for the year ended 30 June 2015

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NOTE 1: STATEMENT OF ACCOUNTING POLICIES

Reporting entity

The Ministry of Transport is a government department, as defined by section 2 of the Public Finance Act 1989 (PFA) and is domiciled and operates in New Zealand. The relevant legislation governing the Ministry’s operations includes the PFA. The Ministry’s ultimate parent is the New Zealand Crown.

In addition, the Ministry has reported the Crown activities which it administers.

The primary objective of the Ministry is to provide policy services to the public, rather than making a financial return. The Ministry has designated itself a public benefit entity for financial reporting purposes.

The financial statements of the Ministry are for the year ended 30 June 2015. The financial statements were authorised for issue by the Chief Executive of the Ministry on 30 September 2015.

The information in these financial statements comprises the revenue, expenses, assets and liabilities associated with the Ministry operating its Wellington, Auckland and Christchurch offices and the Milford Sound/ Piopiotahi Aerodrome for the year.

Basis of preparation

The financial statements have been prepared on a going concern basis, and the accounting policies have been applied consistently throughout the period.

Statement of compliance

The financial statements of the Ministry have been prepared in accordance with the requirements of the PFA, which includes the requirement to comply with New Zealand generally accepted accounting practice (NZ GAAP) and Treasury Instructions.

The financial statements have been prepared in accordance with Tier 1 PBE Accounting Standards (the Standards) and comply with these Standards.

These are the Ministry’s first financial statements prepared in accordance with the Standards. The Ministry has not applied any of the transitional provisions available in any of the Standards. There are no adjustments to any of the financial statements as a result of the transition to the Standards.

Presentation currency and rounding

The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of the Ministry is the New Zealand dollar.

Standards issued that are not yet effective and have not been early adopted

In May 2013, the External Reporting Board issued a new suite of PBE Accounting Standards for application by public sector entities for reporting periods beginning on or after 1 July 2014. The Ministry has applied these Standards in preparing the 30 June 2015 financial statements.

In October 2014, the Standards were updated to incorporate requirements and guidance for the not for profit sector. These updated Standards apply to PBEs with reporting periods beginning on or after 1 April 2015. The Ministry will apply these updated standards in preparing its 30 June 2016 financial statements. The Ministry expects there will be minimal or no change in applying these updated Standards.

Changes in accounting policies

There have been no changes in accounting policies during the financial year.

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Summary of significant accounting policies

Revenue – Crown and other

The Ministry derives revenue from the provision of outputs to the Crown and for services to third parties. The revenue is deemed to be exchange revenue for the purposes of these financial statements. Such revenue is recognised when earned and is reported in the financial period to which it relates. Revenue is measured at the fair value of the consideration received or receivable.

Capital charge

The Ministry recognises the capital charge as an expense in the period to which it relates.

Foreign currency transactions

The Ministry does not enter into foreign exchange contracts.

It translates foreign currency transactions into New Zealand dollars, using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year- end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the surplus or deficit.

Operating leases

An operating lease is where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item. Lease payments under an operating lease are recognised as an expense on a straight-line basis in the period in which they are incurred.

Financial instruments

The Ministry is party to financial instruments as part of its normal operations. These financial instruments include cash and bank balances, and accounts receivable and payable. Financial assets and financial liabilities are initially measured at fair value plus transaction costs, unless they are carried at fair value through profit or loss, in which case the transaction costs are recognised in the statement of comprehensive revenue and expense.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and deposits on call with banks with original maturities of three months or less, and are measured at their face value. The Ministry is only permitted to expend its cash and cash equivalents within the scope and limits of its appropriations.

Debtors, prepayments and other receivables

Short-term debtors, prepayments and other receivables are recorded at their face value, less any provision for impairment.

The Ministry considers a receivable impaired when there is objective evidence the Ministry will not be able to collect the amount due according to the original terms.

The amount of the impairment is the difference between the asset’s carrying amount and the present value of the amounts expected to be collected.

Property, plant and equipment

Property, plant and equipment consist of leasehold improvements, furniture and fittings, office equipment, and the Milford Sound/Piopiotahi Aerodrome.

Property, plant and equipment is shown at cost or valuation, less accumulated depreciation and impairment losses.

Individual assets costing more than $2,000 are capitalised. Assets of a lower cost are capitalised if they are part of a group, or if they are attractive, to improve the control over them.

Additions

The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to the Ministry and the cost of the item can be measured reliably.

