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The Ministry of Foreign Affairs and Trade (‘the Ministry’) is a New Zealand Government department as defined by section 2 of the Public Finance Act 1989.
In addition, the Ministry has reported on Crown activities and trust monies which it administers.
The Ministry manages the Government’s business with foreign countries and their governments, and with international organisations. The primary objective of the inistry is to provide services to the Government rather than making a financial return. Accordingly, the Ministry has designated itself as a public benefit entity for the purposes of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).
The reporting period for these financial statements is the year ended 30 June 2012. The financial statements were authorised for issue by the Chief Executive on 28 September 2012.
These financial statements have been prepared in accordance with the requirements of the Public Finance Act 1989, and with New Zealand generally accepted accounting practice (NZ GAAP and Treasury Instructions).
These financial statements have been prepared in accordance with NZ GAAP as appropriate for public benefit entities and they comply with NZ IFRS.
These financial statements have been prepared on an historical cost basis, modified by the revaluation of certain assets and liabilities including land and buildings and derivative financial instruments to fair value.
The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of the Ministry is New Zealand dollars (NZ$).
The Ministry has adopted the following revision to accounting standards during the financial year, which have had only a presentational or disclosure effect:
NZ IAS 1 Presentation of Financial Statements – The amendments introduce a requirement to present, either in the statement of changes in equity or the notes, for each component of equity, an analysis of other comprehensive income by item. The Ministry has presented this analysis in note 9.
Standards, amendments and interpretations issued that are not yet effective and have not been adopted include:
The Minister of Commerce has approved a new Accounting Standards Framework (incorporating a Tier Strategy) developed by the External Reporting Board (XRB). Under this Accounting Standards Framework, the Ministry is classified as a Tier 1 reporting entity and it will be required to apply full Public Benefit Entity Accounting Standards (PAS). These standards are being developed by the XRB based on current International Public Sector Accounting Standards. The effective date for the new standards for public sector entities is expected to be for reporting periods beginning on or after 1 July 2014. This means the Ministry expects to transition to the new standards in preparing its 30 June 2015 financial statements. As the PAS are still under development, the Ministry is unable to assess the implications of the new Accounting Standards Framework at this time.
Due to the change in the Accounting Standards Framework for public benefit entities, it is expected that all new NZ IFRS and amendments to existing NZ IFRS will not be applicable to public benefit entities. Therefore, the XRB has effectively frozen the financial reporting requirements for public benefit entities up until the new Accounting Standard Framework is effective. Accordingly, no disclosure has been made about new or amended NZ IFRS that exclude public benefit entities from their scope.
The preparation of financial statements in conformity with NZ IFRS requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.i The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Revenue is measured at the fair value of consideration received or receivable.
Revenue earned from supply of outputs to the Crown is recognised as revenue when earned.
Services to third parties is recognised at balance date on a straight-line basis over the specified period for the services unless an alternative method better represents the stage of completion of the transaction.
The sale of publications is recognised when the publication is sold to the customer. The recorded revenue is the gross amount of the sale.
Interest income is accrued using the effective interest rate method. The effective interest rate exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. The method applies this rate to the principal outstanding to determine interest income each period.
Rental receipts are recognised as income on a straight-line basis over the term of the lease. All rental income is derived from other government agencies at the Ministry’s overseas posts. No lease incentives have been granted.
Where a physical asset is acquired for nil or nominal consideration the fair value of the asset received is recognised as income when control over the asset is obtained.
Where grants are discretionary until payment, the expense is recognised when the payment is advised. Otherwise, the expense (and corresponding liability) is recognised when the Ministry does not have discretion over the payment. For example, for grants with conditions attached, the expense/liability is recognised when the specified criteria have been fulfilled and notice has been given to the Ministry. For grants without conditions attached, the expense/liability is recognised when the Ministry has an unconditional obligation to make payment.
Interest expense is accrued using the effective interest rate method. The effective interest rate exactly discounts estimated future cash payments through the expected life of the financial liability to that liability’s net carrying amount. The method applies this rate to the principal outstanding to determine interest expense each period.
Foreign currency transactions (including those for which forward exchange contracts are held) are translated into the functional currency 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.
Non-monetary assets and liabilities measured at historical cost in a foreign currency at fair value are translated into New Zealand dollars at the exchange rate applicable at the fair value date. The associated foreign exchange gains or losses follow the fair value gains directly to an asset revaluation reserve in equity.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method (refer interest revenue policy). Loans and receivables issued with a duration of less than 12 months are recognised at their nominal value, unless the effect of discounting is material. Allowances for estimated irrecoverable amounts are recognised when there is objective evidence that the asset is impaired. Interest, impairment losses, and foreign exchange gains and losses are recognised in the surplus or deficit.
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.
Cash and cash equivalents include cash on hand, cash in transit, bank accounts, and deposits with a maturity of no more than three months from date of acquisition.
Financial liabilities are recognised initially at fair value less transaction costs and material liabilities are subsequently measured at amortised cost using the effective interest rate method (refer interest expense policy). Financial liabilities entered into with a duration of less than 12 months are recognised at their nominal value. Amortisation and, in the case of monetary items, foreign exchange gains and losses, are recognised in the surplus or deficit as is any gain or loss when the liability is derecognised.
The Ministry uses derivative financial instruments to hedge its exposure to foreign exchange movements. In accordance with its Foreign Exchange Management Policy, the Ministry does not hold or issue derivative financial instruments for trading purposes. The Ministry has not adopted hedge accounting.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value on each balance date. They are reported as either assets or liabilities depending on whether the derivative is in a net gain or net loss position respectively. Movements in the fair value of derivative financial instruments are recognised in the surplus or deficit.
