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Note 1: Statement of accounting policies

Reporting Entity

The Ministry of Transport (the Ministry) is a government department as defined by section 2 of the Public Finance Act 1989 and is domiciled in New Zealand.

The primary objective of the Ministry is to provide services to the public rather than making a financial return. Accordingly, the Ministry has designated itself as a public benefit entity for the purpose of the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

The financial statements of the Ministry are for the year ended 30 June 2010. The financial statements were authorised for issue by the Chief Executive of the Ministry on 30 September 2010.

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

Until 31 July 2008, the Ministry was responsible for the Motor Vehicle Registry and Revenue Management business and the Economic Compliance Unit, both of which were contracted out to Land Transport New Zealand. The Land Transport Management Act 2003 came into force on 1 August 2008. At that date, Land Transport New Zealand merged with Transit New Zealand to form the NZ Transport Agency and the ownership of the Motor Vehicle Register and the responsibilities of the Registrar function transferred to the new entity. The Chief Executive of the Ministry remains responsible for the collection, investigation and enforcement of road user charges and fuel excise duty refunds.

These financial statements have been prepared pursuant to section 35 of the Public Finance Act 1989.

In addition, the Ministry has reported the Crown activities which it administered throughout 2009/2010.

Basis of preparation

The financial statements of the Ministry have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand generally accepted accounting practice (NZ GAAP).

These financial statements have been prepared in accordance with, and comply with, NZ IFRS as appropriate for public benefit entities.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements. The financial statements have been prepared on an historical cost basis, modified by the revaluation of certain fixed assets.

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, amendments, and interpretations issued that are not yet effective and have not been early adopted and which are relevant to the Ministry, are:

  • NZ IAS 24 Related Party Disclosures (Revised 2009) replaces NZ IAS 24 Related Party Disclosures (Issued 2004) and is effective for reporting periods commencing on or after 1 January 2011. The revised standard:
    1. Removes the previous disclosure concessions applied by the Ministry for arms-length transactions between the Ministry and entities controlled or significantly influenced by the Crown. The effect of the revised standard is that more information is required to be disclosed about transactions between the Ministry and entities controlled or significantly influenced by the Crown.
    2. Provides clarity on the disclosure of related party transactions with Ministers of the Crown. Further, with the exception of the Minister of Transport, the Ministry will be provided with an exemption from certain disclosure requirements relating to transactions with other Ministers of the Crown. The clarification could result in additional disclosures should there be any related party transactions with Ministers of the Crown.
    3. Clarifies that related party transactions include commitments with related parties.
  • NZ IFRS 9 Financial Instruments will eventually replace NZ IAS 39 Financial Instruments: Recognition and Measurement. NZ IAS 39 is being replaced through the following three main phases: Phase 1 Classification and Measurement, Phase 2 Impairment Methodology, and Phase 3 Hedge Accounting. Phase 1 on the classification and measurement of financial assets has been completed and has been published in the new financial instrument standard NZ IFRS 9. NZ IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in NZ IAS 39. The approach in NZ IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the many different impairment methods in NZ IAS 39.The new standard is required to be adopted for the year ended 30 June 2014. The Ministry has not yet assessed the effect of the new standard and expects it will not be early adopted.

Capital charge

The capital charge is recognised as an expense in the period to which it relates.

Budget figures

The budget figures are those included in the Estimates 2009. In addition, the financial statements also present the updated budget information from the Supplementary Estimates.

Revenue

The Ministry derives revenue from 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. Revenue is measured at the fair value of the consideration received or receivable.

Leases

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 charged as expenses in 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 income.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and funds on deposit with banks and is measured at its face value.

Debtors and other receivables

Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate, less impairment changes.

Impairment of a receivable is established when there is objective evidence that the Ministry will not be able to collect amounts due according to the original terms of the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default in payments are considered indicators that the debtor is impaired. The amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of comprehensive income. Overdue receivables that are renegotiated are reclassified as current (ie not past due).