In most instances, an item of property, plant and equipment is recognised at its cost. Where an asset is acquired through a non-exchange transaction, it is recognised at fair value, as at the date of acquisition.

Disposal

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the surplus or deficit. When a re-valued asset is sold, the amount included in the revaluation reserve in respect of the asset is transferred to taxpayers’ funds.

Revaluation

The Ministry does not revalue its assets, except for the Milford Sound/Piopiotahi Aerodrome, which is stated at optimised depreciated replacement cost as determined by an independent registered valuer. It is re-valued at least every five years. Additions between revaluations are recorded at cost.

The net revaluation result is credited or debited to other comprehensive revenue and expense and accumulated to an aerodrome asset revaluation reserve in equity. Where this would result in a debit balance in the aerodrome asset revaluation reserve, this balance is not recognised in other comprehensive revenue and expense, but is recognised in the surplus or deficit. Any subsequent increase on revaluation that reverses a previous decrease in value recognised in the surplus or deficit will be recognised first in the surplus or deficit, up to the amount previously expensed, and then recognised in other comprehensive revenue and expense.

The revaluation reserve will not be distributed without authorisation by the Crown.

Subsequent costs

Costs incurred subsequent to initial acquisition are capitalised only when it is probable future economic benefits or service potential associated with the item will flow to the Ministry and the cost of the item can be measured reliably.

The Ministry recognises the costs of day-to-day servicing of property, plant and equipment in the surplus or deficit as they are incurred.

Depreciation

Depreciation is provided on a straight-line basis on all property, plant and equipment, at rates that will write off the cost (or valuation) of the assets to their estimated residual values over their useful lives. The useful lives and associated depreciation rates of major asset classes have been estimated as follows:

Asset class

Useful life

Depreciation rate

Furniture and fittings

10 years

10% per annum

Leasehold improvements

12 years

8.3% per annum

Milford Sound/ Piopiotahi Aerodrome

3-100 years

1-33.3% per annum

Plant and equipment

2-10 years

10-50% per annum

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter.

Capital work in progress is not depreciated. The total cost of this work is transferred to the relevant asset category on the completion of the project and then depreciated.

The residual value and useful life of an asset is reviewed, and adjusted if appropriate, at each financial year end.

Intangible assets

Software acquisition and development

Individual assets costing more than $2,000 are capitalised. Assets of a lower cost are capitalised if they are part of a group, or if they are attractive, to improve the control over them.

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.

Costs directly associated with the development of software for internal use by the Ministry are recognised as an intangible asset. Direct costs include the software development, employee costs and an appropriate portion of relevant overheads. Costs associated with the development and maintenance of the Ministry’s website are recognised as an expense when incurred.

Costs associated with maintaining computer software are recognised as an expense when incurred. Costs of upgrades or updates are only capitalised when they increase the useful life or value of the software. Staff training cost is recognised as an expense when incurred.

Amortisation

The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each period is recognised in the surplus or deficit.

The useful lives and associated amortisation rates of software have been estimated as follows:

Asset class

Useful life

Depreciation Rate

Software

3-5 years

20-33.3% per annum

Capital work in progress is not amortised. The total cost of this work is transferred to the relevant asset category on the completion of the project and then amortised.

Impairment of property, plant and equipment and intangible assets

All of these Ministry assets are classed as non-cash- generating for impairment testing.

The only Ministry asset that generates a commercial return is the Milford Sound/Piopiotahi Aerodrome. The aerodrome assets are periodically re-valued, which precludes them from being classed as cash-generating.

An intangible asset not yet available for use at the balance sheet date is tested annually for impairment.

Property, plant and equipment and intangible assets that have a finite useful life are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell, and value in use.

Value in use is the depreciated replacement cost for an asset, where the future economic benefits or service potential of the asset are not primarily dependent on the asset’s ability to generate net cash inflows and where the entity would, if deprived of the asset, replace its remaining future economic benefits or service potential.

If an asset’s carrying amount exceeds its recoverable amount, the asset is impaired and the carrying amount is written down to the recoverable amount. The impairment loss is recognised in the surplus or deficit, as is the reversal of an impairment loss.

Creditors and other payables

Short-term creditors and other payables are recorded at their face value.

Employee entitlements

Employee entitlements include salaries and wages accrued up to balance date, annual leave earned but not yet taken at balance date, retirement and long service leave entitlements, and sick leave.

Presentation of employee entitlements

Employee entitlements expected to be settled within 12 months of the end of the period in which the employee renders the related service are classified as current liabilities. Employee entitlements expected to be settled beyond 12 months after the end of the reporting period in which the employee renders the related service, are classified as non-current liabilities.

