
	Advanced Search

...PREV | CONTENTS | NEXT...

2004 Annual Report

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 30 June 2004

NOTE 1 STATEMENT OF ACCOUNTING POLICIES

(a): Reporting Entity

The financial statements presented here for the reporting entity, the Securities Commission, are prepared pursuant to section 30 of the Securities Act 1978 and section 41 of the Public Finance Act 1989.

(b): Measurement System

The accounting principles recognised as appropriate for the measurement and reporting of results and financial position on a cost basis have been applied with the exception that the library is periodically revalued.

(c)
Accounting Policies

(i): Budget Figures: The budget figures are those approved by Commission Members on 18 July 2003.
The budget figures are prepared in accordance with generally accepted accounting practice and are consistent with the accounting policies adopted by Commission Members for the preparation of the financial statements.
(ii): Depreciation: Fixed assets, other than the library, are shown at cost and have been depreciated on the following bases:
- office furniture - 20 percent of diminishing value,
- office equipment - straight line over three years,
- leasehold improvements - straight line over remaining life of lease which is 9 years,
- motor vehicle - straight line over five years.
(iii): Library: All library acquisitions are recorded at cost. The library is depreciated on a straight line basis over ten years. The library is revalued to fair value every three years by Lambert Library Services (independent valuer). In the year that the periodic revaluation of the library is undertaken any difference between the depreciated value of the library and the fair value is recognised in the asset revaluation reserve. If this results in a debit balance in the asset revaluation reserve, the balance is expensed in the statement of financial performance.
(iv): Short Term Deposits: Short term deposits are shown at cost.
(v): Employee Annual Leave: Provision is made in respect of the Commission's liability for employee annual leave entitlements. This has been calculated on an actual entitlement basis at current remuneration rates.
(vi): GST: All items in financial statements are exclusive of GST with the exception of accounts receivable and accounts payable which are stated with GST included.
(vii): Financial Instruments: 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.
(viii): Income Tax: The Commission is exempt from income tax under the Income Tax Act 1994.
(ix): Revenue Recognition: Government grant is recognised as revenue when it becomes due. Revenue from application fees and costs recoverable and from administrative services to the Takeovers Panel is recognised when the relevant services are provided.
(x): Litigation Fund: Interest income is reported as income of the Securities Commission in the financial period in which it is derived. Reimbursements from the Crown to top up the fund are shown as income in the period in which the Commission's claim for reimbursement is accepted by the Crown. The balance of the fund is disclosed as a component of equity in the statement of financial position.
(xi): Changes in Accounting Policy: There have been no changes in accounting policies since the date of the last audited financial statements except that the depreciation basis on office equipment has been changed to straight line over three years (previously straight line over five years). All other policies have been applied on a basis consistent with other years.

NOTE 2 ADMINISTRATIVE SERVICES TO THE TAKEOVERS PANEL

The Commission provides administrative services to the Takeovers Panel. For each financial year the Commission and the Panel agree on the level of services required and on the fees to be paid to the Commission for these services. The costs involved in providing these services are part of total expenditure.

NOTE 3 ALLOCATION OF RECEIPT FOR USE OF ASSETS

This represents amounts received from the Takeovers Panel to finance the purchase of assets required by the Commission to service the requirements of the Panel. The prepayment is being amortised, having regard to the expected life of the assets over the following periods:

Furniture, fittings and library	5 years
Office equipment	3 years

The balance of the unamortised amount was written off during the year.

NOTE 4 ALLOCATION OF RENT HOLIDAY

This represents amounts received from the landlord for a rent holiday. The accrual is being released having regard to the expected life of the lease of 9 years.

NOTE 5 LITIGATION FUND

This represents government funding to cover the costs and expenses incurred by the Securities Commission in taking or defending eligible cases. It is being held on short term deposit. There have been three calls on the resources of the litigation fund to date.

	2004 $	2003 $

Opening balance	871,873	-
Government grant received	218,510	843,750
Interest received	43,296	28,123
Expenditure on approved litigation	(289,929)	-

Closing balance	$843,750	$871,873

NOTE 6 REMUNERATION OF MEMBERS OF THE COMMISSION

	2004 $	2003 $

Members' fees	321,811	273,866
Chairman's remuneration (salary and motor vehicle allowance)	307,840	300,000

Total remuneration paid to Members of the Commission	$629,651	$573,866

Members are remunerated on the basis of time spent on the work of the Commission.

Members' fees for the year ended 30 June 2003 were:

	2004 $	2003 $

C.A.N. Beyer	45,905	35,625
F.R.S. Clouston	56,751	49,647
M. Chen	18,818	-
A.M. Cotton	45,930	48,173
K.D. Dunstan	32,802	-
E.M. Hickey	-	31,076
L.A.J. Kavanagh	24,050	27,696
J.M.G. Perry	24,664	17,504
C.A. Quinn	27,096	17,090
R.M. Spiller	41,746	22,295
M.R.H. Webb	4,049	24,760

	$321,811	$273,866

NOTE 7 EMPLOYEE REMUNERATION

During the year, the number of employees of the Commission, not being Members, who received remuneration and other benefits in excess of $100,000 were:

Remuneration $	No. of Employees 2004	No. of Employees 2003
160,001 to 170,000	1	-
150,001 to 160,000	-	-
140,001 to 150,000	3	-
130,001 to 140,000	-	3
120,001 to 130,000	-	1
110,001 to 120,000	1	-
100,001 to 110,000	2	-

