­STATEMENTOF ACCOUNTING POLICIES

Reporting Entity

The Ministry of Fisheries is a Government Department as defined by section 2 of the Public Finance Act 1989.

These are the financial statements of the Ministry of Fisheries prepared pursuant to section 35 of the Public Finance Act 1989. In addition, the Ministry has reported on activity undertaken on behalf of the Crown and trust monies which it administers.

Measurement Basis

The general accounting principles recognised as appropriate for the measurement and reporting of financial performance and financial position on an historical cost basis, modified by the revaluation of certain property, plant and equipment, have been followed.

Specific Accounting Policies

Revenue

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.

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 new methodology introduced in 2003/04 that cascades input costs to outputs as illustrated below.

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While observing the same principles as previously used for assigning input costs, this new methodology introduces a higher level of transparency in that process.

It also provides for more detailed explanations of output costings and will promote a better understanding of year-on-year variations.

Debtors and Receivables

Receivables are recorded at estimated realisable value after providing for doubtful and uncollectable debts.

Operating Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Operating lease expenses are recognised on a systematic basis over the period of the lease.

Fixed Assets

Land and buildings are stated at fair value, as established by an independent valuation for the Ministry of Fisheries, with subsequent additions at cost. For the purpose of these financial statements, land and buildings, although owned by the Crown, are deemed to be owned by the Ministry as principal occupier or user. Land, buildings and vessels are revalued on a cyclical basis. All assets within these classes are revalued, at least every five years.

All other property, plant and equipment is stated at net book value (NBV) - i.e. Cost less depreciation. Only fixed assets with a cost in excess of $5,000 are capitalised.

Depreciation

Other than freehold land and work in progress, depreciation is provided on a straight line basis so as to allocate the depreciable cost (or valuation) of assets over their estimated useful lives. The estimated economic useful lives are:

The cost of leasehold improvements is capitalised and depreciated over the unexpired period of the lease, or the estimated remaining useful life of the improvements, whichever is 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.

Inventories

Inventories acquired for use in the provision of goods and services are expensed, except for bulk stocks which are capitalised and expensed when used. Inventories are valued at cost less provision for obsolescence where applicable.

Employee Entitlements

Provision is made in respect of the Ministry's liability for annual leave, long service leave and retirement 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 an annual actuarial valuation based on the present value of expected future entitlements.

Foreign Currency

Foreign currency transactions are converted into New Zealand dollars at the exchange rate at the date of the transaction.

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 noncurrent assets.

Financing activities comprise capital injections by, or repayment of capital to, the Crown.

Financial Instruments

The Ministry is party to financial instruments as part of its normal operations. These financial instruments include bank accounts, debtors and creditors.

All financial instruments are recognised in the Statement of Financial Position, and all revenues and expenses in relation to financial instruments are recognised in the Statement of Financial Performance.

Goods and Services Tax (GST)

All financial information in this document is expressed exclusive of GST, except for the items Debtors and Receivables, and Creditors and Payables, which are inclusive of GST in the Statement of Financial Position, Statement of Financial Performance and Statement of Cash Flows.

The amount of GST owing to or from the Department of Inland Revenue at balance date is included in Creditors and Payables or Debtors and Receivables as appropriate.

Taxation

Government Departments are exempt from the payment of income tax in terms of the Income Tax Act 1994.

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.

Contingent Liabilities

Contingent liabilities are disclosed at the point at which the contingency is evident.

Taxpayers' Funds

This is the Crown's net investment in the Ministry.

Changes in Accounting Policies

The accounting policies of the Ministry have not been changed since the last audited financial statements. All policies have been applied on a basis consistent with previous years.

Statement of significant assumptions

These statements have been compiled on the basis of Government policies and the Ministry's Statement of Intent 2004/08. The forecast financial statements comply with generally accepted accounting practice, as required by the Institute of Chartered Accountants of New Zealand. The forecasts have been prepared on the basis of assumptions about future events that are expected to take place within the forecast period.

Finally, the financial statements have been prepared based on assumptions that:

• the Ministry is a going concern

• activities are attributable to the reporting period

• the accrual basis of accounting has been used to record transactions.

Revenue Profile (inclusive of Crown activities)

This shows the prospective revenue flows from external sources to the Ministry and the Crown for the next fiscal period.

