users understand more about the AES and how it can be used.

Agriculture industry 2008 results

Data on the agriculture industry provides an example of the range of information available.

In 2008 the agriculture, forestry, and fishing sector (ANZSIC06 division A) continued the trend of increasing its total income. The 2008 financial year is the fourth consecutive year of increases in sales of goods and services, and total income. In 2008, the agriculture, forestry, and fishing industry showed a strong 19.8 percent increase in sales of goods and services, and a 127.6 percent increase in surplus before income tax. The sales increase in 2008 is much more significant than that in 2007, when the industry had a 2.1 percent increase in sales of goods and services. Surplus before income tax decreased by 25.8 percent in 2007.

Graph, Agriculture Industry: Total Income and Surplus

The strong 2008 agriculture results were driven by the dairy cattle farming industry, which had a $4.1 billion (58.3 percent) increase in sales of goods and services, leading to a $4.4 billion rise in total income. Expenditure grew at a lower level than sales, showing an increase of $2.8 billion or 38.7 percent in 2008. As a result, the dairy cattle farming industry recorded a $1.6 billion increase in surplus before income tax in 2008. The strong sales growth was driven by the increasing dairy prices in the 2008 financial year. The Overseas Trade Index: June 2009 quarter shows a very strong 45.6 percent rise in merchandise export prices of dairy products in the period from June 2007 to June 2008.

Dairy cattle farming is the largest agricultural industry, accounting for 38.6 percent of the agriculture sector’s total income in 2008.

Graph, Agriculture: Total income by industry

Treatment of local and central government data

Prior to AES 2007, local authority data was published under the local government administration industry. Financial performance information for local authority data is collected by function. The AES has used this function to allocate the financial performance of local authority data to the industry in which the function is performed. Financial position data remains in local authority industry O7530 (Local government administration).

In addition, under ANZSIC06 a number of central government units previously classified to central government administration have been classified to the industry in which they are now considered to function.

The presence of either local or central government units has a significant impact on some published industries. In these cases, separate tables have been published that exclude local and central government units (tables 4.01 to 4.08 available on Statistics NZ website). This includes tables for the health and education industries, exclusive of government units.

Introduction of new accounting standards

New Zealand International Financial Reporting Standards (NZIFRS) are the New Zealand equivalent to International Financial Reporting Standards (IFRS), modified to suit New Zealand entities and including public benefit entities. These standards replace the Financial Reporting Standards (FRS) and Statements of Standard Accounting Practice (SSAP).

Adoption of the standards began in AES 2006 and has continued through to AES 2008. Part of the requirements for adopting the standards is for entities to show the effect of transition to NZIFRS. The AES has been able to use this information to identify some of the impact on financial results. Footnotes have been added to the published tables where there is significant known impact.

The standards that have had the most impact are:

  • NZ IAS 12: Income tax (increasing deferred tax liabilities and decreasing revaluation reserve)
  • NZ IAS 32: Financial instruments: presentation (shifts between equities and liabilities due to reclassification)
  • NZ IAS 39: Financial instruments: recognition and measurement (increasing liabilities due to the hedging activity)
  • NZ IAS 38: Intangible assets (shifting computer software from fixed assets to intangible assets).

Further information for users

The AES provides a wealth of information to assist in understanding the structure and performance of industries within the New Zealand economy. When using AES data, it is important to be aware that there are a number of design issues that may impact on results. These are discussed below.

1. Results in the AES can be affected by how companies structure themselves and therefore how they are captured and reported in the AES. Large corporates often set up separate entities to manage different divisions of their business. These divisions are classified based on their predominant activity. For example, their administration (head office) and their asset-owning activities may be classified to management and related consulting services (in division M), and to financial asset investors (in division K), respectively. This may mean that a manufacturing unit will not have these support activities recorded in the manufacturing industry.

If a business is divided into different divisions, this may mean that the AES results will include inter-company flows between divisions. These flows are referred to as gross flows.

