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Notes to the financial statements for the year ended 30 June 2008

Notes to the Financial Statements for the Year Ended 30 June 2008

Note 1: Revenue Other

Revenue Other was derived from the following sources:

 

 

2007/08

 

 

 

2006/07

 

 

 

Other Government Departments

 

Other Sources

 

 

 

Other Government Departments

 

Other Sources

 

Contract history projects

 

102

 

-

 

 

61

 

39

 

Seconded staff

 

83

 

50

 

 

78

 

-

 

State Sector Retirement Savings Scheme (SSRSS)
–recovery from State Services Commission

 

161

 

-

 

 

145

 

-

 

Contribution towards Digital Broadcasting Strategy project

 

-

 

60

 

 

-

 

198

 

Publication sales/royalties

 

-

 

25

 

 

-

 

50

 

Antiquities dealers’ licences

 

2

 

1

 

 

-

 

1

 

Total revenue other

 

348

 

136

 

 

284

 

288

 

 

Note 2: Personnel Costs

 

 

2007/08

 

2007/08

 

2007/08

 

2006/07

 

 

 

Actual

 

Main
Estimates

 

Supp.
Estimates

 

Actual

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Salaries and wages

 

7,305

 

7,000

 

7,240

 

6,593

 

Training and development

 

174

 

200

 

200

 

103

 

Employer contributions to superannuation funds*

 

218

 

205

 

220

 

209

 

Other personnel costs

 

202

 

30

 

166

 

124

 

Total personnel costs

 

7,899

 

7,435

 

7,826

 

7,029

 

 

* Employer contributions to defined contribution plans include contributions to the State Sector Retirement Savings Scheme, Kiwisaver, Government  Superannuation Fund and the Global Retirement Trust Superannuation.

Note 3: Other Operating Expenses

 

 

2007/08

 

2007/08

 

2007/08

 

2006/07

 

 

 

Actual

 

Main
Estimates

 

Supp.
Estimates

 

Actual

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Administration costs*

 

2,582

 

3,793

 

3,926

 

5,089

 

Rental and leasing costs

476

400

477

453

Other occupancy costs

237

252

252

223

Publicity and research

248

342

342

339

Information communication technology**

725

649

649

1,228

Transfers to International Cultural Diplomacy Programme agencies***

1,675

 

1,560

 

1,560

 

1,218

 

Audit fees for financial statement audit (Audit New Zealand)

38

34

44

38

Audit fees for NZ IFRS transition (Audit New Zealand)

6

14

6

10

Total operating costs

5,987

7,044

7,256

8,598

 *    Includes initiatives under the Cultural Diplomacy International Programme. See page 65 for a breakdown of initiatives in 2007/08.

 ** The 2006/07 comparative figure of $1.228 million includes $770,000 for web development costs for the NZLive website which have been
     expensed under NZ IFRS. These costs were capitalised in the financial statements for the year ended 30 June 2007.

*** The 2006/07 comparative figure of $1.218 million includes $954,000 which was incorrectly classified as an administration cost in the financial statements for  the year ended 30 June 2007.

Note 4: Depreciation and Amortisation

 

 

2007/08

 

2007/08

 

2007/08

 

2006/07

 

 

 

Actual

 

Main
Estimates

 

Supp.
Estimates

 

Actual

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Depreciation – Property, Plant and Equipment

 

 

 

 

Computer equipment

83

73

86

99

Office equipment

21

19

21

21

Office furniture

17

20

20

8

Leasehold improvements

143

120

148

84

Works of Art

-

-

-

-

 

 

 

 

 

Amortisation – Intangible Assets

 

 

 

 

Computer software

54

194

59

31

Total depreciation and amortisation

318

426

334

243

Note 5: Capital Charge

The Ministry 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 2008 was 7.5% (2007: 7.5%).

Note 6: Debtors and Other Receivables

 

 

2007/08

 

2007/08

 

2007/08

 

2006/07

 

 

 

Actual

 

Main
Estimates

 

Supp.
Estimates

 

Actual

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Debtor Crown

 

1,000

 

-

 

1,000

 

1,609

 

Trade debtors

 

258

 

120

 

150

 

51

 

GST receivables

 

-

 

115

 

-

 

-

 

Other receivables

 

-

 

-

 

-

 

150

 

Total debtors and other receivables

 

1,258

 

235

 

1,150

 

1,810

 

 

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

As at 30 June 2008 all overdue trade debtors have been assessed for impairment as detailed below (a provision is not required):

 

 

2007

 

2008

 

 

Gross

 