Property, plant and equipment

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

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

All fixed assets costing more than $2,000 are capitalised. They are valued at historical cost or estimated recoverable amount, less accumulated depreciation. Any write-down of an item to its recoverable amount is recognised in the statement of comprehensive income.

Additions

The cost of an item of 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 at no cost, or for a nominal cost, 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 statement of comprehensive income. When revalued assets are sold, the amounts included in the property, plant and equipment revaluation reserves in respect of those assets are transferred to general funds.

Revaluation

The Ministry does not revalue its assets, except for Milford Sound/Piopiotahi Aerodrome.

Milford Sound/Piopiotahi Aerodrome is stated at optimised depreciated replacement cost as determined by an independent registered valuer. Milford Sound/Piopiotahi Aerodrome is revalued at least every five years. Additions between revaluations are recorded at cost.

The result of revaluing Milford Sound/Piopiotahi Aerodrome is credited or debited to an asset revaluation reserve for that class of asset. Where a revaluation results in a debit balance in the revaluation reserve, the debit balance will be expensed in the statement of comprehensive income.

Subsequent costs

Costs incurred subsequent to initial acquisition are capitalised only when 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.

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 classes of assets have been estimated as follows:

Furniture and fittings 10 years  10% per annum 
Leasehold improvements 2-10 years  10-50% per annum 
Milford Sound/Piopiotahi Aerodrome 6-100 years  1-17% per annum 
Plant and equipment 3-10 years 10-33.3% 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 applicable, at each financial year end.

Intangible assets

Software acquisition and development

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

Costs associated with maintaining computer software are recognised as an expense when incurred. Costs that are 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.

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 statement of comprehensive income.

The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows:

 

Other software  3-5 years  20-33.3% per annum 
Crash analysis system  2 years  50% per annum 
Motor vehicle register 3 years  33.3% per annum 

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.

Impairment of non-financial assets

An intangible asset that is 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 that 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 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. For revalued assets the impairment loss is recognised against the revaluation reserve for that class of asset. Where that results in a debit balance in the revaluation reserve, the balance is recognised in the statement of comprehensive income.

For assets not carried at a revalued amount, the total impairment loss is recognised in the statement of comprehensive income.

The reversal of an impairment loss on a revalued asset is credited to the revaluation reserve. However, to the extent that an impairment loss for that class of asset was previously recognised in the statement of comprehensive income, a reversal of the impairment loss is also recognised in that statement.

For assets not carried at a revalued amount, the reversal of an impairment loss is recognised in the statement of comprehensive income.

Creditors and other payables

Creditors and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method.

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.

Current liability for employee entitlements

Employee entitlements that the Ministry expects to be settled within 12 months of balance date 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 that 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.

Long-term employee entitlements

Entitlements that are payable beyond 12 months, such as long service leave and retirement leave, have been calculated on an actuarial basis, using a model for use by government entities that was developed by the Treasury during 2008/09 in consultation with a firm of actuaries.

The calculations are based on:

  • likely future entitlements 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.

The discount rates used are detailed below and are in line with Treasury guidance.

  Year to 30 June 2011  Year to 30 June 2012  Outyears 
Discount rate % 3.48  4.45  6.00 
Salary inflation factor % 3.00  3.00  3.50 

Superannuation schemes

Defined contribution 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 statement of comprehensive income as incurred.

Taxpayers’ funds

Taxpayers’ funds are the Crown’s investment in the Ministry and are measured as the difference between total assets and total liabilities. Taxpayers’ funds are disaggregated and classified as general funds and asset revaluation reserves.

The Revaluation reserve - aerodrome relates to the revaluation of Milford aerodrome to fair value.

Provisions

The Ministry recognises a provision for future expenditure 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 that an outflow of future economic benefits will be required to settle the obligation
  • a reliable estimate can be made of the amount of the obligation.

Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.

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, then 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 (IRD) is included as part of receivables or payables in the statement of financial position.

The net GST paid to, or received from the IRD, 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

Government departments are exempt from income tax as public authorities. Accordingly, no charge for income tax has been provided for.

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 by or investments by the Crown.

Commitments

Expenses yet to be incurred on non-cancellable contracts that have been entered into on or before balance date are disclosed as commitments to the extent that 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 that are 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 16 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

Useful lives of assets are determined by the Ministry 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 2010.

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 accommodation leases, and has determined the lease arrangements to be operating leases.

Changes in accounting policies

The accounting policies have been applied consistently to all years presented in these schedules.

Certain items have been re-classified to conform to the current year’s presentation of the Ministry’s financial statements. These reclassifications do not have material impact on the substance of the information presented.

The Ministry has adopted one revision to accounting standards during the year, which has had only a presentational or disclosure effect.

NZ IAS 1 Presentation of Financial Statements (Revised 2007) replaces NZ IAS 1 Presentation of Financial Statements (Issued 2004). The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics and introduces a statement of comprehensive income. The statement of comprehensive income will enable readers to analyse changes in equity resulting from non-owner changes separately from transactions with owners. The Ministry has decided to prepare a single statement of comprehensive income for the year ended 30 June 2010 under the revised standard. Financial statement information for the year ended 30 June 2009 has been restated accordingly. Items of other comprehensive income presented in the statement of comprehensive income were previously recognised directly in the statement of changes in equity.

Note 2: Revenue Crown

 

Actual 2008/09
$000
 Actual 2009/10
$000
27,817 Policy advice  27,199 
 3,517 Sector leadership and support 2,315 
 - Land transport revenue forecasting and strategy 615 
 238 Distress radio beacons national education campaign
 365 Next steps review implementation
 31,937 Total revenue Crown 30,129 

Note 3: Revenue from fees

 

Actual 2008/09
$000 
 Actual 2009/10
$000 
17,688  Road user charges collection, investigation and enforcement  17,344 
916  Land transport revenue forecasting and strategy 1,000 
392  Refund of fuel excise duty 429 
18,996  Total revenue from fees 18,773 

The above revenue replaced the Motor Vehicle Registry and Revenue Management output class from 1 July 2008. The revenue shown for 2008/09 is for the eleven months to 30 June 2009 (note 5).

Note 4: Other revenue

Actual 2008/09
$000 
 Actual 2009/10
$000
495  Departmental 625 
1,897  Crown entities 89 
73  Other recoveries 96 
2,465  Total other revenue 810 

The decrease in revenue from Crown entities is mainly due to $800,000 received for the road user charges review from the NZ Transport Agency and $1,016,000 from the Accident Compensation Corporation received for the Motor Vehicle Registry and Revenue Management output class in 2008/09. This output class ceased on 31 July 2008 (note 5).

Note 5: Revenue from the National Land Transport Fund

In prior years, the Ministry received funding from the National Land Transport Fund (the Fund) to cover the cost of the Motor Vehicle Registry and Revenue Management output class. On 1 August 2008, the funding regime changed with the transfer of the Motor Vehicle Register to the NZ Transport Agency and the cessation of this appropriation from 31 July 2008. Thus the revenue shown for 2008/09 is for July 2008 only.

Note 6: Contractual payments to Crown entities

 

Actual 2008/09
$000
 Actual 2009/10
$000
  NZ Transport Agency:  
17,688  For road user charges collection, investigation and enforcement activity 17,344 
1,013  For rules programme activity 813 
392  For refund of fuel excise duty 429 
4,670  For motor vehicle registry and revenue management activity
1,438  Civil Aviation Authority for rules programme activity 1,541 
857  Maritime New Zealand for rules programme activity 710 
26,058  Total contractual payments to Crown entities 20,837 

Note 7: Personnel expenses

 