The full fair value of a foreign exchange derivative is classified as current if the contract is due for settlement within 12 months of balance date. Otherwise, foreign exchange derivatives are classified as non-current.
All items in the financial statements, including appropriation statements, are stated exclusive of GST except for Creditors and Payables and Debtors and Receivables, 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 amount of GST owing to, or owed by Inland Revenue at balance date, being the difference between Output GST and Input GST, is included in Creditors and Payables or Debtors and
Receivables (as appropriate).
Commitments and contingencies are disclosed exclusive of GST.
The budget figures are those included in the information Supporting the Estimates of Appropriations for the Government of New Zealand for the year ended 30 June 2012, which are consistent with the financial information in the Main Estimates. In addition, the financial statements also present the updated budget information from the Supplementary Estimates and the estimated Actuals in the 2012/13 Estimates of Appropriation. The budget figures have been prepared in accordance with NZ GAAP, using accounting policies that are consistent with those in preparing these financial statements.
The Main Estimates are the original forecast for the financial year, as tabled in Parliament on 19 May 2011. The Supplementary Estimates are the forecast as tabled in Parliament on 24 May 2012.
As a Government department, the Ministry is exempt from the payment of income tax (Income Tax Act 2007) and no charge for income tax has been provided for.
Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments to the extent that they are equally unperformed obligations. Commitments relating to employment contracts are not disclosed.
Items of property, plant and equipment are initially recorded at cost. Where an asset is acquired for nil or nominal consideration the asset will be recognised initially at fair value, where fair value can be reliably determined. The fair value of the asset received, less costs incurred to acquire the asset, is also recognised as revenue in the surplus or deficit.
Unrealised gains and losses arising from changes in the value of property, plant and equipment are recognised as at balance date. To the extent that a gain reverses a loss previously charged to the surplus or deficit for the asset class, the gain is credited to the surplus or deficit. Otherwise, gains are credited to an asset evaluation reserve for that class of asset. To the extent that there is a balance in the asset revaluation reserve for the asset class any loss is debited to the reserve. Otherwise, losses are reported in the surplus or deficit.
Revaluations are carried out for the following classes of property, plant and equipment to reflect the service potential or economic benefit obtained through control of the asset. Revaluation is based on the fair value of the asset, with changes reported by class of asset. Accumulated depreciation at revaluation date is eliminated against the gross carrying amount so that the carrying amount after revaluation equals the revalued amount.
Land and buildings are recorded at fair value less impairment losses and, for buildings, less depreciation accumulated since the assets were last revalued. Valuations undertaken in accordance with standards issued by the New Zealand Property Institute are used where available. Additions between revaluations are recorded at cost. A revaluation for all land and buildings was last completed on 31 October 2011. Land and buildings are revalued every three years, or whenever it is determined that the carrying amount differs materially to fair value.
Works of art are recorded at cost less impairment losses.
Other property, plant and equipment – which includes leasehold improvements, furniture and fittings, computer equipment, motor vehicles, and office equipment – are recorded at cost less accumulated depreciation and accumulated impairment losses.
Realised gains and losses arising from disposal of property, plant, and equipment are recognised in the surplus or deficit in the period in which the transaction occurs. Any balance attributable to the disposed asset in the asset revaluation reserve is transferred to retained earnings.
For each property, plant and equipment asset project, borrowing costs incurred during the period required to complete and prepare the asset for its intended use are expensed.
The carrying amounts of property, plant and equipment are reviewed at least annually to determine if there is any indication of impairment. Where an asset’s recoverable amount is less than its carrying amount, it will be reported at its recoverable amount and an impairment loss will be recognised. Losses resulting from impairment are reported in the surplus or deficit, unless the asset is carried at a revalued amount in which case any impairment loss is treated as a revaluation decrease.
Depreciation is charged on a straight-line basis at rates calculated to allocate the cost or valuation of an item of property, plant and equipment over its estimated useful life. Typically, the estimated useful lives of different classes of property, plant and equipment are as follows:
Buildings |
|
|---|---|
|
– Structure |
35 to 60 years |
|
– Fit out |
3 to 20 years |
|
– Services |
3 to 20 years |
|
Plant and machinery |
10 years |
|
Computer equipment (excluding computer software) |
3 to 5 years |
|
Equipment |
5 to 20 years |
|
Leasehold improvements |
5 to 15 years |
|
Motor vehicles |
8 years |
|
Furniture and fittings |
6 years 8 months |
The cost of leasehold improvements is capitalised and depreciated over the unexpired period of the
lease with a maximum period of 15 years.
Intangible assets are initially recorded at cost. The cost of an internally generated intangible asset represents expenditure incurred in the development phase of the asset only. The development phase occurs after the following can be demonstrated: technical feasibility; ability to complete the asset; intention and ability to sell or use; and development expenditure can be reliably measured. Expenditure incurred on research of an internally generated intangible asset is expensed when it is incurred.
Where the research phase cannot be distinguished from the development phase, the expenditure is expensed when it is incurred.
Intangible assets with finite lives are subsequently recorded at cost less any amortisation and impairment losses. Amortisation is charged to the surplus or deficit on a straight-line basis over the useful life of the asset.
Typically, the estimated useful lives of these assets are as follows:
|
Computer software |
3 to 8 years |
Where there is an active market for an intangible asset, the asset is recorded at a revalued amount, being fair value less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Unrealised gains and losses arising from changes in the value of intangible assets are recognised as at balance date. To the extent that a gain reverses a loss previously charged to the surplus or deficit, the gain is credited to the surplus or deficit. Otherwise, gains are credited to an asset revaluation reserve for that asset. To the extent that there is a balance in the asset revaluation reserve for the intangible asset, any loss is debited to the reserve. Otherwise, losses are reported in the surplus and deficit.