Impairment

 

Net

 

Gross

 

Impairment

 

Net

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Not past due

 

51

 

-

 

51

 

241

 

-

 

241

 

Past due 1-30 days

 

-

 

-

 

-

 

-

 

-

 

-

 

Past due 31-60 days

 

-

 

-

 

-

 

-

 

-

 

-

 

Past due 61-90 days

 

-

 

-

 

-

 

-

 

-

 

-

 

Past due > 91 days

 

-

 

-

 

-

 

17

 

-

 

17

 

Total

 

51

 

-

 

51

 

258

 

-

 

258

 

 

A provision for doubtful debts has not been calculated. No losses are expected for the Ministry’s pool of debtors.

Note 7: Property, Plant and Equipment

 

 

Computer Equipment

 

Office Equipment

 

Office Furniture

 

Leasehold Improvements

 

Works of Art

 

Total

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Cost or Valuation

 

 

 

 

 

 

Balance at 1 July 2006

500

148

311

727

20

1,706

Additions

62

32

54

357

-

505

Disposals

-

(10)

-

-

-

(10)

Balance at 30 June and 1 July 2007

562

 

170

 

365

 

1,084

 

20

 

2,201

 

Additions

83

16

173

229

-

501

Disposals

(25)

(18)

(158)

-

-

(201)

Other asset adjustment (rounding)

-

 

(1)

 

-

 

-

 

-

 

(1)

 

Balance at 30 June 2008

620

167

380

1,313

20

2,500

Accumulated Depreciation and Impairment Losses

 

 

 

 

 

 

Balance at 1 July 2006

315

99

293

439

-

1,146

Depreciation expense

99

21

8

84

-

212

Elimination on disposal

-

(10)

-

-

-

(10)

Impairment losses

-

-

-

-

-

-

Balance at 30 June and 1 July 2007

414

 

110

 

301

 

523

 

-

 

1,348

 

Depreciation expense

83

21

17

143

-

264

Elimination on disposal

(25)

(17)

(156)

-

-

(198)

Impairment losses

-

-

-

-

-

-

Balance at 30 June 2008

472

114

162

666

-

1,414

Carrying Amounts

 

 

 

 

 

 

At 1 July 2006

185

49

18

288

20

560

At 30 June and 1 July 2007

148

60

64

561

20

853

At 30 June 2008

148

53

218

647

20

1,086

Note 8: Intangible Assets

 

 

Acquired Software

 

 

 

$(000)

 

Cost or Valuation

 

 

Balance at 1 July 2006

 

241

 

Additions

 

39

 

Disposals

 

-

 

Balance at 30 June and 1 July 2007

 

280

 

Additions

 

52

 

Disposals

 

(167)

 

Other asset adjustment (rounding)

 

(1)

 

Balance at 30 June 2008

 

 

164

 

Accumulated Amortisation
and Impairment Losses

 

 

 

 

Balance at 1 July 2006

 

214

 

Depreciation expense

 

31

 

Elimination on disposal

 

-

 

Impairment losses

 

-

 

Balance at 30 June and 1 July 2007

 

245

 

Depreciation expense

 

54

 

Elimination on disposal

 

(167)

 

Impairment losses

 

-

 

Balance at 30 June 2008

 

132

 

Carrying Amounts

 

 

At 1 July 2006

 

27

 

At 30 June and 1 July 2007

 

35

 

At 30 June 2008

 

32

 

There are no restrictions over the title of the Ministry’s intangible assets, nor are any intangible assets pledged as security for liabilities.

Note 9: Creditors and Other Payables

 

 

2007/08

 

2007/08

 

2007/08

 

2006/07

 

 

 

Actual

 

Main
Estimates

 

Supp.
Estimates

 

Actual

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Trade creditors

943

315

430

351

PAYE payable

87

80

80

78

GST payable

13

-

85

85

Accrued expenses

397

250

250

272

Total creditors and payables

1,440

645

845

786

 

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.

Note 10: Employee Entitlements

 

 

2007/08

 

2007/08

 

2007/08

 

2006/07

 

 

 

Actual

 

Main
Estimates

 

Supp.
Estimates

 

Actual

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Current employee entitlements are represented by:

 

 

 

 

 

 

 

 

Annual leave

341

270

345

316

Long-service leave

52

10

50

45

Total current portion

393

280

395

361

Non-current employee entitlements are represented by:

 

 

 

 

Long-service leave

22

25

20

21

Retirement leave

94

108

70

69

Total non-current portion

116

133

90

90

Total employee entitlements

509

413

485

451

 

The present value of the retirement and long service leave obligations depends 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 are the discount rate and the salary inflation factor. Any changes in these assumptions will impact on the carrying amount of the liability.