Actual 2008/09
$000
 Actual 2009/10
 $000 
17,257  Salary and wages 16,423 
502  Employer contribution to defined contribution schemes 489 
253  Annual leave 207 
21  Long service leave 11 
Retirement leave (12) 
Sick leave 31 
370  Other personnel costs 259 
18,409  Total personnel expenses 17,408 

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

Note 8: Other operating expenses

 

Actual 2008/09
$000
 Actual 2009/10
$000
5,624  Professional and specialist services 4,947 
2,547  Other operating expenses 2,014 
1,407  Operating lease payments 1,565 
1,787  Computer bureau and software licence fees 1,581 
306  Advertising and publicity 244 
65  Audit feed for the financial statement audit 71 
11,736  Total other operating expenses 10,422 

Note 9: 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 2010 was 7.5 percent (2009: 7.5 percent).

Note 10: Taxpayer’s funds

Actual 2008/09
$000
 Actual 2009/10
$000 
  General funds   
9,371  Balance at 1 July 2,381 
Net surplus / (deficit)
(6,990)  Capital withdrawal (26) 
2,381  Balance at 30 June 2,355 
  Revaluation reserve-aerodrome  
603  Balance at 1 July 603 
Revaluation gains 158 
603  Balance as at 30 June 761 
2,984  Total taxpayers' funds 3,116 

An amount of $26,000 was repaid to the Crown during the year as the Ministry’s contribution towards the funding of the Identity Verification Services. In 2008/09, $6,990,000 was repaid to the Crown being the proceeds of $3,019,000 from the sale of the Motor Vehicle Register to the NZ Transport Agency, plus unspent depreciation on the register of $3,971,000.

Note 11: Debtors and other receivables

Actual 2008/09
$000
 Actual 2009/10
$000 
2,567  Crown  3,206 
263  Other 248 
2,830  Total debtors and other receivables 3,454 

As at 30 June 2010 the Ministry was owed money by the Crown, as Crown revenue was only drawn down as required.

The carrying value of debtors and other receivables approximates their fair value. No debtor is past due, and the Ministry has assessed that no provision for impairment is required.

Note 12: Property, plant and equipment

Leasehold improvements
$000 
Plant and equipment
$000 
Milford Sound/ Piopiotahi Aerodrome
$000 
Furniture and fittings
$000 
Total
$000 
Cost or valuation           
Balance at 1 July 2008 2,170  1,722  702  944  5,538 
Additions 143  330  480 
Disposals (195)  (112)  (307) 
Balance at 30 June 2009 2,170  1,670  1,032  839  5,711 
Balance at 1 July 2009 2,170  1,670  1,032  839  5,711 
Additions 191  190  385 
Net increase in revaluation 123  123 
Disposals (317)  (317) 
Balance at 30 June 2010 2,170  1,544  1,345  843  5,902 
Accumulated depreciation          
Balance at 1 July 2008 464 1,285 22 336 2,107
Depreciation expense 218 234 7 84 543
Disposals - (195) - (93) (288)
Balance at 30 June 2009 682 1,324 29 327 2,362
Balance at 1 July 2009 682 1,324 29 327 2,362
Depreciation expense 217 193 13 82 505
Reverse accumulated depreciation on revalutation - - (35) - (35)
Disposals - (317) - - (317)
Balance at 30 June 2010 899 1,200 7 409 2,515
Carrying amounts          
At 1 July 2008 1,706 437 680 608 3,431
At 30 June and 1 July 2009 1,488 346 1,003 512 3,349
At 30 June 2010 1,271 344 1,338 434 3,387

Milford Sound/Piopiotahi Aerodrome was valued as at 31 March 2010 by an independent valuer, G.Hughson (BE,MIPENZ), of Maunsell Ltd.

The total fair value of the aerodrome at that date was $1.3 million resulting in a gain on revaluation of $0.158 million. The net increase in revaluation was $0.123 million after setting off the reversal of accumulated depreciation on the date of valuation of $0.035 million.