Realised gains and losses arising from disposal of intangible assets are recognised in the surplus and deficit in the period in which the transaction occurs.
Intangible assets with finite lives are reviewed at least annually to determine if there is any indication of impairment. An intangible asset with an indefinite life is tested for impairment annually. Where an intangible asset’s recoverable amount is less than its carrying amount, it will be reported at its recoverable amount and an impairment loss will be recognised. Losses resulting from impairment are reported in the surplus or deficit, unless the asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation decrease.
Non-current assets or disposal groups are separately classified where their carrying amount will be recovered through a sale transaction rather than continuing use; that is, where such assets are available for immediate sale and where sale is highly probable. These assets are recorded at the lower of their carrying amount and fair value less costs to sell.
Short-term creditors and other payables are recorded at their face value.
Employee benefits expected to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay.
These include salaries accrued up to balance date, annual leave earned but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months, and sick leave.
A liability for sick leave is recognised 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 it will be used by staff to cover those future absences.
A liability and an expense are recognised for bonuses where the Ministry has a contractual obligation or where there is a past practice that has created a constructive obligation.
Employee benefits that are due to be settled beyond 12 months after the end of the reporting period in which the employee renders the related service, such as long service leave and retiring leave, are calculated on an actuarial basis. The calculations are based on:
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.
Obligations for 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 or deficit as incurred.
Termination benefits are recognised in the surplus or deficit only when there is a demonstrable commitment to either terminate employment prior to normal retirement date or to provide such benefits as a result of an offer to encourage voluntary redundancy. Termination benefits settled within 12 months are reported at the amount expected to be paid, otherwise they are reported as the present value of the estimated future cash outflows.
Operating leases, where the lessor substantially retains the risks and rewards of ownership, are recognised in a systematic manner over the term of the lease.
Leasehold improvements are capitalised and the cost is amortised over the unexpired period of the lease or the estimated useful life of the improvements, whichever is shorter. Lease incentives received are recognised evenly over the term of the lease as a reduction in rental expense.
Other liabilities and provisions are recognised 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, and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. Liabilities and provisions to be settled beyond 12 months are recorded at their present value.
Contingent liabilities and contingent assets are recorded in the Statement of Contingent Liabilities and contingent assets at the point at which the contingency is evident. Contingent liabilities are disclosed if the possibility that they will crystallise is not remote. Contingent assets are disclosed if it is probable that the benefits will be realised.
Taxpayers’ funds are the Crown’s investment in the Ministry and is measured as the difference between total assets and total liabilities. Taxpayers’ funds are disaggregated and classified as general funds and property revaluation reserves.
These reserves relate to the revaluation of land and buildings to fair value.
Accounting policies are changed only if the change is required by a standard or interpretation or otherwise provides more reliable and more relevant information.
These accounting policies have been applied consistently to all periods presented in these financial statements.
When presentation or classification of items in the financial statements is amended or accounting policies are changed voluntarily, comparative figures are restated to ensure consistency with the current period unless it is impracticable to do so.
The Ministry transacts with other government agencies on a regular basis, for example, for the purchase of postage stamps or the registration of vehicles. These transactions are conducted on an arm’s length basis.
The Ministry’s policy is to directly charge costs to outputs wherever possible. This is done using the following activity based principles: i) total corporate costs are allocated to operational cost centres based on head, and ii) operating costs are accumulated in operational cost centres and attributed to outputs on the basis of pre-established ratios. Output allocation factors are based on estimates of the time that staff intend to spend on producing various outputs. They are reviewed annually as part of an operational planning and evaluation exercise to ensure they provide an accurate measure of resource consumption.
To summarise, the Ministry has determined the cost of outputs using the cost allocation system outlined below.
‘Operational cost centre’ is a unit that produces outputs. All overseas posts and regional and functional divisions in Wellington are operational cost centres.
‘Support service cost centre’ is a unit that provides support services to operational cost centres.
‘Output allocation factor’ is a ratio calculated from an estimate of time each officer spends on producing specified outputs.
‘Direct costs’ are those costs directly attributed to outputs.
‘Indirect costs’ are those costs directly attributed to operational cost centres.
‘Corporate costs’ are those costs of support service cost centres attributed to operational cost centres
as overhead. Corporate costs account for approximately 24 percent (2011: 24 percent) of the Ministry’s output costs.
i Where material information on the major assumptions is provided in the relevant accounting policy or will be provided with a relevant note.
Services for Other New Zealand Agencies: Recovery of costs for a range of support services provided to other New Zealand agencies with overseas interests and rental income from sub-let office and residential accommodation.
Services include general office services; access to communications and courier systems; operational support to agency representatives working out of the Ministry’s overseas posts; and fees for work performed on behalf of other agencies.
Consular Services: Notarial and legal charges, diplomatic passports, and authentication of document charges.
Miscellaneous: Sale of publications including the UN Handbook, discounts received, and miscellaneous service charges.