2. The time series of the AES can be affected by the restructuring of companies. For example, if the various divisions within a company were to be restructured or amalgamated, then the following would happen:

  • the consolidation of these units would remove the gross flows and leave net flows
  • the industrial classification of the resulting unit would be determined by predominant activity and the activity in the other industries would disappear
  • value-added would remain the same in both options.

The reverse may also occur, when restructuring results in net flows being represented in a gross form.

3. The 'all industries' table is a summation of divisional tables and therefore includes gross flows.

4. AES results are presented for a nominal March year. However, the data is collected from businesses with balance dates between 1 October 2007 and 30 September 2008. The table below lists, for each industry, the predominant balance date by total income.

 Predominant Balance Dates by Industry
 Industry  Year ended
 A - Agriculture, forestry, and fishing  March
 B - Mining  December
 C - Manufacturing  March
 D - Electricity, gas, water, and waste services  June
 E - Construction  March
 F - Wholesale trade  March
 G & H - Retail trade and accommodation  March
 I - Transport, postal, and warehousing  June
 J - Information media and telecommunications  June
 K - Financial and insurance services  September
 L - Rental, hiring, and real estate services  March
 M & N - Professional, scientific, technical, administrative, and support services  March
 O - Public administration and safety  June
 P - Education and training  December
 Q - Health care and social assistance  June
 R & S - Arts, recreation, and other services  March
 Note: This table has been produced using weighted total income data and therefore reflects the population as it is represented in the AES. The count of predominant balance dates may produce different results to this table, which is based on total income. This is because the count is dominated by the small businesses sourced from IR 10s, which have small values of total income.

5. In the postal collection, additions and disposals of fixed assets are specifically requested. However, in the administrative data source (IR 10), only the closing book value of fixed assets and depreciation are requested. Where IR 10s are used, the net additions value is modelled using a simple fixed asset equation:

net additions = closing book value - opening book value + depreciation - net gain on sale

where:
opening book value is taken from the previous year's IR 10
positive net additions are reflected as 'additions' and negative values as 'disposals'.

There are three points to note:

  • revaluations on sale should be accounted for and will impact on results if they are significant
  • only net additions are recorded; total additions and disposals are not available
  • net additions are calculated for total fixed assets and then apportioned by closing book values of each asset type.

6. Statistics NZ has a legal obligation to protect companies' privacy and industry-sensitive information. It is for this reason that all tables released have confidentiality rules applied to protect the information supplied by an individual company. Once all confidential financial items have been identified, further items are suppressed to complete the protection of the confidential value.

Use of Annual Enterprise Survey data

In addition to its use in the national accounts, the AES is also a data source for a number of other existing and upcoming Statistics NZ outputs, including:

Since the last redesign of AES, there has been increased demand for non-standard output from users. Statistics NZ is providing more input into research surrounding these requests. Examples include:

  • the Reserve Bank of New Zealand's use of financial position data in its Financial Stability Report
  • the Centre for Advanced Engineering has established a set of national key performance indicators for the construction industry, one of which is a profitability indicator for which AES data is used
  • ad hoc requests from other government departments, such as the Ministry of Economic Development
  • requests by turnover bands, which can add significant analytical value and are a popular request
  • requests from businesses for financial data to gauge their performance against industry averages
  • value-added per employee count, and turnover per employee count.

Note that any release of information is subject to confidentiality and may have caveats placed on the data.

Future enhancements

Review of annual financial statistics

The AES was last redeveloped in 1999, largely to meet requirements for national accounting purposes. Statistics NZ has reviewed the survey against current and future user needs and will introduce several changes for the 2009 AES. These changes will inprove data quality, business processes, and reduce respondent load through increased use of administrative data.

Improvements being incorporated into the 2009 AES redesign include:

  • increased use of administrative data to replace sampled units
  • a more efficient sampling strategy
  • enhancements to editing and imputation processes.

For more information on this redesign contact Nicholas Cox: info@stats.govt.nz.

For technical information contact: 
Joanna Heeney or Jo Laban
Christchurch 03 964 8700
Email: info@stats.govt.nz

Next release ...

Annual Enterprise Survey: 2009 financial year (provisional) will be released in October 2010.

 

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