In determining the appropriate discount rate the Ministry considered the interest rates on NZ Government Bonds which have terms to maturity that match, as closely as possible, the estimated future cash outflows. The salary inflation factor has been determined after considering historical salary inflation patterns and after obtaining advice from an independent actuary.

If the discount rate were to differ by 1% from the Ministry’s estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $23,000 higher/lower.

If the salary inflation factor were to differ by 1% from the Ministry’s estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $22,000 higher/lower.

Note 11: Repayment of Surplus

 

 

2007/08

 

2007/08

 

2007/08

 

2006/07

 

 

 

Actual

 

Main
Estimates

 

Supp.
Estimates

 

Actual

 

 

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Net surplus/(deficit)

 

1,241

 

 

 -

 

521 

 

Add:

 

Adjustment to intangible asset under NZ IFRS

 

 

 

-

 

 

-

 

 

-

 

 

655

Total repayment of surplus

 

1,241

 

-

 

-

 

1,176

 

Note 12: Financial Instruments

The Ministry is party to financial instrument arrangements as part of its everyday operations. These financial instruments include bank balances, trade debtors, trade creditors and foreign currency forward contracts on behalf of the Crown.

Credit Risk

Credit risk is the risk that a third party will default on its obligations to the Ministry, causing the Ministry to incur a loss.

In the normal course of its business the Ministry incurs credit risk from trade debtors and transactions with financial institutions.

The Ministry does not require any collateral or security to support financial instruments with financial institutions that the Ministry deals with as these entities have high credit ratings. For its other financial instruments the Ministry does not have significant concentrations of credit risk.

Fair Value

The fair value of financial instruments is equivalent to the carrying amount disclosed in the Statement of Financial Position.

Currency Risk

Currency risk is the risk that debtors and creditors due in foreign currency will fluctuate because of changes in foreign exchange rates. Owing to the nature and limited number of foreign exchange transactions undertaken, the Ministry has no significant exposure to currency risk.

Interest Rate Risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. This could impact on the return on investments or the cost of borrowing. The Ministry has no significant exposure to interest rate risk on its financial instruments.

Under section 46 of the Public Finance Act the Ministry cannot raise a loan without Ministerial approval, and no such loans have been raised. Accordingly, there is no interest rate exposure for funds borrowed (30 June 2007: Nil).

Liquidity risk

Liquidity risk is the risk that the Ministry will encounter difficulty raising liquid funds to meet commitments as they fall due.

In meeting its liquidity requirements, the Ministry closely monitors its forecast cash requirements with expected cash drawdowns from the New Zealand Debt Management Office. The Ministry maintains a target level of available cash to meet liquidity requirements.

The Ministry’s financial liabilities will be settled in less than six months. The amounts disclosed are the contractual undiscounted cash flows.

Note 13: Related-party Information

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

The Ministry enters into numerous 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 Ministry would have adopted if dealing with that entity at arm’s length in the same circumstance are not disclosed.

There was one close family member of a senior manager employed briefly by the Ministry during the year. The terms and conditions of this employment were no more favourable than the Ministry would have implemented in any other circumstances.

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

Note 14: Variance Explanations

Explanations for major variances from the Ministry’s estimated figures in the Statement of Intent are as follows.

Statement of Financial Performance

Personnel costs

Personnel costs are $464,000 higher than budgeted due to higher than expected increases in remuneration and higher than budgeted positions (at the time of preparing the 2007/08 main estimates). The increase in staff numbers was a result of capability funding received in the 2007 Budget. The breakdown of the capability funding was not known until well after the 2007/08 Main Estimates were submitted; therefore the budget for personnel costs in the Statement of Intent was underestimated.

Operating costs

Operating costs are $1.057 million lower than budgeted in the Statement of Intent mainly due to timing differences for various projects which span a number of financial years. Approval in-principle was obtained to carry forward unspent operating funding in the 2007/08 financial year to 2008/09 for:

·Te Ara – the Encyclopedia of New Zealand project ($350,000)

·NZLive.com (cultural portal project) ($260,000)

·New Zealand Memorial Park ($215,000)

·Strategic Policy Development and Sector Leadership ($150,000)

·Agency reviews ($135,000)

·International Cultural Diplomacy Programme ($90,000)

·From Memory War Oral History Programme ($30,000).