30/06/11 |
|
30/06/12 |
|---|---|---|
|
14,242 |
Services for other New Zealand agencies |
14,423 |
|
537 |
Consular services |
437 |
|
544 |
Miscellaneous |
556 |
|
15,323 |
Total Other Revenue |
15,416 |
30/06/11 |
|
30/06/12 |
|---|---|---|
|
131,584 |
Salaries and wages |
131,026 |
|
7,160 |
Employer contributions to defined contribution plans |
6,257 |
|
606 |
ACC levy |
493 |
|
192 |
Increase / (decrease) in employee entitlements |
85 |
|
(45) |
Increase / (decrease) sick leave liability |
(8) |
|
24,192 |
FBT |
22,153 |
|
163,689 |
Total Personnel Costs |
160,006 |
30/06/11 |
|
30/06/12 |
|---|---|---|
|
329 |
Audit fees for financial statement audit |
330 |
|
- |
Audit fees other |
201 |
|
51,317 |
Other operating |
53,438 |
|
8,750 |
Travel |
8,423 |
|
9,922 |
Professional services and contractors |
11,758 |
|
4,409 |
Staff training |
3,469 |
|
1,929 |
Representation |
1,992 |
|
2,118 |
Asset/Debt write-offs |
20 |
|
34 |
Loss on sale of assets |
16 |
|
78,808 |
Total Operating Costs |
79,466 |
30/06/11 |
|
30/06/12 |
|---|---|---|
|
41,147 |
Rentals and operating leases |
34,911 |
|
6,741 |
Maintenance |
5,096 |
|
2,939 |
Rates, Taxes & Communal Charges |
2,673 |
|
3,890 |
Utilities |
4,269 |
|
753 |
Other |
1,097 |
|
55,470 |
Total Accommodation and Operating Lease Costs |
48,046 |
30/06/11 |
|
30/06/12 |
|---|---|---|
|
7,915 |
Freehold buildings |
7,534 |
|
2,493 |
Plant and equipment |
2,563 |
|
8,750 |
Furniture and fittings |
6,423 |
|
867 |
Motor vehicles |
913 |
|
5,451 |
Computer equipment |
6,032 |
|
25,476 |
Total Depreciation Charge |
23,465 |
30/06/11 |
|
30/06/12 |
|---|---|---|
|
2,796 |
Computer software |
2,520 |
|
2,796 |
Total Amortisation Charge |
2,520 |
The Ministry pays a capital charge to the Crown on its taxpayers’ funds balance as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2012 was 8.0 percent (2011: 7.5 percent).
30/06/11 |
|
30/06/12 |
|---|---|---|
|
407,455 |
Balance at 1 July |
403,759 |
|
7,400 |
Net operating surplus/ (deficit) |
19,253 |
|
(75) |
Capital withdrawal to the Crown |
- |
|
(11,021) |
Return of operating surplus to the Crown |
(18,817) |
|
403,759 |
General Funds as at 30 June |
404,195 |
PROPERTY REVALUATION RESERVES |
||
|
98,066 |
Balance at 1 July |
98,066 |
|
- |
Revaluation gains / (losses) |
60,038 |
|
98,066 |
Revaluation Reserves as at 30 June |
158,104 |
|
501,825 |
Total Taxpayers' Funds |
562,299 |
PROPERTY REVALUATION RESERVE CONSISTS OF: |
||
|
84,129 |
Land revaluation reserve |
145,170 |
|
13,937 |
Buildings revaluation reserve |
12,934 |
|
98,066 |
Total Property Revaluation Reserve |
158,104 |
30/06/11 |
|
30/06/12 |
|---|---|---|
|
2,186 |
Trade debtors |
2,343 |
|
63 |
Receivables |
169 |
|
- |
GST receivable |
133 |
|
32 |
Post establishment loans |
28 |
|
2,281 |
Total Current |
2,673 |
NON-CURRENT |
||
|
152 |
Deposit bonds |
147 |
|
2,933 |
Lease deposits |
3,001 |
|
186 |
Post establishment loans |
44 |
|
3,271 |
Total Non-Current |
3,192 |
|
5,552 |
Total Debtors and Receivables |
5,865 |
The carrying amount of debtors and other receivables approximates their fair value.
As at 30 June 2012 and 2011, all receivables have been assessed for impairment and no provision was required.
Age Debtors |
30/06/11 |
30/06/12 |
|---|---|---|
|
Not past due |
97 |
- |
|
Past due 1-30 days |
1,693 |
1,794 |
|
Past due 31-60 days |
131 |
170 |
|
Past due 61-90 days |
45 |
175 |
|
Past due >91 days |
220 |
204 |
|
Total |
2,186 |
2,343 |
Current prepayments include expenditure paid in advance for property leases. Non-current prepayments include the Ministry’s Beijing Embassy land lease which is being amortised over the remaining life of the lease.