Current liability for employee entitlements

These employee entitlements are measured at nominal values, based on accrued entitlements at current rates of pay.

The Ministry recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent the Ministry anticipates it will be used by staff to cover those future absences.

The Ministry recognises a liability and an expense for bonuses where it is contractually obliged to pay them, or where there is a past practice that has created a constructive obligation.

Non-current employee entitlements

These employee benefits are calculated on an actuarial basis. The calculations of likely future entitlements are based on:

  • years of service
  • years to entitlement
  • the likelihood that staff will reach the point of entitlement
  • contractual entitlements information
  • the present value of the estimated future cash flows

Expected future payments are discounted using market yields on Government bonds at balance date with terms to maturity that match, as closely as possible, the estimated future cash outflows for entitlements. The inflation factor is based on the expected long-term increase in remuneration for employees. The discount rates used are detailed below and are provided by the Treasury.

 

2014/15
%

2015/16
%

Outyears
%

Discount rate

2.93

2.81

4.39

Salary inflation factor %

2.00

3.00

3.00

Defined contribution superannuation schemes

Obligations for employer contributions to the State Sector Retirement Savings Scheme, Kiwisaver and the Government Superannuation Fund are accounted for as defined contribution schemes, and are recognised as an expense in the surplus and deficit as incurred.

Equity

Equity is the Crown’s investment in the Ministry, and is measured as the difference between total assets and total liabilities. Equity is disaggregated and classified as taxpayers funds and property revaluation reserves.

Property revaluation reserves

The reserve relates to the revaluation of Milford Sound/ Piopiotahi Aerodrome to fair value.

Provisions

The Ministry recognises a provision for future expenses of uncertain amount or timing when:

  • there is a present obligation (either legal or constructive) as a result of a past event
  • it is probable an outflow of future economic benefits will be required to settle the obligation and
  • a reliable estimate can be made of the amount of the obligation

Provisions are not recognised for deficits from future operating activity.

Provisions are measured at the present value of the expenditure and are discounted using market yields on Government bonds at balance dates with terms to maturity that match as closely as possible the estimated timing of future cash outflows. The increase in the provision due to the passage of time is recognised as a interest expense and is included in finance costs.

Goods and services tax (GST)

All items in the financial statements, including appropriation statements, are stated exclusive of GST, except for receivables and payables, which are stated on a GST inclusive basis. Where GST is not recoverable as input tax, it is recognised as part of the related asset or expense.

The net amount of GST recoverable from, or payable to, the Inland Revenue Department is included as part of receivables or payables in the statement of financial position.

The net GST paid to, or received from the Inland Revenue Department, including the GST relating to investing and financing activities, is classified as an operating cash flow in the statement of cash flows.

Commitments and contingencies are disclosed exclusive of GST.

Income tax

The Ministry is a public authority and so is exempt from the payment of income tax. Accordingly, no charge for income tax has been provided.

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 the payment to the Crown of the operating surplus achieved by the Ministry and any capital withdrawals or investments by the Crown.

Commitments

Expenses yet to be incurred on non-cancellable contracts entered into on or before balance date are disclosed as commitments, to the extent there are equally unperformed obligations.

Contingent liabilities and contingent assets

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

Statement of cost accounting policies

The Ministry has determined the cost of outputs, using the cost allocation system outlined below.

Types of cost

Direct costs are those costs directly attributed to an output. Indirect costs are those costs that cannot be identified with a specific output in an economically feasible manner.

Method of assigning direct costs to outputs

Direct costs, such as consultants, are charged to outputs on the basis of the cost of the service provided.

Personnel costs are allocated to outputs, based on the time recording data from the Ministry’s time recording system.

Method of assigning indirect costs to outputs

Indirect costs are allocated to outputs through a two- stage process. The costs are assigned to cost centres within the Ministry, and then the costs are allocated to outputs on the basis of the direct staff time attributable to the outputs of that cost centre.

Critical accounting estimates and assumptions

In preparing these financial statements, the Ministry has made estimates and assumptions about the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Retirement and long service leave

Note 13 provides an analysis of the exposure in relation to estimates and uncertainties surrounding retirement and long service leave liabilities.

Useful lives of property, plant and equipment and intangible assets

The Ministry determines the useful lives of assets based on its best assessment of the asset’s use.

Critical judgements in applying the Ministry’s accounting policies

Management has exercised the following critical judgements in applying the Ministry’s accounting policies for the year ended 30 June 2015.