The above in-principle expense transfers total $1.230 million and account for the variance between the 2007/08 total expenses (Actual) and total revenue (Supplementary Estimates) recognised in the Statement of Financial Performance. The actual amount of expense transfers is restricted to the amount of unspent appropriation available under the outputs to which the above activities relate (refer Statement of Departmental Expenditure Against Appropriations).

The $1.241 million operating surplus was primarily generated from the timing differences mentioned above. This surplus will be returned to the Crown as required under the Public Finance Act 1989.

Statements of Financial Position and Cash Flows

Debtors and Other Receivables

Debtors and other receivables are $1.023 million higher than budgeted mainly due to the $1 million balance for Debtor Crown, which arose because $1 million revenue Crown was not drawn down from the NZDMO in relation to the in-principle expense transfers mentioned above.

Creditors and Payables

Creditors and other payables are $595,000 higher than budgeted due to creditors submitting final invoices for work that was not finalised until late June 2008, including: a leasehold reconfiguration, website development, contribution to the Anzac statue on Sydney Harbour bridge, agency assistance/reviews and legislative compliance. When preparing the budget figures for the Statement of Intent it was envisaged that these projects would be completed well before June 2008.

Employee Entitlements

The increase in total employee entitlements is mainly due to an increase in untaken annual leave, and milestone anniversaries being reached by some of the employees who are entitled to retirement leave.

Property, Plant and Equipment

Capital expenditure is $330,000 higher than budgeted due to expenditure on leasehold improvements. The nature and extent of the improvements was unknown at the time of preparing the Statement of Intent.

Working Capital

The Ministry’s working capital position in 2007/08 ($130,000) improved by $46,000 compared to 2006/07 ($84,000). Contributing factors include: capital expenditure totalling $553,000 in 2007/08 was partly funded by a capital injection of $250,000, and the residual capital expenditure was less than the depreciation and amortisation expense incurred; of the $553,000 capital expenditure incurred in 2007/08, approximately $395,000 was spent on leasehold improvements and furniture and fittings in the second half of 2007/08 that was not depreciated until the end of June 2008 when the project was finalised.

Statement of Cash Flows

Cash outflows for payments to suppliers was less than budgeted due to the timing differences and late submission of invoices mentioned above.

Note 15: Key Management Personnel Compensation

Total Remuneration

 

30 June 2008

 

30 June 2007

 

Salaries and other short-term employee benefits

 

1,461

 

1,256

 

Post-employment benefits

 

-

 

-

 

Other long-term benefits

 

30

 

-

 

Termination benefits

 

-

 

-

 

Total key management personnel compensation

 

1,491

 

1,256

 

 

Key management personnel include the Chief Executive and the nine senior managers (2007: eight senior managers).

Salaries and wages and other short-term employee benefits include salaries, allowances, employer contributions to superannuation and movement in annual leave.

Other long-term benefits include increases in long service leave liability and/or retirement leave liability. The net movement of nil for other long-term benefits in 2007 is due to an increase in retirement leave and long service leave for the year offset by an adjustment of the probability rates applied to retirement leave for one senior manager.

Note 16: Post Balance Date Events

There are no significant post balance date events to report.

Note 17: Explanation of Transition to New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)

The Ministry’s financial statements for the year ended 30 June 2008 are the first financial statements that comply with NZ IFRS. The Ministry has applied First-time Adoption of NZ IFRS (NZ IFRS 1) in preparing these financial statements. The Ministry’s transition date is 1 July 2006. The Ministry prepared its opening NZ IFRS balance sheet at that date. The reporting date of these financial statements is 30 June 2008. The Ministry NZ IFRS adoption date is 1 July 2007. In preparing the financial statements in accordance with NZ IFRS, the Ministry has applied the mandatory exceptions and no optional exemptions from full retrospective application of NZ IFRS.

The only mandatory exception from retrospective application that applies to the Ministry is the requirement for estimates under NZ IFRS at July 2006 and 30 June 2007 to be consistent with estimates made for the same date under NZ GAAP.

Reconciliation of Equity

The following table shows the changes in equity, resulting from the transition from previous NZ GAAP to NZ IFRS as at 1 July 2006 and 30 June 2007.