|
Freehold |
Freehold Buildings |
Furniture |
Plant & Equipment |
Motor Vehicles |
Computer |
Total |
|---|---|---|---|---|---|---|---|
COST OR VALUATION |
|||||||
|
Balance at 1 July 2010 |
245,173 |
114,625 |
62,361 |
26,025 |
7,665 |
30,272 |
486,121 |
|
Additions |
946 |
2,347 |
7,463 |
1,708 |
1,062 |
4,562 |
18,088 |
|
Asset class adjustment - reclassification |
- |
(2,610) |
2,610 |
(1,018) |
- |
1,018 |
- |
|
Impairment |
- |
- |
(1,342) |
- |
- |
- |
(1,342) |
|
Disposals |
- |
- |
(2,457) |
(1,108) |
(1,054) |
(854) |
(5,473) |
|
Balance at |
246,119 |
114,362 |
68,635 |
25,607 |
7,673 |
34,998 |
497,394 |
|
Balance at |
246,119 |
114,362 |
68,635 |
25,607 |
7,673 |
34,998 |
497,394 |
|
Additions |
40 |
5,608 |
4,141 |
939 |
1,683 |
3,318 |
15,729 |
|
Asset class adjustment - reclassification |
- |
2 |
10 |
1,248 |
35 |
(1,295) |
- |
|
Revaluation |
61,041 |
(19,981) |
- |
- |
- |
- |
41,060 |
|
Disposals |
- |
- |
(2,577) |
(688) |
(1,688) |
(974) |
(5,927) |
|
Balance at |
307,200 |
99,991 |
70,209 |
27,106 |
7,703 |
36,047 |
548,256 |
ACCUMULATED DEPRECIATION AND IMPAIREMENT LOSSES |
|||||||
|
Balance at |
- |
8,423 |
34,424 |
18,571 |
4,367 |
15,974 |
81,759 |
|
Depreciation expense |
- |
7,915 |
8,780 |
2,493 |
867 |
5,451 |
25,506 |
|
Eliminate |
- |
- |
(2,364) |
(1,094) |
(906) |
(852) |
(5,216) |
|
Asset class adjustment - reclassification |
- |
- |
- |
(652) |
- |
652 |
- |
|
Impairment adjustment |
- |
(30) |
- |
- |
- |
(30) |
|
|
Balance at |
- |
16,338 |
40,810 |
19,318 |
4,328 |
21,225 |
102,019 |
|
Balance at |
- |
16,338 |
40,810 |
19,318 |
4,328 |
21,225 |
102,019 |
|
Depreciation expense |
- |
7,534 |
6,470 |
2,563 |
913 |
6,032 |
23,512 |
|
Eliminate |
- |
- |
(2,526) |
(681) |
(1,557) |
(961) |
(5,725) |
|
Asset class adjustment - reclassification |
- |
1 |
14 |
(33) |
- |
18 |
- |
|
Eliminate on revaluation |
- |
(18,978) |
- |
- |
- |
- |
(18,978) |
|
Impairment adjustments |
- |
(47) |
- |
- |
- |
(47) |
|
|
Balance at |
- |
4,895 |
44,721 |
21,167 |
3,684 |
26,314 |
100,781 |
CARRYING AMOUNTS |
|||||||
|
At 1 July 2010 |
245,173 |
106,202 |
27,937 |
7,454 |
3,298 |
14,298 |
404,362 |
|
At 30 June and |
246,119 |
98,024 |
27,825 |
6,289 |
3,345 |
13,773 |
395,375 |
|
At 30 June 2012 |
307,200 |
95,096 |
25,488 |
5,939 |
4,019 |
9,733 |
447,475 |
Land and Buildings were revalued at fair value as at 31 October 2011. This valuation was conducted by an independent registered valuer, S N Dean, Director – Valuation and Advisory Services, Colliers International New Zealand Limited, FNZIV, AREINZ and FPINZ, on the Ministry’s behalf. Land and Buildings have been translated into New Zealand dollars at the exchange rate prevailing as at that date.
The total amount of property, plant, and equipment in the course of construction is $2.945 million (2011: $7.682 million).
As at 30 June 2012 the Ministry had no properties intended for sale (30 June 2011: nil).
The Ministry owns property in 14 locations globally that have restrictions on their sale, mostly in relation to their use, or requiring that country’s Government’s approval to sell. The carrying amount of the property is $160 million (2011: $106 million).
There are conditions that apply to the land leased by the Ministry in New Delhi. The following restrictions in relation to the sale and treatment of sale proceeds apply:
Based on the above restrictions the Ministry’s Valuer has valued the New Delhi land at 20 percent of the fair value, which is $59.36 million.
|
Acquired software |
|---|---|
COST |
|
|
Balance at 1 July 2010 |
15,463 |
|
Additions |
2,234 |
|
Balance at 30 June 2011 |
17,697 |
|
Balance at 1 July 2011 |
17,697 |
|
Additions |
1,499 |
|
Disposals |
(2,361) |
|
Balance at 30 June 2012 |
16,835 |
ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES |
|
|
Balance at 1 July 2010 |
8,468 |
|
Amortisation expense |
2,796 |
|
Balance at 30 June 2011 |
11,264 |
|
Balance at 1 July 2011 |
11,264 |
|
Amortisation expense |
2,520 |
|
Eliminate on disposal |
(2,361) |
|
Balance at 30 June 2012 |
11,423 |
CARRYING AMOUNTS |
|
|
At 1 July 2010 |
6,995 |
|
At 30 June and 1 July 2011 |
6,433 |
|
At 30 June 2012 |
5,412 |
30/06/11 |
|
30/06/12 |
|---|---|---|
|
3,112 |
Trade creditors |
2,798 |
|
6,864 |
Accrued expenses |
4,391 |
|
6,082 |
FBT payable |
5,358 |
|
395 |
GST payable |
- |
|
16,453 |
Total Creditors and Payables |
12,547 |
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.
30/06/11 |
|
30/06/12 |
|---|---|---|
|
7,400 |
Net Surplus/ (Deficit) |
19,253 |
|
Add/(Less) |
||
|
107 |
Movement in discount rate for Long Service Leave and Retirement Leave |
936 |
|
3,514 |
Net loss/(gain) on derivative financial instruments |
(1,372) |
|
11,021 |
Total return of operating surplus |
18,817 |
The operating surplus is required to be paid to the Crown by 31 October.
