Annual Report of Statistics New Zealand for the year ended 30 June 2010

1. Statement of accounting policies for the year ended 30 June 2010

Reporting entity and statutory basis

Statistics New Zealand (referred to in full or as ‘the department’) is a government department as defined by section 2 of the Public Finance Act 1989. These financial statements, which are prepared pursuant to section 45 of the Public Finance Act 1989, encompass the activities of Statistics New Zealand for the year ended 30 June 2010.

For purposes of appropriation under the Public Finance Act 1989, the department’s outputs are grouped as follows:

Official statistics – multi-class output appropriation (MCOA)

• Coordination of government statistical activities
• Population, social, and labour force statistical information services
• Economic and business statistical information services.

Multi-year appropriation (MYA)

• 2011 Census of Population and Dwellings.

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

The financial statements of Statistics New Zealand are for the year ended 30 June 2010. The financial statements were authorised for issue by the Government Statistician on 30 August 2010.

Basis of preparation

The financial statements of Statistics New Zealand 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 practices (NZ GAAP) and treasury instructions.

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

The financial statements have been prepared on a historical cost basis.

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

Changes in accounting policies

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

Statistics New Zealand has adopted the following revisions to accounting standards during the financial year which have only had 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. Statistics New Zealand 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.
• Amendments to NZ IFRS 7 Financial Instruments: Disclosures. The amendments introduce a three-level fair value disclosure hierarchy that distinguishes fair value measurements by the significance of valuation inputs used, and requires the maturity analysis of derivative liabilities to be presented separately from non-derivative financial liability contractual maturity analysis. This new information is disclosed in note 20. The transitional provisions of the amendments do not require disclosure of comparative information in the first year of application. The department has elected to disclose comparative information.

Standards, amendments, and interpretations issued but not yet effective that have not been early adopted, and which are relevant to the department 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:
  • Removes the previous disclosure concessions applied by the department for arm’s-length transactions between the department 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 department and entities controlled or significantly influenced by the Crown.
  • Provides clarity on the disclosure of related party transactions with ministers of the Crown. Further, with the exception of the Minister of Accountability, the department 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.
  • Clarifies that related party transactions include commitments with related parties.

The department expects it will early adopt the revised standard for the year ended 30 June 2011.

• 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 department has not yet assessed the effect of the new standard and expects it will not be early adopted.

Revenue

Revenue is measured at the fair value of consideration received or receivable.

Revenue Crown

Revenue earned from the supply of outputs to the Crown is recognised as revenue when earned.

Sale of publications

Sale of publications are recognised when the product is sold to the customer. The recorded revenue is the gross amount of the sale.

Other income

Revenue from contracted surveys are recognised to the extent that the service has been completed by Statistics New Zealand.

Rental income

Lease receipts under an operating sub-lease are recognised as income on a straight-line basis over the lease term.

Capital charge

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

Leases

Operating leases

An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an asset. Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term.

Cash and cash equivalents

Cash includes 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 if relevant.

Impairment of a receivable is established when there is objective evidence that the department 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 a provision for impairment account, and the amount of the loss is recognised in the surplus or deficit. Overdue receivables that are renegotiated are reclassified as current (that is, not past due).

Property, plant, and equipment

Property, plant, and equipment consist of computer equipment, leasehold improvements, furniture and fittings, and office equipment. All property, plant, and equipment is shown at cost, less accumulated depreciation and impairment losses.

Individual assets, or group of assets, are capitalised if their cost is greater than $1,000. The value of an individual asset that is less than $1,000 and is part of a group of similar assets is capitalised.

Additions

The cost of an item of property, plant, and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to Statistics New Zealand and the cost of the item can be measured reliably. Work in progress is recognised at cost less impairment and is not depreciated. Property, plant, and equipment is recognised at cost.

Disposals 

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the surplus or deficit.

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 Statistics New Zealand 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 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:

The residual value and useful life of an asset is reviewed, and adjusted if applicable, at each financial year’s 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 Statistics New Zealand, are recognised as an intangible asset. Direct costs include the software development, employee, and directly applicable operating costs.

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:

Impairment of non-financial assets

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. An intangible asset that is not yet available for use at the balance sheet date is tested for impairment annually.

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.

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

Short-term employee entitlements

Employee entitlements that Statistics New Zealand expects 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 and wages 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.