Note 13: Intangible assets

 

 Motor Vehicle Register
$000 
Crash analysis system
$000 
Other software
$000 
Total 
$000 
Cost         
Balance at 1 July 2008 33,386  408  791  34,585 
Additions 267  456  723 
Disposals (33,653)  (115)  (33,768) 
Balance at 30 June 2009 408  1,132  1,540 
Balance at 1 July 2009 408  1,132  1,540 
Additions 133  133 
Balance at 30 June 2010 408  1,265  1,673 
Accumulated depreciation        
Balance at 1 July 2008 30,459  408  371  31,238 
Amortisation expense 175  172  347 
Disposals (30,634)  (115)  (30,749) 
Balance at 30 June 2009 408  428  836 
Balance at 1 July 2009 408  428  836 
Amortisation expense 297  297 
Balance at 30 June 2010 408  725  1,133 
Carrying amounts        
At 1 July 2008 2,927  420  3,347 
At 30 June and 1 July 2009 704  704 
At 30 June 2010 540  540 

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

Note 14: Finance cost

 

Actual 2008/09
$000
 Actual 2009/10
$000 
- Discount unwind on provisions (note 17)  20 
 - Total finance cost 20 

Note 15: Creditors and other payables

Actual 2008/09
$000
 Actual 2009/10
$000 
1,976  Accrued expenses  3,230 
395  Trade creditors 741 
(102)  GST payable 371 
2,269  Total creditors and other payables 4,342 

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 16: Employee entitlements

Actual 2008/09
$000
 Actual 2009/10
$000 
  Current liabilities   
847  Annual leave 987 
95  Long service leave 112 
11  Retirement leave 26 
Sick leave 31 
953  Total of current portion 1,156 
  Non-current liabilities  
140  Long service leave 134 
330  Retirement leave 304 
470  Total of non-current portion 438 
1,423  Total provision for employee entitlements 1,594 

The present values of the long service and retirement leave obligations depend 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 include 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 1 percent from the Ministry’s estimates, with all other factors held constant, the estimated carrying amount of the liability would be $33,000 higher/lower.

If the inflation factor were to differ by 1 percent from the Ministry’s estimates, with all other factors held constant, the estimated carrying amount of the liability would be $41,000 higher/lower.

Note 17: Provision for lease make-good

Actual 2008/09
$000 
 Actual 2009/10
$000 
552  Opening balance 1 July  552 
Discount unwind (note 14) 20 
552  Balance at 30 June 2010 572 

In respect of its leased premises, the Ministry is required at the expiry of the lease term 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 these leases, which impacts on the timing of expected cash outflows.

Note 18: Reconciliation of the net surplus in the Statement of comprehensive income with net cash flows from operating activities in the Statement of cash flows for the year ended 30 June 2010

 

Actual 2008/09
$000
 Actual 2009/10
$000 
Net surplus 
  Add non-cash items  
543  Depreciation of property, plant and equipment 505 
347  Amortisation of intangible assets 297 
890  Total of non-cash items 802 
  Add/ (deduct) movements in working capital items  
(Increase)/decrease in prepayments
(216)  (Increase)/decrease in debtors and other receivables (625) 
(1,251)  Increase/(decrease) in payables and provisions 2,093 
Increase/(decrease) in employee entitlements 171 
(1,456)  Net movements in working capital items 1,639 
  Add/(deduct) items classified as investing activities  
Loss on non-current assets held for sale
38  Work in progress expensed
19  (Profit)/loss on disposal of property, plan and equipment
58  Total of investing activities
(508)  Net cash flows from operating activities 2,441 

Note 19: 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 that are speculative in nature to be entered into.

Credit risk

Credit risk is the risk that 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 and deposits with banks.

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 and net debtors. There is no collateral held as security against these financial instruments, including those instruments that are overdue or impaired.

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 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 15.

