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Annual Report 30 June 2013

Notes to the non-departmental statements and schedules

For the year ended 30 June 2013

Note 1: Non-departmental statement of accounting policies

Reporting entity

These non-departmental schedules and statements present financial information on public funds managed by MFAT on behalf of the Crown.

These non-departmental balances are consolidated into the financial statements of the Government. For a full understanding of the Crown's financial position, results of operations, and cash flows for the year, reference should also be made to the financial statements of the Government.

Accounting policies

The non-departmental schedules and statements have been prepared in accordance with the Government's accounting policies as set out in the financial statements of the Government, and in accordance with relevant Treasury instructions and Treasury circulars.

Measurement and recognition rules applied in the preparation of these non-departmental schedules and statements are consistent with New Zealand generally accepted accounting practice 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 following particular accounting policies have been applied.

Budget figures

The budget figures are those included in MFAT's main estimates for the year ended 30 June 2013. In addition, these financial statements also present the updated budget information from the Supplementary Estimates.

Foreign exchange

Foreign currency transactions are translated into New Zealand dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the schedule of non-departmental income or expenses.

Goods and Services Tax

All items in the financial statements, including appropriation statements, are stated exclusive of GST. Receivables and payables are stated on a GST-inclusive basis. In accordance with Treasury instructions, GST is returned on revenue received on behalf of the Crown, where applicable. However, an input tax deduction is not claimed on non-departmental expenditure. Instead, the amount of GST applicable to non-departmental expenditure is recognised as a separate expense and eliminated against GST revenue on consolidation of the government financial statements.

Debtors and receivables

Debtors and receivables are recorded at estimated realisable value, after providing for doubtful and uncollectable debts.

Commitments

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.

Contingent liabilities

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.

Expenses

Grants

Where grants are discretionary until payment, the expense is recognised when the payment is advised. Otherwise, the expense (and corresponding liability) is recognised when MFAT 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 us. For grants without conditions attached, the expense/liability is recognised when we have an unconditional obligation to make payment.

Other liabilities and provisions

Other liabilities and provisions are recorded at the best estimate of the expenditure required to settle the obligation. Liabilities and provisions to be settled beyond 12 months are recorded at their present value.

Investments

Where MFAT holds a non-controlling, minority interest, the shares are valued at cost in the financial statements.

Associates are entities in which MFAT has significant influence, but not control over their operating and financial policies. In our financial statements, our investment in associates has been valued by the equity method.

Note 2: Debtors and receivables

Debtors and receivables relate principally to recoveries of payments made on behalf of the Secretariat of the Pacific Environmental Programme.

Note 3: Prepayments

Prepayments relate to the Official Development Assistance (ODA) programme.

Note 4: Shares

MFAT held the following shares as at balance date.

European Bank for Reconstruction and Development

30/06/12

30/06/13

At cost
$000

At net current value
$000

Type

Number

Share value
EUR
'000

Paid In value
EUR
'000

At Net current value
$000

At cost
$000

5,781

2,432

5,781

2,432

Ordinary

1,050

10,500

3,500

2,741

5,781

The European Bank for Reconstruction and Development's authorised share capital is EUR 30 million divided into 3.000 million shares, having a face value of EUR 10,000 each. New Zealand has been allocated 1,050 shares, amounting to 0.04 percent of the Bank's capital. The authorised share capital is divided into paid-in and callable shares. The total par value of paid-in shares is EUR 3.500 million. A contingent liability exists for EUR 7 million for uncalled share capital. The shares have been valued at cost.

Pacific Forum Line

As a shareholder, MFAT owned 23.1 percent (2012: 22.85 percent) or the equivalent shareholding of $352,000 (2012: $0.352 million). On 1 October 2012 the Pacific Forum Line (PFL) was sold to the Samoan Government with settlement taking place in January 2013.

The sale resulted in a net loss of $170,000, which is recognised in the Schedule of Non-Departmental Expenditure.

Note 5: Major budget variations

Schedule of non-departmental expenditure

ODA actual expenditure was $64.6 million less than forecast primarily due to the predictability in the timing of actual expenditure. This is due to unforeseen circumstances during the design and implementation of development activities. Aid expenditure is therefore part of a multi-year appropriation. This is the first year of a three-year appropriation. For more detail refer to the section on Vote ODA non-departmental appropriations.

Schedule of non-departmental assets

The higher-than-forecast cash balance is a result of the lower than expected ODA expenditure noted above.

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