Notes to and Forming Part of the Forecast Financial Statements

1. Statement of Significant Underlying Assumptions

1. These forecast financial statements have been prepared in accordance with section 38 of the Public Finance Act 1989.
2. These statements have been compiled on the basis of government policies and the Output Plan agreed between the Chief Executive of Land Information New Zealand and the Minister for Land Information at the time the statements were finalised.

2. Statement of Significant Accounting Policies

THE REPORTING ENTITY

Land Information New Zealand is a government department as defined by section 2 of the Public Finance Act 1989. In addition, the Department also reports on the Crown activities that it administers.

BASIS OF PREPARATION

The financial statements have been prepared in accordance with Generally Accepted Accounting Practice (GAAP) in New Zealand, adopting the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) for the forecast financial statements.

LINZ is a public benefit entity, as defined under NZ IAS 1.

ACCOUNTING POLICIES

Revenue

The Department derives revenue through the provision of outputs to the Crown and for services to third parties. Third-party revenue is recognised when earned while Crown revenue is recognised where it can be reliably measured. The revenue is reported in the financial period to which it relates. Cash receipts for incomplete services are recognised as deferred revenue.

Cost allocation

The Department determines the cost of outputs using a cost allocation system, which is outlined below:

• Costs that are directly related to an output are allocated directly to that output.
• Costs that are not directly related to an output are allocated to Direct Output Producing Cost Centres (DOPCC) using, as a proxy for consumption, cost drivers such as full-time equivalent staff (FTEs), floor area and estimated usage.
• DOPCC costs are allocated to outputs using drivers appropriate to the source of the cost such as FTEs, estimated usage, and direct costs.

Debtors and receivables

Debtors and receivables are stated at estimated realisable value after providing for doubtful and uncollectable debts. A provision for doubtful debts is raised where doubt as to collection exists, and where debts which are known to be uncollectable are written off.

Leases

The Department leases office premises, office equipment and motor vehicles. As all the risks and benefits of ownership are substantially retained by the lessor, these leases are classified as operating leases.

Payments made under operating leases are charged as period expense, in equal instalments over accounting periods covered by the lease term, except in those circumstances where an alternative basis would be more representative of the pattern of benefits to be derived from the leased property.

Surplus leased accommodation

The provision for surplus leased accommodation represents the Department's liability under lease agreements for surplus leased space. The provision is calculated on the net present value of the rental payable. The liability created is then amortised over the term of the lease.

Statement of Cash Flows

For the purposes of the Statement of Forecast Cash Flows, cash includes cash balances on hand and held in bank accounts.

Operating activities include cash received from all income sources of Land Information New Zealand, and record the cash payments made for the supply of goods and services.

Investing activities are those relating to the acquisition and disposal of non-current assets.

Financing activities comprise capital injections by, or repayment of, capital to the Crown.

Work in progress

The value of non-current work in progress is the capitalised direct costs of incomplete capital projects.

Research costs

Research costs are expensed in the period incurred.

Plant, property and equipment

Acquisition

All individual assets or groups of assets forming part of a network or which are material in aggregate, costing more than $3,000, are capitalised and recorded at cost.

Depreciation

Depreciation is provided on a straight-line basis on all plant, property and equipment, other than non-current work in progress. The depreciation period reflects the expected useful economic lives of the assets and is used to allocate the assets' costs or valuation less estimated residual value. The useful lives of the major classes of assets have been estimated as follows:

The cost of leasehold improvements is capitalised and depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is shorter.

Impairment

If the estimated recoverable amount of an asset is less than its carrying amount, the asset is written down to its estimated recoverable amount and an impairment loss is recognised as an expense in the Statement of Forecast Financial Performance.

Provision for employee entitlements

Annual leave

The provision for annual leave represents the amount which the Department has a present obligation to pay, resulting from employees' services provided up to balance date. The provision is calculated at current wage and salary rates.

Long service leave and retirement leave

The provision for long service leave and retirement leave represents the Department's long-term vested and unvested obligation calculated using the present value of the estimated future cash outflows (future salaries). Obligations payable within 12 months of reporting date are based on current wages and salary rates.

Foreign currency

Foreign currency transactions are translated to New Zealand dollars at the exchange rates prevailing at the dates of the transactions.

Where a forward foreign exchange contract has been used to establish the price of a transaction, the forward rate specified in that foreign exchange contract is used to translate that transaction to New Zealand dollars. Consequently, no exchange gain or loss resulting from the difference between the forward rate and the spot rate on date of settlement is recognised.

Any exchange gains or losses, whether realised or unrealised, are recognised in the Statement of Financial Performance in the period to which they relate.

Financial instruments

Revenue and expenses in relation to all financial instruments are recognised in the Statement of Forecast Financial Performance. The Department enters into forward foreign exchange contracts to hedge foreign currency transactions. Any exposure to gains and losses on these contracts is generally offset by a related loss or gain on the item being hedged.

Apart from the forward foreign exchange contracts, all financial instruments are recognised in the Statement of Forecast Financial Position.

Taxation

Income tax

Land Information New Zealand, as a government department, is exempt from the payment of income tax under section CB3 (a) of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided for.

Fringe benefit tax

Fringe benefit tax is paid on all liable benefits, subject to both general and specific exemptions, provided to employees.

Goods and services tax (GST)

The Statement of Forecast Financial Performance and Statement of Forecast Cash Flows are exclusive of GST. The Statement of Forecast Financial Position is also exclusive of GST except for creditors, payables, debtors and receivables which are GST inclusive. 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 the Statement of Forecast Financial Position.

3. Changes in Accounting Policies

There have been no changes in accounting policies since the date of the last audited financial statements, other than adopting the New Zealand equivalents to International Financial Reporting Standards (IFRS). All policies have been applied on a basis consistent with other years.

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