Statement of Accounting Policies for the Year Ended 30 June 2003
Reporting Entity
The Ministry of Economic Development is a government department as defined by section 2 of the Public Finance Act 1989.
The financial statements are prepared pursuant to section 35 of the Public Finance Act 1989, and cover all the activities of the Ministry of Economic Development as set out in the 2002/2003 Estimates of Annual Appropriations and Departmental Budgets, including Votes: Economic, Industry and Regional Development; Commerce; Communications; Consumer Affairs; Energy; and Tourism. Two Votes: Government Superannuation Fund, and Sport, Fitness and Leisure are included in comparative information but do not form part of the Ministry’s results for the 2002/2003 year.
In addition, the Ministry has reported the Crown activities and trust monies that it administers.
Measurement Basis
The financial statements have been prepared on an historical basis modified by the revaluation of certain fixed assets.
Accounting Policies
The following particular accounting policies which materially affect the measurement of financial results and financial position have been applied:
Budget Figures
The budget figures are those presented in the Budget Night Estimates (Main Estimates) and those amended by the Supplementary Estimates.
Revenue
The Ministry derives revenue through the provision of outputs to the Crown and for services to third parties. Such revenue is recognised when earned and is reported in the financial period to which it relates.
Expenditure
Expenses are recognised in the financial period to which they relate.
Cost Allocation
The Ministry has derived costs shown in these statements using a costing system which directly charged 86.2% of 2002/2003 actual costs and indirectly allocated the remaining 13.8% (2001/2002 87.7%, 12.3%).
Direct costs are those attributable to outputs on the basis of resource consumption. Costs which bear no direct relationship to outputs are classified as indirect. These indirect costs are confined to corporate overheads.
The following are the cost drivers employed to assign direct and indirect costs to outputs for the major cost groupings:
| Cost Groupings Cost Driver | Cost Driver |
| Direct Costs | |
| Accommodation | Amount of floor space occupied |
| Cafeteria administration | Staff numbers |
| Depreciation on leasehold improvements | Amount of floor space occupied |
| Depreciation on furniture & fittings | Amount of floor space occupied |
| Other personnel & operating | Direct charging |
|
| Indirect Costs | |
| Corporate overheads | Assessed usage, staff numbers and time |
Debtors and Receivables
Debtors are recorded at estimated realisable value, after providing for doubtful debts.
Inventories
Inventories are stated at the lower of cost or net realisable value.
Operating Leases
The Ministry leases office premises and office equipment, mainly photocopiers. As all the risks of ownership are retained by the lessor, these leases are classified as operating leases. Operating lease costs are expensed in the period in which they are incurred.
Depreciation
Depreciation of fixed assets, other than leasehold improvements and work in progress, is provided on a straight line basis so as to allocate the depreciable amount of assets over their useful lives. The depreciable amount is the historical cost or revalued amount, less the residual value. The estimated useful lives are:
| Buildings | 20years |
| Computer equipment and software | 4years |
| Furniture and fittings | 5years |
| Office equipment | 5years |
| Testing equipment | 10years |
| Motor vehicles | 5years |
All fixed assets other than motor vehicles ($5,000) are assumed to have no residual value.
The cost (or valuation) of leasehold improvements is capitalised and depreciated over the unexpired period of the lease.
Taxation
The Ministry of Economic Development, as an institution of the Crown, is not required to pay income tax in terms of the Income Tax Act 1994.
Goods and Services Tax (GST)
The Statement of Unappropriated Expenditure and the Statements of Departmental and Non-Departmental Expenditure and Appropriations are inclusive of GST. The Statement of Financial Position is exclusive of GST, except for Creditors and payables and Debtors and receivables, which are GST inclusive. All other statements are GST exclusive.
The amount of GST owing to or from the Inland Revenue Department at balance date, being the difference between Output GST and Input GST, is included in Creditors and payables, or Debtors and receivables (as appropriate).
Provision for Employee Entitlements
Provision is made in respect of the Ministry’s liability for annual leave, long service leave and retirement leave. Annual leave is recognised as it accrues to employees at current rates of pay. Long service leave and retirement leave are determined on an actuarial basis based on the present value of expected future entitlements.
Financial Instruments
The Ministry is party to financial instruments as part of its normal operations. These financial instruments include bank accounts, short-term deposits, debtors, creditors and foreign currency forward contracts. The Ministry enters into the foreign currency forward contracts to hedge currency transactions. Any exposure to gains or losses on those contracts is generally offset by a related loss or gain on the item being hedged. Apart from foreign currency forward contracts, all financial instruments are recognised in the Statement of Financial Position and all revenues and expenses in relation to financial instruments are recognised in the Statement of Financial Performance.
Except for those items covered by a separate accounting policy all financial instruments are shown at their estimated fair value.
Statement of Cash Flows
The following are definitions of the terms used in the Statement of Cash Flows:
- Cash means coins, notes and current 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; and
- Financing activities comprise capital injections by, or repayment of capital to, the Crown.
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 there are equally unperformed obligations.
Contingent Liabilities
Contingent liabilities are disclosed at the point at which the contingency is evident.
Taxpayers’ Funds
This is the Crown’s net investment in the Ministry.
Changes in Accounting Policies
In the year ended 30 June 2003, there were no changes in accounting policies. All policies have been applied on a basis consistent with prior years.
In accordance with the transitional provisions of FRS-3, the Ministry will continue to recognise leasehold improvements on the basis of the previous valuation policy until the next revaluation which is due in the year ended June 2004. Accordingly there is no effect from this change in these financial statements.
Back to Top