Annual Report for the year ended 30 June 2005
Part 4: Non-departmental schedules
Statement of non-departmental accounting policies
Measurement and recognition rules applied in the preparation of these non-departmental financial statements and schedules are consistent with generally accepted accounting practice and Crown accounting policies.
These non-departmental balances are consolidated into the Crown Financial Statements and therefore readers of these statements and schedules should also refer to the Crown Financial Statements for 2004/05.
The following accounting policies have been applied:
Budget figures
The budget figures are those presented in the budget estimates (main estimates) and those amended by the supplementary estimates (supplementary estimates) and any transfer made by Order in Council under section 5 of the Public Finance Act 1989.
Revenue recognition
Military equipment is sold at cost to New Zealand Defence Force in July and January each year. Revenue is recognised and reported in those months.
Interest income
Interest income is recognised in the period in which it is earned.
Goods and services tax (GST)
Input GST on the procurement or refurbishment of military equipment is expensed.
Work in progress
Work in progress comprises project expenditure to be recovered from the New Zealand Defence Force for the six months preceding balance date, plus accruals at balance date.
Foreign currency
Foreign currency transactions are converted into New Zealand dollars at the exchange rate at the date of the transaction. Where a forward exchange contract has been used to establish the price of a transaction, the forward rate specified in that foreign exchange contract is used to convert that transaction to New Zealand dollars. Consequently, no exchange gain or loss resulting from the difference between the forward exchange contract rate and the spot exchange rate on date of settlement is recognised.
Monetary assets and liabilities are translated to New Zealand dollars at the closing exchange rate. The resulting unrealised exchange gain or loss is recognised in the schedule of non-departmental expenses. Other exchange gains or losses, whether realised or unrealised, are recognised in the schedule of non-departmental expenses in the period to which they relate.
Schedule of non-departmental revenues and receipts
For the year ended 30 June 2005
Non-departmental revenues and receipts are administered by the Ministry on behalf of the Crown.
As these revenues and receipts are not established by the Ministry nor earned in the production of the Ministry's outputs, they are not reported in the Ministry's departmental financial statements.
| Note | 30/6/2004 Actual $000 | 30/6/2005 Actual $000 |
30/6/2005 Main estimates $000 |
30/6/2005 Supp. estimates $000 |
|
|---|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | |||||
| Sales of military equipment, at cost, to New Zealand Defence Force The individual projects are: |
|||||
| Maritime helicopters |
3,067 | 861 | - | 861 | |
| Orion autopilot |
28 | - | - | - | |
| ANZAC ships |
20,910 | 1,006 | 1,967 | 1,006 | |
| Tactical communications equipment |
7,706 | 4,958 | 9,810 | 4,958 | |
| Light armoured vehicles |
331,782 | 123,230 | 139,344 | 123,229 | |
| P-3K Orion systems upgrade |
- | 30,765 | - | 30,765 | |
| Project Protector vessels |
- | 61,005 | - | 60,996 | |
| Light operational vehicles |
- | 42,899 | 19,201 | 42,900 | |
| Very low level air defence system |
- | 2,088 | 7,255 | 2,088 | |
| B-757 aircraft and modifications |
98,071 | 10,262 | 37,708 | 10,262 | |
| Medium range anti-armour weapon |
679 | 5,283 | 4,670 | 5,283 | |
| Other projects | 55 | - | - | - | |
| Total sales to New Zealand Defence Force | 462,298 | 282,357 | 219,955 | 282,348 | |
| Interest on foreign currency investments |
C1 | 290 | 237 | 250 | 170 |
| Other revenue |
C2 | 137 | - | - | - |
| Total revenues and receipts administered on behalf of the Minister of Defence | 462,725 | 282,594 | 220,205 | 282,518 |
(Figures are GST exclusive)
Schedule of non-departmental expenses
For the year ended 30 June 2005
Non -departmental expenses are administered by the Ministry on behalf of the Crown.
As these expenses are not spent in the production of the Ministry's outputs, they are not reported in the Ministry's departmental financial statements.