Statement of Forecast Expenditure by Output Class

This statement discloses the forecasted expenditure by the Ministry for the delivery of each output class.

The 2004/05 SOI shows an increase of $8,197 over the 2003/04 SOI. The following table provides the reasons for the difference.

Fiscal Trend of Services

The following table shows the trend in the costs of Ministry services over the period from 2002/03 to 2004/05. The research figures are the direct costs for the provision of research services and do not include any share of Ministry overheads.

Industry Contributions (including share of overheads)

This section shows the extent of industry contributions to the cost of delivery of the Ministry's outputs.

It is necessary to note that the above industry figures are gross numbers, and that several adjustments will be made to arrive at the actual industry contribution for the fishing year commencing on 1 October 2004. These include: a) application of the settlement credit related to unders and overs for the period 1994/95 to 30 June 2002

1. application of unders and overs for the 2002/03 and 2003/04 years, when determined

2. adjustment for carry forward of expenditure from 2003/04 to 2004/05

3. adjustments to the research programme as better information becomes available.

GST status of departmental output classes: reconciliation between Statement of Intent and Main Estimates for the year ending 30 June 2005

Explanatory notes: Generally accepted accounting practice is to present forecast financial statements exclusive of GST. When appropriated by Parliament, these expenses are inclusive of GST, in accordance with legislation. The table above presents a reconciliation from the (GST exclusive) Statement of Intent to the (GST inclusive) Main Estimates.

The amounts in the column headed Main Estimates correspond to the annual appropriations appearing in Part B1 of Vote Fisheries or Part B1 of Vote Biosecurity (Fisheries) in the Estimates of Appropriations for the year ending 30 June 2005.

The amounts in the column headed Statement of Intent correspond to "total expenses" for 2004/05 appearing in the Statement of Forecast Expenditure by Output Class shown on page 88 of this report. The figures included in the Statement of Intent represent the costs of fisheries services approved by the Minister of Fisheries in May 2004.

The differences between the SOI and the Main Estimates are explained in the following paragraphs: Items not included in this Statement of Intent

1. This relates to an increase in funding approved in the 2002 Budget for improved observer coverage to monitor incidental captures of seabirds in commercial fishing operations. Implementation of this activity is subject to consultation with fisheries stakeholders and so the amount is not included in the SOI.

2. An amount of $296 (excluding GST) has been included in the appropriations to fund the full implementation of the Serious Offences Unit new initiative. The Ministry intends to phase this initiative in over a period of three years. Implementation will be at 50% for 2004/05 and 2005/06, rising to 100% in 2006/07 and thereafter.

Adjustments after consultation

In terms of the Fisheries Act 1996, the Ministry of Fisheries is required to undertake an annual consultation process with iwi and other stakeholders on the fisheries services to be delivered in the forthcoming financial year. The consultation process starts from the distribution by the Ministry of the draft consultation document and concludes when the Minister of Fisheries makes formal decisions on the services to be provided.

Particular stages of the process cover:

• the Ministry responding to written questions on any matters needing clarification before the plenary meeting

• a plenary meeting where the proposed fisheries services can be discussed in an open forum

• the Ministry analysing and replying to issues raised by participants in written submissions

• presentation of formal advice to the Minister of Fisheries recommending the services to be provided in the following year. This advice paper also includes the written submissions from participants.

As a result of the consultation process for 2004/05, the Ministry recommended the deletion from the Statement of Intent of four fisheries research projects at a cost of $365. These are, however, still included in the Main Estimates figures in output class Fisheries Information and Monitoring.

Other adjustments in the column headed "Adjustments after consultation" were made to reflect changes in effort directed to Ministry outputs.

Statement of financial performance for the year ending 30 June

The Statement of Accounting Policies should be read in conjunction with these financial statements

Statement of financial position at 30 June

The Statement of Accounting Policies should be read in conjunction with these financial statements

Statement of cash flows for the year ending 30 June

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The Statement of Accounting Policies should be read in conjunction with these financial statements

Reconciliation of net cash flows from operating activities to net surplus/(deficit) in the Statement of Financial Performance for the year ending 30 June

The Statement of Accounting Policies should be read in conjunction with these financial statements

Statement of forecast movements in taxpayers' funds (equity) as at 30 June

Details of fixed assets by category as at 30 June 2005

Statement of forecast commitments as at 30 June