Statistics New Zealand 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 Statistics New Zealand anticipates it will be used by staff to cover those future absences.

Statistics New Zealand 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 retiring leave, have been calculated on an actuarial basis. 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 and contractual entitlements information
• the present value of the estimated future cash flows. A weighted average discount rate of 3.48 percent and a salary inflation factor of 3.50 percent were used. The discount rate is based on the weighted average of government bonds with terms to maturity similar to those of the relevant liabilities. The inflation factor is based on the expected long-term increase in remuneration for employees.

Superannuation schemes

Defined contribution schemes

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 statement of financial performance as incurred.

Provisions

Statistics New Zealand 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 and 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 expenditures expected to be required to settle the obligation using a 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.

Taxpayers’ funds

Taxpayers’ funds is the Crown’s investment in Statistics New Zealand and is measured as the difference between total assets and total liabilities. Taxpayers’ funds is classified as general funds.

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.

Cancellable commitments that have penalty or exit costs explicit in the agreement on exercising that option to cancel are included in the statement of commitments at the value of that penalty or exit cost.

Commitments and contingencies are disclosed exclusive of GST.

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 (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.

Income tax

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

Budget figures

The budget figures are those included in the Information Supporting the Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2010, 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. The budget figures have been prepared in accordance with NZ GAAP, using accounting policies that are consistent with those adopted in preparing these financial statements.

Statement of cost-accounting policies

Statistics New Zealand has determined the cost of outputs using the cost allocation system outlined below.

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

Statistics New Zealand has derived the costs of outputs shown in these financial statements using a cost driver to assign indirect costs. The cost drivers employed for assigning direct costs to outputs are based on direct charging and time recording.

The cost driver employed to allocate indirect costs to outputs is the proportion of Statistics New Zealand’s internal budget that is assigned to direct outputs. Indirect costs, excluding the costs of survey, compilation, and statistical databases and development projects, accounted for 50 percent of total costs for the year ended 30 June 2010 (2009: 49 percent). The percentage fluctuates from year to year, depending on the amount of direct funding received in relation to the five-yearly cycle of the Census of Population and Dwellings.

There have been no changes in cost accounting policies, since the date of the last audited financial statements.

Critical accounting estimates and assumptions

In preparing these financial statements Statistics New Zealand has made estimates and assumptions concerning 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 in note 12, which provides an analysis of the exposure in relation to estimates and uncertainties surrounding retirement and long-service leave liabilities.

Critical judgements in applying Statistics New Zealand’s accounting policies

 Management has exercised the following critical judgements in applying Statistics New Zealand accounting policies for the period ended 30 June 2010.

Leases

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 Statistics New Zealand. 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, whereas with an operating lease no such asset is recognised.

Statistics New Zealand has exercised its judgement on rental leases, and has determined them to be operating leases.

2. Revenue other

3. Gain on sale of assets

During the period, the department disposed of no assets that resulted in any gains on disposal (2009: $19,110).

4. Personnel costs

5. Other operating expenses

^{The audit related fees were for an assurance engagement over Statistics New Zealand's procurement processes.}

6. Capital charge

The department 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).

7. Loss on disposal of non-current assets

During the period there was a loss on the disposal of computer hardware assets of $81,683 (2009: $3,242,208).

8. Debtors and receivables

The carrying value of debtors and other receivables approximates their fair value.

Movements in the provision for doubtful debts are as follows:

The provision for impairment has been calculated based on a review of specific overdue receivables and a collective assessment. The collective impairment provision is based on an analysis of past collection history and debt write-offs.

Statistics New Zealand holds no collateral as security or other credit enhancements over receivables that are either past due or impaired.

9. Creditors and other payables

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.

10. Repayment of surplus to the Crown

Under section 22 of the Public Finance Act 1989, no operating surplus can be retained by Statistics New Zealand.

Statistics New Zealand has a provision for repayment to the Crown of $742,017 operating surplus (2009: $1,278,849).

11. Provisions

The additional provision made relates to Statistics New Zealand’s obligations in respect to employee superannuation entitlements.

12. Employee entitlements

The present value of the retirement and long-service 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 these assumptions will impact on the carrying amount of the liability.

Statistics New Zealand has used the actuarial models provided by the Treasury including the appropriate discount rate and salary inflation factor. The discount rate is based on New Zealand government bond data at 30 June 2010. The salary inflation factor has been determined after considering historical salary inflation patterns and after obtaining advice from an independent actuary.

