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Annual Enterprise Survey: 2007 financial year (provisional)
Embargoed until 10:45am  –  03 October 2008
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 New Zealand 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 2007 financial year increased by 6.3 percent to $523,897 million. In 2007, 14 of the 16 industry groups recorded increases in income.
  • Surplus before income tax, which is total income less total expenditure (excluding salaries and wages to working proprietors), across all industries is $65,842 million. This is an increase of $11,385 million from the 2006 financial year.
  • Salaries and wages paid to employees across all industries increased by $4,340 million (6.4 percent) in the 2007 financial year. This compares to increases of 7.7 percent in 2006, and 8.1 percent in 2005.
  • Total expenditure for the 2007 financial year increased by 4.5 percent to $464,248 million.
  • The total value of fixed assets grew by 11.5 percent to $413,087 million in the 2007 financial year. This is lower than the 13.7 percent increase recorded in 2006.
  • The current ratio, which measures current assets to current liabilities, is 83.8 percent in the 2007 financial year. This is down on the 84.7 percent recorded in 2006.

Graph, Surplus before Income Tax.

New industrial classification for 2007

This is the first official publication of the Annual Enterprise Survey 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 has been 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 New Zealand has also developed New Zealand Standard Industrial Output Categories (NZSIOC) to assist in the standardisation of outputs. Further information on NZSIOC is available on our website.

AES 2007 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 New Zealand 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 New Zealand will advise on the most appropriate data to suit a user's needs. The focus of the remainder of this commentary is on providing information to help users understand more about the AES and how it can be used.

Treatment of local and central government data

Local authority data has previously been published under Local Government Administration. Financial performance information for local authority data is collected by function. The AES has used this function to allocate the financial performance of the local authority data to the industry in which the function is performed. Financial position data remains in local authority industry O7530 (Local Government Administration). This change has been implemented for the three year time series 2005–2007 as published in this release.

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

The presence of either local or central government units have a significant impact on some published industries. In these cases, a separate table has been published excluding local and central government units (tables 4.01 to 4.09 – available on the Statistics New Zealand website). This includes tables for the health and education industries exclusive of government units.

The introduction of new accounting standards

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

Adoption of the standards began in AES 2006 and will continue through until 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.

Further information for users

The AES provides a wealth of information that can 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 in 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 2006 and 30 September 2007. 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 New Zealand 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 New Zealand outputs, including:

  • Longitudinal Research of Business Dynamics project
  • Non-profit Satellite Account
  • Business Price Indexes
  • Examining the Annual Enterprise Survey by Institutional Sector 2004–2006.

Since the last redesign of AES, there has been increased demand for non-standard output from users. Statistics New Zealand 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 New Zealand has reviewed the survey against current and future user needs. AES is currently being redesigned to improve data quality, business processes and to reduce respondent load through increased use of administrative data.

Improvements being incorporated into the 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 Jeni Darnbrough: info@stats.govt.nz.

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

Next release ...

Annual Enterprise Survey: 2008 financial year (provisional) will be released in October 2009.

 

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