This schedule includes both capital and operating expenses.
| 30/6/2004 Actual $000 | 30/6/2005 Actual $000 |
30/6/2005 Main estimates $000 |
30/6/2005 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Purchase of military equipment The individual projects are: |
||||
| Maritime helicopters |
1,273 | 9 | - | 8 |
| ANZAC ships |
6,611 | 840 | 2,717 | 368 |
| Light armoured vehicles |
262,766 | 21,521 | 16,065 | 25,540 |
| Light operational vehicles |
3,628 | 54,072 | 28,920 | 75,915 |
| Medium range anti-armour weapon |
2,136 | 9,084 | 10,359 | 11,128 |
| Very low level air defence system |
1,631 | 2,138 | 8,751 | 2,697 |
| P-3K Orion systems upgrade |
- | 65,618 | - | 72,962 |
| C-130H Life extension | - | 43,962 | - | 38,950 |
| Project Protector vessels |
- | 114,035 | - | 137,530 |
| B-757 aircraft and modification |
14,540 | 236 | 22,687 | 10,179 |
| Tactical communications equipment |
8,878 | 1,560 | 6,496 | 1,907 |
| Other | 3 | - | - | - |
| Total purchases of military equipment |
301,466 | 313,075 | 95,995 | 377,184 |
| GST input tax expensed |
47,272 | 14,585 | 44,178 | 24,245 |
| Unrealised exchange losses/(gains) |
(4,281) | 4,129 | - | - |
| Total expenses administered on behalf of the Minister of Defence | 344,457 | 331,789 | 140,173 | 401,429 |
(Figures are GST exclusive)
Schedule of non-departmental assets
For the year ended 30 June 2005
Non -departmental assets are administered by the Ministry on behalf of the Crown.
As these assets are neither controlled by the Ministry nor used in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of financial position.
| 30/6/2004 Actual $000 | 30/6/2005 Actual $000 |
30/6/2005 Main estimates $000 |
30/6/2005 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Crown bank accounts |
26,116 | 162,033 | 23,489 | 31,568 |
| Debtors and receivables |
26 | 42 | - | - |
| Work in progress |
136,009 | 166,727 | 46,526 | 230,845 |
| Total assets administered on behalf of the Minister of Defence | 162,151 | 328,802 | 70,015 | 262,413 |
(Figures are GST exclusive)
Schedule of non-departmental liabilities
For the year ended 30 June 2005
Non -departmental liabilities are administered by the Ministry on behalf of the Crown.
As these liabilities are neither controlled by the Ministry nor used in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of financial position.
| 30/6/2004 Actual $000 | 30/6/2005 Actual $000 |
30/6/2005 Main estimates $000 |
30/6/2005 Supp. estimates $000 |
|
|---|---|---|---|---|
| Administered on behalf of the Minister of Defence | ||||
| Creditors and payables |
12,731 | 10,441 | 9,586 | 9,586 |
| Total liabilities administered on behalf of the Minister of Defence |
12,731 | 10,441 | 9,586 | 9,586 |
(Figures are GST inclusive)
Schedule of non-departmental commitments
For the year ended 30 June 2005
Non-departmental commitments are administered by the Ministry on behalf of the Crown.
As these commitments are not incurred in the production of the Ministry's outputs, they are not reported in the Ministry's departmental statement of commitments.
| 30/6/2004 Actual $000 | 30/6/2005 Actual $000 |
|
|---|---|---|
| Capital commitments | ||
| Less than one year |
57,621 | 455,776 |
| One to two years |
11,804 | 291,160 |
| Two to five years |
6,665 | 63,718 |
| More than five years |
- | - |
| Total non-departmental capital commitments |
76,090 | 810,654 |
(Figures are GST exclusive)
These figures exclude the non-recoverable GST payable to the New Zealand Customs Service on the import of military equipment.