Operating lease

Determining whether a lease agreement is a finance lease or an operating lease requires judgement as to whether the agreement transfers substantially all the risks and rewards of ownership to the Ministry. Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include renewal options in the lease term and determining an appropriate discount rate to calculate the present value of the minimum lease payments. Classification as a finance lease means the asset is recognised in the statement of financial position as property, plant and equipment. With an operating lease, no such asset is recognised.

The Ministry has exercised its judgement on the appropriate classification of its accommodation lease, and has determined it to be an operating lease.

Budget figures

The 2015 budget figures are for the year ended 30 June 2015 and were published in the 2013/14 annual report. They are consistent with the Ministry’s best estimate financial forecast information submitted to the Treasury for the Budget Economic Forecast Update (BEFU) for the year ending 30 June 2015.

The 2016 forecast figures are for the year ending 30 June 2016, and are consistent with the best estimate financial forecast information submitted to the Treasury for the Budget Economic Forecast Update (BEFU) for the year ending 30 June 2016.

The forecast financial statements have been prepared, as required by the PFA, to communicate forecast financial information for accountability purposes.

The budget and forecast figures are unaudited and have been prepared using the accounting policies adopted in preparing these financial statements.

The 30 June 2016 forecast figures have been prepared in accordance with PBE FRS 42 Prospective Financial Statements and comply with PBE FRS 42.

The forecast financial statements were approved for issue by the Chief Executive on 21 April 2015. The Chief Executive is responsible for the forecast financial statements, including the appropriateness of the assumptions underlying them and all other required disclosures.

While the Ministry regularly updates its forecasts, updated forecast financial statements for the year ending 30 June 2016 will not be published.

Significant assumptions used in preparing the forecast financials

The forecast figures contained in these financial statements reflect the Ministry’s purpose and activities and are based on a number of assumptions on what may occur during 2015/16. The forecast figures have been compiled on the basis of existing government policies and Ministerial expectations at the time the Main Estimates were finalised.

The main assumptions, which were adopted as at 21 April 2015, were as follows:

  • the Ministry’s activities and output expectations will remain substantially the same as the previous year, focusing on the Government’s priorities
  • estimated year-end information for 2014/15 was used as the opening position for the 2015/16 forecasts.
  • personnel costs were based on 151 full-time equivalent staff, which takes into account staff turnover
  • operating costs were based on historical experience and other factors believed to be reasonable in the circumstances and are the Ministry’s best estimate of future costs that will be incurred
  • remuneration rates are based on current wages and salary costs, adjusted for anticipated remuneration changes

The actual financial results achieved for 30 June 2016 are likely to vary from the forecast information presented, and the variations may be material.

Since the approval of the forecasts, there has been no significant change or event that would have a material impact on the forecasts.

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NOTE 2: REVENUE CROWN

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

-

Policy advice and related outputs multi category appropriation

29,597

30,843

30,186

30,843

31,855

Policy advice and related outputs multi class output appropriation

-

-

-

-

1,087

Search and rescue activity co-ordination PLA

1,201

1,201

1,201

1,201

429

Fuel excise duty refund administration

475

429

475

429

33,371

Total revenue Crown

31,273

32,473

31,862

32,473

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NOTE 3: OTHER REVENUE

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

70

From Crown entities

192

-

235

90

209

Other recoveries

237

230

236

230

279

Total other revenue

429

230

471

320

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NOTE 4: PERSONNEL EXPENSES

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

15,635

Salary and wages

15,379

16,300

15,600

15,900

556

Employer contributions to defined contribution schemes

561

560

560

560

36

Annual leave

88

-

-

-

(37)

Long service leave

28

90

90

90

(96)

Retirement leave

164

90

90

90

(1)

Sick leave

(1)

-

-

-

354

Other personnel costs

245

680

680

680

16,447

Total personnel expenses

16,464

17,720

17,020

17,320

Employer contributions to defined contribution plans include contributions to State Sector Retirement Savings Scheme, KiwiSaver, and the Government Superannuation Fund.