30/06/11 |
|
30/06/12 |
|---|---|---|
CURRENT PORTION |
||
|
291 |
Onerous contracts |
1,125 |
|
136 |
Lease make good |
640 |
|
- |
Restructuring |
4,568 |
|
- |
Other |
198 |
|
427 |
Total Current |
6,531 |
NON-CURRENT PORTION |
||
|
4,182 |
Onerous contracts |
2,211 |
|
2,097 |
Lease make good |
1,339 |
|
6,279 |
Total Non-Current |
3,550 |
|
6,706 |
Total |
10,081 |
|
Onerous |
Make good |
Restructuring |
Other |
Total |
|---|---|---|---|---|---|
|
Balance as 1 July 2010 |
452 |
2,297 |
- |
- |
2,749 |
|
Additional provisions made |
4,064 |
- |
- |
- |
4,064 |
|
Amounts used |
(62) |
(64) |
- |
- |
(126) |
|
Discount unwind |
19 |
- |
- |
- |
19 |
|
Balance as at 30 June 2011 |
4,473 |
2,233 |
- |
- |
6,706 |
|
Balance as 1 July 2011 |
4,473 |
2,233 |
- |
- |
6,706 |
|
Additional provisions made |
- |
- |
4,568 |
198 |
4,766 |
|
Amounts used |
(291) |
(35) |
- |
- |
(326) |
|
Unused amounts reversed |
(846) |
(219) |
- |
- |
(1,065) |
|
Balance as at 30 June 2012 |
3,336 |
1,979 |
4,568 |
198 |
10,081 |
The restructuring provision arises from the Ministry’s organisational change decisions and relates to the cost of expected redundancies ($3.105 million) and costs associated with relocation of affected staff ($1.463 million). Management anticipate that the restructuring will be completed within 12 months of balance date and the amount of the liability is considered to be reasonably certain.
In respect of a number 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. In many cases, the Ministry has the option to renew these leases, which affects the timing of the expected cash outflows to make good the premises.
The provision for onerous contracts arises from a non-cancellable lease where the unavoidable costs of meeting the lease contract exceed the economic benefits to be received from it. Due to decisions to consolidate staff into one building and reduce accommodation costs. This will result in four vacant floors located in two buildings from 1 January 2013 with two years remaining on one lease (three floors) and five years remaining on the other (one floor). Tenants have not yet been found for the vacant floors. No sublease cash inflows on the vacant floors have been included in measuring the provision as there is not sufficient certainty that these floors will be let.
30/06/11 |
|
30/06/12 |
|---|---|---|
CURRENT LIABILITIES |
||
|
8,876 |
Annual leave |
9,385 |
|
1,150 |
Long service leave |
1,008 |
|
1,114 |
Retirement leave |
1,215 |
|
829 |
Retirement gratuities |
1,070 |
|
186 |
Posting-related leave |
154 |
|
4,644 |
Salaries and allowances |
4,168 |
|
169 |
Sick leave liability |
161 |
|
606 |
ACC levy |
620 |
|
17,574 |
Total Current |
17,781 |
NON-CURRENT LIABILITIES |
||
|
1,037 |
Long service leave |
1,261 |
|
7,583 |
Retirement leave |
8,577 |
|
1,948 |
Retirement gratuities |
1,656 |
|
377 |
Posting-related leave |
314 |
|
10,945 |
Total Non-Current |
11,808 |
|
28,519 |
Total Provision for Employee Entitlements |
29,589 |
An independent actuarial valuation was undertaken by AON Consulting New Zealand Limited as at 30 June 2012 to estimate the present value of retirement leave and long service leave.
The key assumptions used in discounting to present value were:
|
Salary Growth |
|||
|---|---|---|---|---|
Projection year |
2011/12 |
2010/11 |
||
|
1 |
3.10% |
3.50% |
||
|
2 |
3.40% |
3.50% |
||
|
3+ |
3.50% |
3.50% |
||
30/06/11 |
|
30/06/12 |
|---|---|---|
|
7,400 |
Net operating Surplus/ (Deficit) |
19,253 |
|
Add/ (Less) Non-Cash Items |
||
|
28,272 |
Depreciation and amortisation |
26,043 |
|
3,514 |
Net (gains)/loss on derivatives and foreign exchange |
(1,372) |
|
107 |
Movement in discount rate for Long Service Leave and Retirement Leave |
936 |
|
31,893 |
Total Non-Cash Items |
25,607 |
|
Add/(Less) Items Classified as Investing or Financing Activities |
||
|
(136) |
(Gains) / losses on disposal property, plant and equipment |
(214) |
|
(136) |
Total Items Classified as Investing or Financing Activities |
(214) |
|
Add/(Less) Working Capital Movements |
||
|
(37,772) |
(Inc)/Dec in debtors and receivables |
(1,756) |
|
(2,904) |
(Inc)/Dec in prepayments |
2,456 |
|
(72) |
Inc/(Dec) in creditors and payables |
(4,097) |
|
214 |
Inc/(Dec) in Provisions |
1,536 |
|
1,103 |
Inc/(Dec) in current employee entitlements |
3,963 |
|
(39,431) |
Net Working Capital Movements |
2,102 |
|
Add/(Less) Movements in Non-Current Liabilities |
||
|
(1,062) |
Inc/(Dec) in employee entitlements |
790 |
|
4,296 |
Inc/(Dec) in Provisions |
(2,779) |
|
3,234 |
Net Working Non-Current Movements |
(1,989) |
|
2,960 |
Operating Activities Net Cash Flows |
44,759 |
The Ministry is party to financial instrument arrangements as part of its everyday operations. These include instruments such as bank balances, investments, accounts receivable, and foreign currency forward contracts.
The Ministry is exposed 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.
Currency risk is the risk that debtors and creditors, due in foreign currency, will fluctuate because of changes in foreign exchange rates.
The Ministry uses foreign exchange forward contracts to manage foreign exchange exposures.
The notional principal amounts of outstanding forward exchange contracts in New Zealand dollar equivalents at 30 June 2012 were:
|
30/06/11 |
30/06/12 |
|---|---|---|
|
USD |
17,259 |
17,551 |
|
JPY |
4,094 |
4,366 |
|
EUR |
18,567 |
17,834 |
|
Other |
34,838 |
30,376 |
|
Total |
74,758 |
70,127 |
Forward Foreign Exchange Contracts
Derivative financial instruments include forward foreign exchange contracts in gain with a fair value totalling $0.112 million and forward foreign exchange contracts in loss with a fair value totalling $4.790 million (2011: $0.151 million and $6.201 million respectively). A movement in foreign exchange rates plus or minus 10 percent has an impact of ($2.596) million / $10.627 million on the Ministry’s revenue/expenditure and assets/liabilities (2011: ($0.941) million/($0.165) million) based on a derivative valuation model using balance date forward exchange rates plus or minus 10 percent.