If the discount rate were to differ by 1 percent from the department’s estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $303,647 lower (1 percent increase) or $345,917 higher (1 percent decrease).

If the salary inflation factor were to differ by 1 percent from the department’s estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $353,966 higher (1 percent increase) or $315,789 lower (1 percent decrease).

13. Deferred revenue

Deferred revenue is the portion of operating revenue received which relates to future years. It will be recognised as income in the year when the services are provided.

14. Property, plant, and equipment

15. Intangible assets

Carrying amounts at year-end are stated at cost less accumulated amortisation and include work in progress relating to software of $179,360 (2009: Nil) and internally generated assets $3,080,320 (2009: $4,228,007).

There are no restrictions over the title of the Statistics New Zealand’s intangible assets. No intangible assets are pledged as security for liabilities.

16. Taxpayers’ funds

17. Reconciliation of net surplus/(deficit) to net cash from operating activities

18. Related-party transactions and key management personnel

Related-party transactions

The department is a wholly owned entity of the Crown. The Government significantly influences the roles of the department as well as being its major source of revenue.

The department 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 or client relationship, on terms and conditions no more or less favourable than those which it is reasonable to expect the department would have adopted if dealing with that entity at arm’s length in the same circumstance, are not disclosed.

There are no other related-party transactions.

No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

Key management personnel compensation

19. Events after the balance sheet date

There have been no significant events after the balance sheet date.

20. Financial instruments

Financial instrument categories

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

Financial instrument risks

Statistics New Zealand’s activities expose it to a variety of credit risk and liquidity risks. The department 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

A credit risk is the risk that a third party will default on its obligation to the department, causing the department to incur a loss. In the normal course of its business, credit risk arises from debtors.

The department 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 department does not have significant concentrations of credit risk.

The department’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 and other receivables. 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 department will encounter difficulty raising liquid funds to meet commitments as they fall due. In meeting its liquidity requirements, the department closely monitors its forecast cash requirements with expected cash drawdowns from the New Zealand Debt Management Office. The department maintains a target level of available cash to meet liquidity requirements. The table below analyses the department’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 undiscounted and based on the contractual cash flows, and are equal to the carrying amounts.  

21. Capital management

The department’s capital is its taxpayers’ funds, which comprise general funds and revaluation reserves. Equity is represented by net assets.

The department manages its revenues, expenses, assets, liabilities, and general financial dealings prudently. The department’s equity is largely managed as a by-product of managing income, expenses, assets, liabilities, and compliance with the Government Budget processes, Treasury Instructions, and the Public Finance Act 1989

The objective of managing the department's equity is to ensure the department effectively achieves its goals and objectives for which it has been established, while remaining a going concern.

22. Explanations of major variances against budget

Explanations for major variances from the department’s budgeted figures in the Information Supporting the Estimates are as follows:

Statement of comprehensive income

Revenue Crown

Revenue Crown was $3.413 million lower than budgeted as revenue relating to the Census 2011 will now be recognised in subsequent financial years, as enabled by the multi-year appropriation for this output class.

Revenue other

Other revenue earned is $1.101 million less than budgeted, mainly due to third party contracted surveys which did not eventuate during the year.

Personnel

Personnel costs were $4.903 million below budget due to lower than expected Census 2011 expenditure, which will now be incurred in subsequent financial years. In addition, the budget included costs relating to the provision of third party contracted surveys; some of which did not eventuate during the year

Depreciation and amortisation expenses

Depreciation and amortisation expenses were $0.501 million lower than budgeted, due to reduced expenditure on capital projects such as information technology improvements and the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06).

Statement of financial position

Employee entitlements

Employee entitlements were $1.439 million higher than budgeted, which is primarily due to the long service and retiring leave liabilities using lower actual discount rates than those that were assumed in the budget.

Property, plant, and equipment

The carrying value of property, plant, and equipment was $5.397 million higher than budgeted, as the budget assumed an opening carrying balance that was $5.511 million lower than the actual opening carrying value of property, plant, and equipment. The budget was revised upwards during Supplementary Estimates.

Intangible assets

The carrying value of intangible assets was $8.336 million lower than budgeted, as the budget assumed an opening carrying balance that was $10.053 million higher than the actual opening carrying value of the intangible assets. The budget was revised downwards during Supplementary Estimates.