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NOTE 5: OTHER OPERATING EXPENSES

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

6,783

Consultant, research and legal expenses

4,623

5,578

5,926

5,957

2,667

Other operating expenses

2,500

1,989

2,125

2,079

1,677

Information technology expenses

1,822

1,700

1,700

1,700

1,476

Operating lease payments

1,585

1,580

1,580

1,580

237

Advertising and publicity

180

200

200

200

78

Audit NZ – the financial statement audit

81

86

86

86

10

Audit NZ – for project assurance services

-

-

-

-

1

Loss on disposal of assets

2

-

-

-

12,929

Total other operating expenses

10,793

11,133

11,617

11,602

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NOTE 6: CONTRACTUAL PAYMENTS TO CROWN ENTITIES

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

 

NZ Transport Agency:

       

899

For rules programme activity

899

899

899

899

429

For fuel excise duty refund activity

561

429

565

519

1,200

Civil Aviation Authority: for rules programme activity

1,200

1,200

1,200

1,200

899

Maritime New Zealand: for rules programme activity

899

899

899

899

3,427

Total contractual payments to Crown entities

3,559

3,427

3,563

3,517

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NOTE 7: 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 2015 was 8 percent (2014: 8 percent).

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NOTE 8: EQUITY

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

 

Taxpayers funds

       

1,947

Balance at 1 July

1,947

1,947

1,947

1,947

-

Net surplus/(deficit)

20

-

-

-

-

Provision to repay surplus

(20)

-

-

-

1,947

Balance 30 June

1,947

1,947

1,947

1,947

 

Aerodrome revaluation reserve

       

761

Balance at 1 July

761

761

761

863

-

Revaluation

102

-

102

-

761

Balance at 30 June

863

761

863

863

2,708

Total equity

2,810

2,708

2,810

2,810

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NOTE 9: DEBTORS, PREPAYMENTS AND OTHER RECEIVABLES UNDER EXCHANGE TRANSACTIONS

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

3,047

Due from the Crown

3,406

-

2,929

2,929

21

Other receivables under exchange transactions

48

15

21

21

3,068

Total debtors, prepayments and other receivables under exchange transactions

3,454

15

2,950

2,950

The carrying value of debtors, prepayments and other receivables approximates their fair value. Other receivables greater than 30 days in age are considered to be past due. No debtor is past due (2013/14: $ nil), and the Ministry has assessed that no provision for impairment is required (2013/14: $ nil).

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NOTE 10: PROPERTY, PLANT AND EQUIPMENT

 

Leasehold improvements
$000

Plant and equipment
$000

Aerodrome
$000

Furniture and fittings
$000

Total
$000

Unaudited Main Estimates
$000

Unaudited Supplementary Estimates
$000

Cost or valuation

             

Balance at 1 July 2013

2,170

1,263

1,345

842

5,620

5,621

5,621

Additions

-

111

-

3

114

100

114

Disposals

-

(66)

-

(12)

(78)

-

(79)

Balance at 30 June 2014

2,170

1,308

1,345

833

5,656

5,721

5,656

Balance at 1 July 2014

2,170

1,308

1,345

833

5,656

5,721

5,656

Additions

-

81

-

3

84

140

100

Revaluations

-

-

(35)

-

(35)

-

102

Disposals

-

(93)

-

-

(93)

-

-

Balance at 30 June 2015

2,170

1,296

1,310

836

5,612

5,861

5,858

Accumulated depreciation

             

Balance at 1 July 2013

1,550

865

93

643

3,151

3,152

3,152

Depreciation

149

159

25

77

410

404

410

Disposals

-

(66)

-

(10)

(76)

-

(77)

Balance at 30 June 2014

1,699

958

118

710

3,485

3,556

3,485

Balance at 1 July 2014

1,699

958

118

710

3,485

3,556

3,485

Depreciation

268

155

26

70

519

368

368

Revaluations

-

-

(137)

-

(137)

-

-

Disposals

-

(91)

-

-

(91)

-

-

Balance at 30 June 2015

1,967

1,022

7

780

3,776

3,924

3,853

Carrying amounts

             

At 1 July 2013

620

398

1,252

199

2,469

2,469

2,469

At 30 June and 1 July 2014

471

350

1,227

123

2,171

2,165

2,171

At 30 June 2015

203

274

1,303

56

1,836

1,937

2,005

Forecast at 30 June 2016 (unaudited)

211

285

1,284

14

1,794

   

Milford Sound/Piopiotahi Aerodrome (the aerodrome) was valued at 31 March 2015 by an independent valuer, M Gordon (BE Hons, MBA, CPEng, MIPENZ), of AECOM (NZ) Limited. This valuation was done on the basis of the aerodrome’s optimised depreciated replacement cost.