  Note

 

Previous

NZ GAAP
1 July 2006

Effect on transition to NZ IFRS
1 July 2006

 

NZ IFRS
1 July 2006

 

Previous
NZ GAAP
30 June 2007

 

Effect on transition to NZ IFRS

30 June 2007

NZ IFRS

30 June 2007

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

$(000)

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

1,506

 

-

 

1,506

 

507

 

-

 

507

 

Debtors and other receivables                 a

 

1,526

 

(115)

 

1,411

 

1,810

 

-

 

1,810

 

Prepayments

 

12

 

-

 

12

 

90

 

-

 

90

 

Total current assets

 

3,044

 

(115)

 

2,929

 

2,407

 

-

 

2,407

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment                 b

 

977

 

-

 

977

 

1,543

 

(690)

 

853

 

Intangible assets                                      c

 

-

 

-

 

-

 

-

 

35

 

35

 

Total non-current assets

 

977

 

-

 

977

 

1,543

 

(655)

 

888

 

Total assets

 

4,021

 

(115)

 

3,906

 

3,950

 

(655)

 

3,295

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Creditors and other payables                   a

 

786

 

(115)

 

671

 

786

 

-

 

786

 

Repayment of surplus

 

1,547

 

-

 

1,547

 

1,176

 

-

 

1,176

 

Employee entitlements

 

275

 

-

 

275

 

361

 

-

 

361

 

Total current liabilities

 

2,608

 

(115)

 

2,493

 

2,323

 

-

 

2,323

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Employee entitlements

 

133

 

-

 

133

 

90

 

-

 

90

 

Total non-current liabilities

 

133

 

-

 

133

 

90

 

-

 

90

 

Total liabilities

 

2,741

 

(115)

 

2,626

 

2,413

 

-

 

2,413

 

Net Assets

 

1,280

 

-

 

1,280

 

1,537

 

(655)

 

882

 

 

 

 

 

 

 

 

Taxpayers’ funds

 

 

 

 

 

 

 

General funds                                          b

 

1,280

 

-

 

1,280

 

1,537

 

(655)

 

882

 

Total taxpayers’ funds

 

1,280

 

-

 

1,280

 

1,537

 

(655)

 

882

 

Explanatory notes – Reconciliation of equity

a. Debtors and other receivables / creditors and other payables – GST receivable

Under previous NZ GAAP GST receivable ($115,000) was classified as a receivable (a current asset). NZ IFRS requires the Ministry to classify GST receivable as a credit to net GST payable (a current liability).

b. Property, plant and equipment – website

It was determined that a ministry website that was capitalised under previous NZ GAAP should be expensed under NZ IFRS in consideration of IAS 38 Intangible Assets and NZ SIC 32 Intangible Assets – Website Costs.

c. Intangible assets – computer software

Computer software was classified as property, plant and equipment under previous NZ GAAP. Computer software has been reclassified as an intangible asset on transition to NZ IFRS.

Reconciliation of Surplus

The following table shows the changes in the Ministry’s surplus, resulting from the transition from previous NZ GAAP to NZ IFRS for the year ended 30 June 2007.

 

 

 

Note

 

Previous NZ GAAP

30 June 2007

Effect on transition to NZ IFRS
30 June 2007

 

NZ IFRS

30 June 2007

 

 

 

$(000)

 

$(000)

 

$(000)

 

Income

 

 

 

 

 

Revenue Crown

 

 

15,921

 

-

 

15,921

 

Revenue other

 

 

572

 

-

 

572

 

Gains

 

a

 

-

 

4

 

4

 

Total income

 

 

16,493

 

4

 

16,497

 

 

 

 

 

 

Expenditure

 

 

 

 

 

Personnel costs

 

 

7,029

 

-

 

7,029

 

Depreciation and amortisation expense         

 

b

 

358

 

(115)

 

243

 

Capital charge

 

 

106

 

-

 

106

 

Other operating expenses

 

b

 

7,828

 

770

 

8,598

 

Total expenditure

 

 

15,321

 

655

 

15,976

 

Profit of disposal of assets

 

a

 

4

 

(4)

 

-

 

Net surplus/(deficit)

 

 

1,176

 

(655)

 

521

 

 

Explanatory notes - Reconciliation of surplus

a.Gain on disposal of assets

Under NZ IFRS gain on disposal of assets is recorded as a gain under income. Under GAAP gain/(loss) on disposal of assets was classified in a separate line item within the Statement of Financial Performance.

b.Depreciation and amortisation expense and loss on intangible asset

It was determined that a ministry website that was capitalised under NZ GAAP should be expensed under NZ IFRS in consideration of IAS 38 Intangible Assets and NZ SIC 32 Intangible Assets – Website Costs.

Statement of Cash Flows

Any adjustments to the statement of cash flows on transition to NZ IFRS are in relation to the items mentioned in the reconciliation of equity and reconciliation of surplus above.


Updated on 23rd July 2015