Statement of Intent 1 July 2006 - 30 June 2009
Part 2: Departmental forecast report (continued)
Departmental capital expenditure
The forecast capital expenditure for the 2006/07 financial year reflects the Ministry's share of capital expenditure in the new defence building in Wellington and routine replacement and upgrade of the department's information technology and office equipment, to help our staff efficiently deliver the services set out in this Statement of Intent.
| Departmental Capital Expenditure ($) | Forecast 2006/07 |
Estimated
Actual 2005/06 |
Budget 2005/06 |
Actual 2004/05 |
Actual 2003/04 |
Actual 2002/01 |
Actual 2001/02 |
|---|---|---|---|---|---|---|---|
Other assets |
111,000 | 85,000 | 85,000 | 139,248 | 386,769 | 165,081 | 86,573 |
| Leasehold improvements | - | - | - | - | - | 20,837 | 96,669 |
| Office and computer equipment | 523,000 | 100,000 | 100,000 | 195,255 | 33,407 | - | 47,986 |
| New Defence building | 2,366,000 | 400,000 | 400,000 | 94,743 | - | - | - |
| Total | 3,000,000 | 585,000 | 585,000 | 429,246 | 420,176 | 185,918 | 231,228 |
Transition to International Financial Reporting Standards (IFRS)
This note outlines the process for adopting New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) for the Ministry of Defence.
The Accounting Standards Review Board announced in December 2002 that reporting entities must adopt NZ IFRS for periods beginning after 1 January 2007, with earlier adoption optional. The Minister of Finance announced in 2003 that the Crown will first adopt NZ IFRS for its financial year beginning 1 July 2007. This means that the Ministry of Defence Statement of Intent for 2007/08 will need to recognise IFRS requirements in its Forecast Financial Statements.
The Ministry of Defence has conducted a preliminary assessment of the impacts of transitioning to IFRS. The potential areas of impact from adoption of NZ IFRS may change as implementation unfolds or standards are revised.
The 2007/08 financial statements will require the restatement of 2006/07 comparative figures and the 1 July 2006 opening balance sheet to ensure all information presented in those accounts are prepared on a consistent basis. Treasury has advised that it will be gathering comparative information throughout the 2006/07 financial year in parallel with current reporting requirements.
Under current standards, gains or losses on forward exchange contracts are not recognised, as any exposure to gains or losses on these contracts is generally offset by a related loss or gain on the item being hedged. Disclosure is made of the amount of unrealised gains or losses in the Annual Report in the notes to the financial statements. Under IFRS, these contracts will be valued at fair value, with any gains or losses either being taken to a reserve (if hedge accounting) or to the statement of financial performance (if not hedge accounting). The Ministry of Defence will therefore recognise these contracts at fair value, but it has not yet been determined whether hedge accounting will be adopted.
Current standards require foreign currency transactions which are covered by forward exchange contracts to be translated at the exchange rates specified in those contracts. Under IFRS, these transactions will be translated at the spot rate applying at the time of the transaction.
Under IFRS there will be a requirement to actuarially value some employee entitlements, such as sick leave, which are currently not recorded as a liability.