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NOTE 11: INTANGIBLE ASSETS

 

Purchased software
$000

Unaudited Main Estimates
$000

Unaudited Supplementary Estimates
$000

Cost

     

Balance at 1 July 2013

1,650

1,696

1,695

Additions

99

410

66

Balance at 30 June 2014

1,749

2,106

1,761

Balance at 1 July 2014

1,749

2,106

1,761

Additions

61

210

410

Disposals

(146)

-

-

Balance at 30 June 2015

1,664

2,316

2,171

Accumulated amortisation

     

Balance at 1 July 2013

1,416

1,417

1,416

Amortisation expense

216

209

216

Balance at 30 June 2014

1,632

1,626

1,632

Balance at 1 July 2014

1,632

1,626

1,632

Amortisation expense

74

209

55

Disposals

(146)

-

-

Balance at 30 June 2015

1,560

1,835

1,687

Carrying amounts

     

At 1 July 2013

234

279

279

At 30 June and 1 July 2014

117

480

129

At 30 June 2015

104

481

484

Forecast at 30 June 2016 (unaudited)

485

   

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

Work in progress

The total amount of software in the course of construction is nil. (2013/14: $11,590).

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NOTE 12: CREDITORS AND OTHER PAYABLES UNDER EXCHANGE TRANSACTIONS

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

1,502

Accrued expenses

1,669

1,500

2,000

2,000

870

Trade creditors under exchange transactions

245

83

389

389

264

GST payable

61

-

-

-

19

Revenue received in advance

21

-

-

-

2,655

Total creditors and other payables under exchange transactions

1,996

1,583

2,389

2,389

Creditors and other payables are non-interest bearing and are normally settled on the 20th of the next month, therefore the carrying value of creditors and other payables approximates their fair value.

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NOTE 13: EMPLOYEE ENTITLEMENTS

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

 

Current liabilities

       

498

Accrued salary

124

500

500

500

952

Annual leave

1,040

915

1,018

1,018

104

Long service leave

95

100

100

100

149

Retirement leave

221

86

86

86

31

Sick leave

30

31

31

31

1,734

Total of current portion

1,510

1,632

1,735

1,735

 

Non current liabilities

       

126

Long service leave

163

150

150

150

822

Retirement leave

914

999

798

798

948

Total of non-current portion

1,077

1,149

948

948

2,682

Total provision for employee entitlements

2,587

2,781

2,683

2,683

Accrued salary arises from the fortnightly paydays which do not equate to the year end. Days owed at 30 June 2015: 9 (2013/14:8).

Annual leave reflects the entitlement yet to be taken by staff.

Long service and retirement leave obligations are determined on an actuarial basis using several assumptions. Two key assumptions used are the discount rate and the salary inflation factor. Any changes in this assumption will impact on the carrying amount of the liability. The discount rate and inflation factors used are detailed in the accounting policies.

If the discount rate were to differ by one percent from the Ministry’s estimates, with all other factors held constant, the estimated carrying amount of the liability would be $95,000 higher/ lower.

If the inflation factor were to differ by one percent from the Ministry’s estimates, with all other factors held constant, the estimated carrying amount of the liability would be $107,000 higher/ lower.

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NOTE 14: PROVISION FOR LEASE MAKE-GOOD

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

684

Balance at 1 July

688

684

688

688

4

Discount unwind (Finance cost)

56

-

-

-

688

Balance at 30 June

744

684

688

688

At the expiry of the lease term for its leased premises, the Ministry is required to make good any damage caused to the premises and to remove any fixtures or fittings installed by the Ministry. The Ministry may have the option to renew the lease, which impacts on the timing of any cash outflows.

The finance cost reflects the annual cost incurred in making this provision and is based on an actuarial determination.

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NOTE 15: RECONCILIATION OF THE NET SURPLUS IN THE STATEMENT OF COMPREHENSIVE REVENUE AND EXPENSE WITH NET CASH FLOWS FROM OPERATING ACTIVITIES IN THE STATEMENT OF CASH FLOWS

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

-

Net surplus

20

-

-

-

 

Add non-cash items

       

410

Depreciation of property, plant and equipment

519

368

368

351

216

Amortisation of intangible assets

74

209

55

209

1

Loss on disposal of assets

2

-

-

-

627

Total of non-cash items

595

577

423

560

 

Add/(deduct) movements in working capital items

       

(2,940)

(Increase)/decrease in debtors and other receivables

(386)

-

118

-

952

Increase/(decrease) in payables and provisions

(603)

-

(265)

-

25

Increase/(decrease) in employee entitlements

(95)

-

-

-

(1,963)

Net movements in working capital items

(1,084)

-

(147)

-

(1,336)

Net cash flows from operating activities

(469)

577

276

560

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NOTE 16: RECONCILIATION OF CASH AND CASH EQUIVALENTS IN THE STATEMENT OF FINANCIAL POSITION WITH TOTAL CASH AT 30 JUNE IN THE STATEMENT OF CASH FLOWS

Total cash at 30 June each year in the Statement of cash flows matches cash and cash equivalents in the Statement of financial position at 30 June each year.