Schedule of non-departmental expenditure and appropriations
For the year ended 30 June 2005
The statement of expenditure and appropriations details expenditure incurred against appropriations. The Ministry administers these appropriations on behalf of the Crown.
| 30/6/2004 Actual $000 | 30/6/2005 Actual $000 |
30/6/2005 Main estimates $000 |
30/6/2005 Supp. estimates $000 |
|
|---|---|---|---|---|
| Vote Defence Purchase or development of capital assets by the Crown |
||||
| Defence equipment | 301,466 | 313,075 | 95,995 | 377,184 |
| GST on defence equipment |
47,272 | 14,585 | 44,178 | 24,245 |
|
Total purchase or development of capital assets by the Crown |
348,738 | 327,660 | 140,173 | 401,429 |
(Figures are GST exclusive)
Schedule of non-departmental contingencies
For the year ended 30 June 2005
There are no non-departmental contingent assets or contingent liabilities at 30 June 2005. (30 June 2004 = Nil.)
In August 2004 the Ministry was advised in respect of legal proceedings against the Ministry by Schelde Marinebouw BV. These proceedings were struck out of Court in November 2004.
Notes to the non-departmental schedules
For the year ended 30 June 2005
Note C1: Interest revenue
The Ministry invests foreign currency cash held prior to making payments with financial institutions that the Ministry deals with. All interest earned on short-term deposits is returned to the Crown.
Note C2: Other revenue
| 30/6/2004 Actual $000 | 30/6/2005 Actual $000 |
|
|---|---|---|
| Refunds from foreign military sales cases following the decision to exit the arrangement to lease F-16 aircraft. |
135 | - |
| Other |
2 | - |
| Total other revenue | 137 | - |
Note C3: Budget composition
| 30/6/2005 Main estimates $000 | 30/6/2005 Supp. estimates $000 |
30/6/2005 Budget total $000 |
|
|---|---|---|---|
| Current non tax revenue |
|||
| Crown interest | 250 | (80) | 170 |
| Capital receipts |
|||
| Defence equipment | 219,955 | 62,393 | 282,348 |
| Expenditure |
|||
| Defence equipment | 95,995 | 281,189 | 377,184 |
| GST on defence equipment | 44,178 | (19,933) | 24,245 |
Note C4: Major budget variations
Purchase or development of capital assets by the Crown - defence equipment
The appropriation was increased by $281.189 million to recognise timing changes in existing contract payments, and new projects approved by Government during the financial year not provided for in Main Estimates. The projects involved were:
| $000 | |
|---|---|
| Timing changes | |
| ANZAC ships |
(2,349) |
| Light armoured vehicles |
9,475 |
| Tactical communications |
(4,589) |
| Naval helicopters | 8 |
| B-757 aircraft and modifications |
(12,508) |
| Light operational vehicles |
46,995 |
| Medium range anti-armour weapon |
769 |
| Very low level air defence system |
(6,054) |
| New projects | |
| C-130H Life extension | 38,950 |
| P-3K Orion systems upgrade |
72,962 |
| Project Protector vessels |
137,530 |
| 281,189 |
GST on defence equipment
The appropriation was decreased by $19.933 million to meet timing changes in import GST charges not provided for in Main Estimates. The projects involved were:
| $000 | |
|---|---|
| Timing changes | |
| ANZAC ships |
2 |
| Light armoured vehicles |
(19,658) |
| Tactical communications |
(13) |
| Naval helicopters | 5 |
| B-757 aircraft and modifications |
(8,088) |
| Light operational vehicles |
4,867 |
| Medium range anti-armour weapon |
(58) |
| Very low level air defence system |
18 |
| New projects | |
| C-130H Life extension | 864 |
| P-3K Orion systems upgrade |
559 |
| Project Protector vessels |
1,569 |
| (19,933) |
Note C5: Financial instruments
Currency risk
The Ministry has a foreign exchange covering policy that minimises the currency risk. The policy has key parts:
- the Ministry is not required to arrange cover for foreign exchange transactions more than two years in the future, unless Cabinet decides to the contrary
- a maximum of net aggregate NZ$2 million equivalent exposure at one time is allowed
- cover will occur within five working days of any exposure being identified. These exposures are identified contracts both formal and informal.
Foreign exchange contracts (Crown)
The Ministry had Crown foreign exchange contracts with a face value of $521.508 million at 30 June 2005. (30 June 2004 = $70.990 million.)