Creditors Denominated in Foreign Currencies
As at 30 June 2012, if the New Zealand dollar had weakened/strengthened by 5 percent against the US dollar with all other variables held constant, the surplus/deficit for the year would have been $6,900 (2011:$6,300) higher/lower. This movement is attributable to the foreign exchange gains/losses on translation of US dollar denominated creditors.
As at 30 June 2012, if the New Zealand dollar had weakened/strengthened by 5 percent against the Japanese yen with all other variables held constant, the surplus/deficit for the year would have been $6,800 (2011: $7,700) higher/lower. This movement is attributable to the foreign exchange gains/losses on translation of Japanese Yen denominated creditors.
As at 30 June 2012, if the New Zealand dollar had weakened/strengthened by 5 percent against the Euro with all other variables held constant, the surplus/deficit for the year would have been $10,300 (2011:$16,200) higher/lower. This movement is attributable to the foreign exchange gains/losses on translation of Euro denominated creditors.
Foreign exchange Transaction Exposure
The Ministry faces large foreign exchange transaction exposure due to the inherent risk related to volatile foreign exchange markets impacting expenditure incurred in multiple currencies offshore. The Ministry uses Forward Exchange Contracts to hedge its exposure to foreign exchange movements.
Foreign currency transactions each month are translated into New Zealand dollars at an average (‘spot’) foreign exchange rate, regardless of whether those transactions have been hedged at a different exchange rate. When the Foreign Exchange Contracts mature and are settled, the exchange rate difference between the New Zealand dollar amount at the forward contract rate compared to the New Zealand dollar amount at the spot rate is recognised as a realised gain or loss in the Statement of Comprehensive Income. The resulting net foreign exchange loss or gain has no impact on the bottom line as it is offset by lower or higher costs in the other expenditure lines appearing in the Statement of Comprehensive Income.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. This could impact on the return on investments or the cost of borrowing. The Ministry has no significant exposure to interest rate risk on its financial instruments.
The Public Finance Act stipulates that the Ministry cannot raise a loan without Ministerial approval and no such loans have been raised. Accordingly, there is no interest rate exposure as no funds were borrowed.
Credit risk
Credit risk is the risk that a third party will default on its obligations to the Ministry, causing the Ministry to incur a loss. In the normal course of its business, the Ministry incurs credit risk from trade debtors, and transactions with financial institutions.
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 that are overdue or impaired.
The Ministry does not require any collateral or security to support financial instruments with financial institutions that the Ministry deals with as these entities have high credit ratings. For its other financial instruments, the Ministry does not have significant concentrations of risk.
Liquidity risk
The 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 its liquidity requirements.
The Ministry’s creditors and payables will be settled within three months of balance date. Derivative financial instrument liabilities will be settled within one year of balance date.
The table below analyses the Ministry’s financial liabilities that will be settled based on the remaining period at 30 June 2012 to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.
|
Less than |
Between |
|---|---|---|
2011 |
|
|
|
Creditors and other payables |
16,453 |
- |
|
Derivative financial instrument liabilities |
2,817 |
3,383 |
2012 |
||
|
Creditors and other payables |
12,547 |
- |
|
Derivative financial instrument liabilities |
2,341 |
2,448 |
The table below analyses the Ministry’s forward exchange contract derivatives into the relevant maturity groupings based on the remaining period at balance date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.
|
Liability |
Asset |
Contract |
Less than |
Between |
|---|---|---|---|---|---|
2011 |
|||||
|
Gross settled foreign exchange contracts: |
6,200 |
151 |
- |
- |
- |
|
- outflow |
- |
- |
74,758 |
36,365 |
38,393 |
|
- inflow |
- |
- |
68,708 |
33,653 |
35,055 |
2012 |
|||||
|
Gross settled foreign exchange contracts: |
4,790 |
112 |
- |
- |
- |
|
- outflow |
- |
- |
70,126 |
34,469 |
35,657 |
|
- inflow |
- |
- |
65,449 |
32,183 |
33,266 |
The fair value of all financial instruments is equivalent to the net carrying amount disclosed in the Statement of Financial Position.
The carrying amounts of financial assets and financial liabilities in each of the NZ IAS 39 categories are as follows:
30/06/11 |
|
Notes |
30/06/12 |
|---|---|---|---|
LOANS AND RECEIVABLES |
|||
|
49,416 |
Cash and cash equivalents |
66,342 |
|
|
5,552 |
Debtors and other receivables |
10 |
5,865 |
|
100,875 |
Debtor Crown |
102,451 |
|
|
155,843 |
Total Loans and Receivables |
174,658 |
|
FAIR VALUE THROUGH SURPLUS AND DEFICIT - HELD FOR TRADING |
|||
|
151 |
Derivative financial instrument assets |
112 |
|
|
(6,200) |
Derivative financial instrument liabilities |
(4,790) |
|
|
(6,049) |
Total Fair Value through Surplus and Deficit - Held for Trading |
(4,678) |
|
FINANCIAL LIABILITIES MEASURED AT AMORTISED COST |
|||
|
16,453 |
Creditors and other payables |
14 |
12,547 |
The derivatives in gain and the derivatives in loss represent the difference between the notional principal amount and the carrying amount of the forward exchange contracts.
