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Forecast Financial Statements
Statement of accounting policies
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Reporting entity
The Ministry of Fisheries is a Government Department as defined by section 2 of the Public Finance Act 1989. For the purposes of financial reporting the Ministry of Fisheries is a public benefit entity.
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Reporting period
The reporting period for these forecast financial statements is the year ended 30 June 2008.
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Basis of preparation
(a) Statement of compliance
These forecast financial statements have been prepared pursuant to section 38 of the Public Finance Act 1989. The financial statements comply with Applicable Financial Reporting Standards which include New Zealand equivalents to International Financial Reporting Standards (“NZIFRS”).
This is the first set of forecast financial statements prepared based on NZIFRS.
(b) Basis of measurement
The general accounting principles recognised as appropriate for the measurement and reporting of financial performance and financial position on an historical cost basis have been followed. The accrual basis of accounting has been used unless otherwise stated.
(c) Functional and presentation currency
These forecast financial statements are presented in New Zealand dollars ($) which is the Ministry's functional currency. All financial information presented in New Zealand dollars has been rounded to the nearest thousand.
(d) Use of estimates and judgements
The preparation of forecast financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
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Significant accounting policies
(a) Revenue
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer.
Rendering of services
The Ministry derives revenue through the provision of outputs to the Crown and for services to third parties. Such revenue is recognised when earned and is reported in the financial period to which it relates.
(b) Cost allocation
Those costs that can be specifically attributed to an output are charged directly to that output.
All other costs are assigned through a methodology introduced in 2003/04 that cascades input costs to outputs as illustrated below.
(c) Financial instruments
Non-derivative financial instruments
The Ministry is party to financial instruments as part of its normal operations. These financial instruments include cash, trade and other receivables and trade and other payables. All financial instruments are recognised in the Balance Sheet, and all revenues and expenses in relation to financial instruments are recognised in the Income Statement.
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified and approved.
Trade and other payables
Trade and other payables are stated at cost.
(d) Leased assets
Payments made under operating leases are recognised in the Income Statement on a systematic basis over the period of the lease.
(e) Property, plant and equipment
Motor vehicles and plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment in value.
Land, buildings and vessels are measured at deemed cost less accumulated depreciation. The deemed cost of land, buildings and vessels as at 30 June 2007, the date of transition to NZIFRS, was determined by reference to fair value, as established by an independent valuation for the Ministry of Fisheries in January and April 2003 respectively, with subsequent additions at cost.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
For the purpose of these financial statements, land and buildings, although owned by the Crown, are deemed as being owned by the Ministry as principal occupier or user.
Only property, plant and equipment with a cost in excess of $5,000 is capitalised.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised.
(f) Depreciation
Depreciation of property, plant and equipment, other than freehold land and work in progress, is provided on a straight-line basis at rates calculated to allocate the cost of an item, less any estimated residual value, over its estimated useful life. The estimated economic useful lives are:
| Buildings |
10-100 years |
| Motor vehicles |
up to 10 years |
| Vessels |
4-25 years |
| Plant and equipment |
up to 10 years |
The cost of leasehold improvements is capitalised and depreciated over the unexpired period of the lease or useful life, whichever is the shorter.
Items under construction are not depreciated. The total cost of a capital project is transferred to the appropriate asset class on its completion and then depreciated.
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
(g) Intangible assets
Software
Research costs are expensed as incurred.
Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Ministry intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.
The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the Income Statement when incurred.
Amortisation
Amortisation is recognised in the Income Statement on a straight-line basis over the estimated useful lives of the intangible assets from the date that they are available for use. The estimated economic useful lives are: Software development costs up to 10 years. The amortisation method is reviewed at each financial year-end.
(h) Provisions
A provision is recognised if, as a result of a past event, the Ministry has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
(i) Employee entitlements
Provision is made in respect of the Ministry's liability for annual leave, long service leave, retirement leave and sick leave.
Annual leave has been calculated on an actual entitlement basis at current rates of pay.
Employee entitlements to long service leave and retirement leave are recognised for all employees on the basis of a six monthly actuarial valuation based on the present value of expected future entitlements.
Sick leave has been recognised on the basis of the average number of days all employees have exceeded their annual entitlement, averaged over the last three financial years.
(j) Foreign currency
Foreign currency transactions are converted into New Zealand dollars at the exchange rate prevailing at the date of the transaction.
(k) Statement of cash flows
Cash means cash balances on hand and held in bank accounts.
Operating activities include cash received from all income sources of the Ministry, and record the cash payments made for the supply of goods and services.
Investing activities are those activities relating to the acquisition and disposal of non-current assets.
Financing activities comprise capital injections by, or repayment of capital to, the Crown.
(l) Goods and Services Tax (GST)
All financial information is expressed exclusive of GST, except for trade and other receivables, and trade and other payables, which are expressed inclusive of GST in the Balance Sheet.
The amount of GST payable to or due from the Department of Inland Revenue at balance date is included in trade and other payables or trade and other receivables as appropriate.
(m) Taxation
Government Departments are exempt from the payment of income tax in terms of the Income Tax Act 1994.
(n) Commitments
Future expenses and liabilities to be incurred on non-cancellable operating leases, fisheries and biodiversity research contracts and registry services contracts entered into at balance date are disclosed as commitments to the extent that they are equally unperformed obligations.
(o) Taxpayers' funds
This is the Crown's net investment in the Ministry.
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