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NOTE 17: FINANCIAL INSTRUMENTS

The Ministry’s activities expose it to a variety of financial instrument risks, including market risk, credit risk, and liquidity risk. The Ministry has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions speculative in nature to be entered into.

Credit risk

Credit risk is the risk a third party will default on its obligation to the Ministry, causing the Ministry to incur a loss. In the normal course of its business, credit risk arises from debtors, deposits with banks, and derivative financial instrument assets. The Ministry is only permitted to deposit funds with Westpac, a registered bank, and enter into foreign exchange forward contracts with the New Zealand Debt Management Office. These entities have high credit ratings. For its other financial instruments, the Ministry does not have significant concentrations of credit risk.

The Ministry’s maximum credit exposure for each class of financial instrument is represented by the total carrying amount of cash and cash equivalents, net debtors, and derivative financial instrument assets. There is no collateral held as security against these financial instruments, including those instruments overdue or impaired.

Liquidity risk

Liquidity risk is the risk 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 draw downs from the New Zealand Debt Management Office. The Ministry maintains a target level of available cash to meet liquidity requirements.

The table below analyses the Ministry’s financial liabilities that will be settled, based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows, based on the liabilities in note 12.

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

2,655

Less than 6 months (note 12)

1,996

1,583

2,389

2,389

-

Greater than 6 months

-

-

-

-

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Market risk

Interest rate risk

Interest rate risk is the risk the fair value of a financial instrument will fluctuate, or the cash flows from a financial instrument will fluctuate, due to changes in market interest rates.

The Ministry has no exposure to interest rate risk because it has no interest-bearing financial instruments.

Currency risk

Currency risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Ministry has no exposure to currency risk because it does not enter into foreign exchange forward contracts.

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NOTE 18: CATEGORIES OF FINANCIAL INSTRUMENTS

The carrying amount of the financial assets and financial liabilities in each of the NZ IAS 39 categories are as follows:

Actual 2013/14
$000

 

Actual 2014/15
$000

Unaudited Main Estimates 2014/15
$000

Unaudited Supplementary Estimates 2014/15
$000

Unaudited forecast 2015/16
$000

 

Loans and receivables

       

3,365

Cash and cash equivalents

2,763

5,323

3,131

3,341

3,068

Debtors, prepayments and other receivables under exchange transactions (note 9)

3,454

15

2,950

2,950

 

Financial liabilities measured at amortised cost

       

2,655

Creditors and other payables under exchange transactions (note 12)

1,996

1,583

2,389

2,389

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NOTE 19: RELATED PARTY INFORMATION

The Ministry is a wholly-owned entity of the Crown. The Ministry has been provided with funding from the Crown of $31.2 million (2013/14: $33.4 million), for specific purposes as set out in the scopes of the relevant Government appropriations.

Related party disclosures have not been made for transactions with related parties within a normal supplier or client/ recipient relationship, on terms and condition no more or less favourable than those it is reasonable to expect the Ministry would have adopted, in dealing with the party at arm’s length in the same circumstances. Further, transactions with other Government agencies (for example, government departments and Crown entities) are not disclosed as related party transactions, when they are consistent with the normal operating arrangements between Government agencies and undertaken on the normal terms and conditions for such transactions.

Revenue was received from other entities controlled by the Crown as described in note 3. This was to reimburse the Ministry for costs.

The Ministry also purchases transport outputs from other transport entities controlled by the Crown. These transactions are detailed in note 6 of these financial statements.

Transactions with key management personnel

During 2014/15 and 2013/14, the Ministry did not enter into any transactions with key management personnel or their close families.

Key management personnel compensation

Actual 2013/14
$000

 

Actual 2014/15
$000

1,691

Salaries and other short-term employee benefits

1,730

82

Termination benefits

-

1,773

Total key management personnel compensation

1,730

At 30 June 2015, key management personnel includes the Chief Executive and the five members (2013/14: five members) of the senior management team. This is 6 FTE (2013/14: 6 FTE)

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NOTE 20: CAPITAL MANAGEMENT

The Ministry’s capital is its equity, which comprises tax-payers funds and the aerodrome revaluation reserve. Equity is represented by net assets.

