STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statutory Base

The forecast financial statements for the Ministry of Fisheries for the year ending 30 June 2006 contained in this report have been prepared in accordance with the requirements listed under section 38 of the Public Finance Act  1989, including the requirement to comply with generally accepted accounting practices (GAAP).

Reporting Entity

The Ministry of Fisheries is a Government Department as defined by section 2 of the Public Finance Act 1989. Measurement Basis The general accounting principles recognised as appropriate for the measurement and reporting of financial performance and financial position on an historical cobst basis, modified by the revaluation of certain property, plant and equipment, have been followed.

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.

Debtors and Receivables

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

Leased Assets

Payments made under operating leases are recognised in the Statement of Financial Performance on a systematic basis over the period of the lease.

Leases that transfer substantially all the risks and rewards incidental to ownership of an asset to the Ministry are classified as finance leases and are capitalised. All finance leases are required to be approved by the Minister of Finance.

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. While observing the same principles as previously used for assigning input costs, this methodology introduces a higher level of transparency to that process. It also provides for more detailed explanations of output costings and will promote a better understanding of year-on-year variations.

Property, Plant and Equipment

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) – cost less depreciation. Only property, plant and equipment with a cost in excess of $5,000 is 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:

Buildings		10-100 years
Motor vehicles up to		10 years
Vessels		4-25 years
Plant and equipment		up to 10 years
Leasehold improvements		up to 10 years

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.

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 that 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 non-current 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.

The amount of GST owing to, or due 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 the previous year.