Movements in fair value of derivative financial instruments are recognised in the Statement of Comprehensive Income as a net gain or loss on derivative financial instruments.
The following table analyses the basis of the valuation of classes of financial instruments measured at fair value in the statement of financial position.
Valuation Technique |
||||
|---|---|---|---|---|
|
Total |
Quoted |
Observable inputs |
Significant non-observable inputs |
|
30 June 2011 |
||||
FINANCIAL ASSETS |
||||
|
Foreign exchange derivatives |
151 |
- |
151 |
- |
FINANCIAL LIABILITIES |
||||
|
Foreign exchange derivatives |
6,200 |
- |
6,200 |
- |
|
30 June 2012 |
||||
FINANCIAL ASSETS |
||||
|
Foreign exchange derivatives |
112 |
- |
112 |
- |
FINANCIAL LIABILITIES |
||||
|
Foreign exchange liabilities |
4,790 |
- |
4,790 |
- |
The Ministry’s capital is its equity or taxpayers’ funds, which comprises general funds. 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 through the management of income, expenses, assets, liabilities, and compliance with the Government Budget processes and the Public Finance Act 1989.
The objective of managing the Ministry’s equity is to ensure the Ministry effectively achieves its goals and objectives for which it has been established, whilst remaining a going concern.
All related party transactions have been entered into on an arm’s length basis.
The Ministry is a wholly owned entity of the Crown. The Government significantly influences the roles of the Ministry as well as being its major source of revenue.
The Ministry enters into numerous transactions with other Government departments, Crown agencies and State-owned enterprises on an arm’s length basis. The Ministry has received funding from the Crown of $364 million (2011: 366 million) to provide services to the public for the year ended 30 June 2012.
In conducting its activities, the Ministry is required to pay various taxes and levies (such as GST, FBT, PAYE and ACC levies) to the Crown and entities related to the Crown. The payment of these taxes and levies, other than income tax, is based on the standard terms and conditions that apply to all tax and levy payers. The Ministry is exempt from paying income tax.
The Ministry also purchased goods and services from entities controlled, significantly influenced, or jointly controlled by the Crown. Purchases from these government-related entities for the year ended 30 June 2012 totalled $6.712 million (2011: $6.096 million). These purchases included transport services from VIP Transport Service, contributions and grants to Ministry of Economic Development and New Zealand Police, travel and accommodation to Department of Internal Affairs for Rugby World Cup Guest of Government, air travel from Air New Zealand and postal services from New Zealand Post.
Sales to government-related entities for the year ended 30 June 2012 totalled $14.022 million (2011: $14.228 million) relating to accommodation and support services provided to other New Zealand agencies such as Department of Labour, New Zealand Defence Force, Ministry for Primary Industries and New Zealand Trade and Enterprise.
Apart from those transactions described above, the Ministry has not entered into any related party transactions.
30/06/11 |
|
30/06/12 |
|---|---|---|
|
3,428 |
Salaries and other short-term employee benefits |
4,297 |
|
70 |
Other long-term benefits |
62 |
|
3,498 |
Total Key Management Personnel Compensation |
4,359 |
Key management personnel include the Chief Executive and the 12 members of the Senior Leadership Team including additional Senior Management personnel appointed for a fixed term for oversight of the Change Programme (2011: $3.478 million consisting of the Chief Executive and 11 SLT members including some who took up their roles part way through the financial year).
The above key management personnel compensation excludes the remuneration and other benefits the Minister of Foreign Affairs receives. The Minister’s remuneration and other benefits are not received only for his role as a member of key management personnel of the Ministry. The Minister’s 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 Foreign Affairs and Trade.
The movement in total expenses between the 2011/12 Main Estimates and the 2011/12 Supplementary Estimates was a reduction of $28.639 million. The net reduction is due to increases arising from:
Offset by following decreases:
Actual expenditure (excluding remeasurements) was $26.049 million less than the Supplementary Estimates. The main drivers for this under-expenditure are costs lower than forecast such as:
Forecast revenue from the Crown of $19 million was not drawn down because the Ministry received approval for in-principle expense transfers to transfer expenses from 2011/12 to 2012/13 relating to initiatives and projects arising from the Modernisation Programme and Pacific Island Forum initiatives. The Ministry’s year end under-expenditure against appropriations has enabled the transfer to take place.
The movement in the forecast net closing cash balance between the 2011/12 main estimates and the 2011/12 supplementary estimates of $2.648 million was partly due to a revision of cash flows reflecting changes to the operating budgets in the Statement of Comprehensive Income above.
The actual cash balance as at 30 June 2012 is $33.509 million higher than in the supplementary estimates mainly due to a build-up of capital funds over the years arising from slower than expected capital expenditure demonstrated by expenditure on the purchase of assets being $3.568 million lower than forecast associated with the development of overseas properties.
The actual intangibles balance as at 30 June 2012 is $10.294 million less than in the supplementary estimates mainly due to delays with capital projects arising from design and implementation processes taking longer than anticipated; as well as the rephrasing of the capital works programme; changes in operational and business requirements; and tightening of fiscal forecasts.
The property revaluation reserve is $60.038 million different between 2010/11 main estimates and the 2011/12 supplementary estimates due to the three year property revaluation which happened in October 2011.
The increase in debtor crown ($30.851 million), the increase of plant, property and equipment ($17.495 million) and the increase of intangible assets ($1.251 million) between 2011/12 main estimates and the 2011/12 supplementary estimates is due to delays with capital projects arising from design and tendering processes taking longer than anticipated, as well as the reprioritisation and rephrasing of the capital works programme, changes in operational and business requirements, and tightening fiscal forecasts.
There have been no significant events after the balance sheet date.
[1] Audit Services provided for the review of a tender process.