The Ministry manages its revenues, expenses, assets, liabilities and general financial dealings prudently. The Ministry’s equity is largely managed as a by-product of managing income, expenses, assets, liabilities and compliance with the Government budget process and the Treasury instructions.

The objective of managing the Ministry’s equity is to ensure the Ministry effectively achieves the goals and objectives for which it has been established, whilst remaining a going concern.

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NOTE 21: MAJOR CHANGES TO THE DEPARTMENTAL OUTPUT BUDGETS

Changes were made to the Ministry’s departmental output budgets for 2014/15 by way of the Supplementary Estimates. Explanations for the changes were outlined in the 2014/15 Supplementary Estimates (page 769 onwards). The net changes appear in the following table.

Appropriations for departmental output expenses

Unaudited Main Estimates
$000

Unaudited Supplementary Estimates
$000

Cumulative Vote
$000

Policy advice and related outputs – multi category appropriation (MCA)

30,843

(506)

30,337

Fuel excise duty refund administration

429

136

565

Milford Sound/ Piopiotahi Aerodrome operation and administration

230

-

230

Search and rescue activity co-ordination PLA

1,201

-

1,201

Total departmental appropriations

32,703

(370)

32,333

The adjustments to the appropriations were:

  • reprioritisation of $0.58 million from the Policy advice and related outputs MCA – $0.49 million to non- departmental Vote Transport appropriations and $0.09 million to the Ministry of Social Development
  • additional revenue of $0.074 million in the Policy advice and related outputs MCA
  • additional revenue of $0.136 million for Fuel excise duty refund administration.

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NOTE 22: EXPLANATION OF MAJOR VARIANCES BETWEEN ACTUAL AND BUDGET FIGURES

The significant variances between the actual results and the figures included in the Supplementary Estimates of Appropriations for the year ended 30 June 2015 are:

Statement of comprehensive revenue and expense

Revenue Crown

The actual revenue Crown figure was $0.6 million below the Supplementary Estimates. This amount was not drawn because it was not required to fund expenditure.

Expenses

Personnel expenditure was $0.6 million below the Supplementary Estimates, due to turnover and vacancies.

Statement of financial position

Assets

Cash and cash equivalents were $0.4 million lower than the Supplementary Estimates due mainly to debtors being higher than anticipated.

Debtors, prepayments and other receivables

Debtors were $0.5 million higher than Supplementary Estimates. Drawing of some Crown revenue was deferred because the Ministry has sufficient cash to meet its needs in the short term.

Intangible assets

Intangible assets were $0.4 million lower than Supplementary Estimates. Forecast expenditure on the Ministry’s Document Management System has not started yet.

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NOTE 23: EXPLANATIONS OF MAJOR VARIANCES BETWEEN ACTUAL AND FORECAST 2015/16 FIGURES

The significant variances between the actual results and the forecast 2015/16 figures are:

Statement of comprehensive revenue and expense

Revenue Crown

Forecast 2015/16 Revenue Crown is $1.2 million higher than 2014/15 actual. This is a combination of:

  • reprioritisation of $0.580 million to non-departmental appropriations in 2014/15
  • $0.6 million was not required to fund expenditure in 2014/15.

Expenses

Forecast 2015/16 personnel expenses are $0.9 million higher than 2014/15 actual, due to a net of:

  • some $0.6 million not spent in 2014/15, due to turnover and vacancies
  • approximately $0.3 million for expected salary increases in 2015/16.

Statement of financial position

Assets

Forecast 2015/16 cash and cash equivalents is $0.6 million higher than 2014/15 actual, mainly due to debtors being forecast to be lower in 2015/16.

Debtors, prepayments and other receivables

Forecast 2015/16 debtors, prepayments and other receivables is $0.5 million lower than 2014/15 actual. Drawing of some 2014/15 Crown revenue was deferred because there was sufficient cash available to meet the Ministry’s needs in the short term.

Intangible assets

Forecast 2015/16 intangible assets is $0.4 million higher than 2014/15 actual. Forecast expenditure on the Ministry’s Document Management System has not started yet.

Forecast 2015/16 figures are not subject to audit.

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NOTE 24: EVENTS AFTER BALANCE SHEET DATE

No event has occurred since the end of the financial period (not otherwise dealt with in the financial statements) that has affected, or may significantly affect, the Ministry’s operations or state of affairs for the year ended 30 June 2015.

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