 

Actual 2008/09
$000
 Actual 2009/10
$000
2,269  Less than 6 months  4,342 
Greater than 6 months

Market risk

Interest rate risk

Interest rate risk is the risk that 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 that 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.

Note 20: 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 2008/09
$000
 Actual 2009/10
$000 
  Loans and receivables   
345  Cash and cash equivalents 2,155 
2,830  Debtors and other receivables (note 11) 3,454 
     
  Financial liabilities measured at amortised cost  
2,269  Creditors and other payables 4,342 

Note 21: Related party information

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

The Ministry enters into 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 and 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 dealings with that entity at arm’s length in the same circumstance are not disclosed.

Key management personnel compensation

Actual 2008/09
$000
 Actual 2009/10
$000 
1,922  Salaries and other short-term employee benefits  1,420 
Other long-term benefits
340  Termination benefits
2,269  Total key management personnel compensation 1,420 

At 30 June 2010 key management personnel include the Chief Executive and the four members (2009: 6 members) of the senior management team. The decrease in the cost is due to reduction in number of members and the reorganisation.

Key management personnel compensation excludes the remuneration and other benefits the Minister and the Associate Minister of Transport receive. The Minister’s and Associate’s remuneration and other benefits are not received only for their roles as members of the key management personnel of the Ministry. Their remuneration and other benefits are set by the Remuneration Authority under the Civil List Act 1979 and are paid under Permanent Legislative Authority, and not paid by the Ministry of Transport.

Note 22: Capital management

The Ministry’s capital is its equity (or taxpayers’ funds), which comprise general funds and revaluation reserves. 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.

Note 23: Major changes to the departmental output budgets

Changes were made to the Ministry’s departmental output budgets for the year 2009/10 by way of the Supplementary Estimates. The net changes appear in the following table.

 

 Main Estimates
$000 
Supplementary Estimates
$000
Cumulative Vote
$000 
Appropriations for departmental output expenses       
Policy advice 31,366  (287)  31,079 
Road user charges collection, investigation and enforcement 17,344  17,344 
Refund of fuel excise duty 429  429 
Land transport revenue forecasting and strategy 1,000  700  1,700 
Airport operation and administration 200  50  250 
Sector leadership and support 1,950  550  2,500 
Total departmental appropriations 52,289  1,013  53,302 

 

Explanations for the major changes were outlined in the 2009/10 Information Supporting the Supplementary Estimates.

The total departmental appropriations increased due to a carry forward of $0.65 million from 2008/09, and an increase in other revenue of $0.36 million due mainly to cost recoveries. This funding was allocated to the Policy Advice output class. During the year, funding was transferred from Policy Advice to other output classes to reflect the actual activity expected in each one.

Note 24: Explanation of major variances between actual and budget figures

The significant variances between the actual results and the figures included in the Estimates of Appropriations for the year ended 30 June 2010 are:

Statement of Comprehensive Income

Revenue Crown increased by $0.66 million between the Main Estimates and the Supplementary Estimates. The main reason for this is a carry forward of $0.65 million from 2008/09. The actual figure was $3.58 million below the Supplementary figure because the amount was not required.

Other revenue increased by $0.35 million between the Main Estimates and the Supplementary Estimates. This was due to an increase in other revenue earned in the year.

Other operating expenses increased between the Estimates and the

Supplementary Estimates to reflect the funds carried forward from 2008/09 and the additional other revenue. Actual expenditure was less than this as the Ministry acted to control its expenditure in the current economic climate.

Statement of Financial Position (and Cash Flows)

Cash and bank balances were $1 million lower than budget and $0.9 million lower than the Supplementary Estimates mainly due to the movement in current assets and current liabilities.

Debtors and other receivables were $3.1 million over budget and $3.1 million over the Supplementary Estimates mainly due to the balance due from the Crown for Crown revenue of $3.206 million (budget $nil).

Note 25: 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 2010.

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