NOTE 8

RECONCILIATION OF THE NET DEFICIT FROM OPERATIONS WITH THE NET CASH FLOWS FROM OPERATING ACTIVITIES

	2004 $	2003 $

Reported surplus (deficit)	(47,872)	876,516

Add (less) non-cash items:
- Allocation of receipt for use of assets	(25,177)	(35,557)
- Depreciation	331,587	326,805

	306,410	291,248

Add (less)movement in working capital:
- Increase (decrease) in creditors	(32,672)	172,981
- Decrease (increase) in receivables	(152,919)	89,268

	(185,591)	262,249

Add (less) investing activity items
- Gain on sale of assets	(84,174)	(3,897)

	(84,174)	(3,897)


Net cash flows from operating activities	$(11,227)	$1,426,116

NOTE 9 FIXED ASSETS

	Cost/ Valuation $	2004 Accumulated Depreciation $	Net Book Value $

Assets at cost
Office equipment	599,471	303,610	295,861
Office furniture	392,015	90,846	301,169
Leasehold improvements	1,146,749	65,679	1,081,070
Motor vehicle	64,000	35,200	28,800

Assets at valuation
Library	155,754	-	155,754

	$2,357,989	$495,335	$1,862,654

	Cost/ Valuation $	2003 Accumulated Depreciation $	Net Book Value $

Assets at cost
Office equipment	518,681	319,183	199,498
Office furniture	128,482	110,011	18,471
Leasehold improvements	321,751	313,941	7,810
Motor vehicle	64,000	22,400	41,600

Assets at valuation
Library	240,853	43,013	197,840

	$1,273,767	$808,548	$465,219

In accordance with the Statement of Accounting Policies Note 1 (c) (iii), the library has been revalued at 30 June 2004 to a fair value of $155,754 on the basis of a valuation report compiled by Mrs S Lambert of Lambert’s Library Services. After charging $25,977 depreciation during the year $43,166 was debited to the asset revaluation reserve at 30 June 2004.

NOTE 10 ASSET REVALUATION RESERVE

	2004 $	2003 $

Opening balance	87,496	87,496
Increase (decrease) in revaluation reserve	(43,166)	-

Closing balance	$44,330	$87,496

NOTE 11 CREDITORS AND ACCRUALS

	2003 $	2002 $

Creditors	131,410	302,718
Employee entitlements	103,783	76,659

	$235,193	$379,377

NOTE 12 CASH FLOWS

The cash flows relating to the Commission’s investing activities are reported on a net basis in the statement of cash flows. The amounts involved are held in short term deposits which are rolled over frequently through the year.

NOTE 13 FINANCIAL INSTRUMENTS

(a): Credit Risk
Financial instruments which may subject the Commission to credit risk consist of bank balances, bank short term deposits and accounts receivable.
The Commission’s investments are deposited with a registered bank in New Zealand.
The Commission does not require collateral or security to support financial instruments.
There is no significant concentration of credit risk pertaining to accounts receivable.
(b): Fair Values
All financial instruments are recognised in the statement of financial position and are stated at fair values.

NOTE 14 LEASE COMMITMENTS

The Commission has the following operating lease commitments, which are subject to review under the terms of the leases, with terms of more than one year:

	2004 $	2003 $

- Not later than 1 year	514,500	140,000
- Later than 1 year and not later than 2 years	514,500	-
- Later than 2 years and not later than 5 years	1,543,500	-
- Later than 5 years and not later than 9 years	1,843,625	-

NOTE 15 CAPITAL COMMITMENTS

Estimated capital expenditure contracted for at balance date but not provided for:
$ NIL (2003 - $33,413).

NOTE 16 CONTINGENT LIABILITIES

There are no contingent liabilities at balance date. (2003 - NIL).

NOTE 17 TRANSACTIONS WITH RELATED PARTIES

During the year the Commission paid fees for professional services to:

(a)
Simpson Grierson, a legal firm in which C.A.N. Beyer, Member of the Commission, is a consultant. The fees, totalling $59,382, were charged on normal commercial terms, and related to legal advice and contractual work carried out for:

(i): lease of the new office premises;
(ii): facilities management agreement with the information technology supplier.

(b)

KPMG, an accounting firm in which J.M.G. Perry, Member of the Commission, is a partner. The fees, totalling $10,028, were charged on normal commercial terms, and related to advice and contractual work carried out for internet penetration testing.

There were no amounts outstanding at year end relating to these transactions.

No related party debts have been written off or forgiven during the year.

NOTE 18 BUDGET VARIANCES

(a)
Income
Operating income for the year was $168,000 above budget, mainly arising from:

(i): additional application fees for exemptions;
(ii): profit on sale of fixed assets;
(iii): reduced services provided to the Takeovers Panel;
(iv): reduced government grant for the new office's operational costs.

(b)
Expenditure
Significant variances from budget were:

(i): additional costs from accelerated depreciation of office equipment;
(ii): additional staff and recruitment costs due to catch up on recruitment from 2003;
(iii): reduced travel and accommodation costs due to curtailed overseas travel and generally reduced travel activity;
(iv): reduced professional service costs due to delayed commencement of the public education activities;
(v): additional services and supplies costs due to the increased operational costs of the new offices.

NOTE 19 COST ALLOCATION POLICY

Direct costs are charged directly to outputs. Indirect costs are allocated on the basis of direct labour hours spent on each output.

NOTE 20 INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Commission intends to be an early adopter of International Financial Reporting Standards (IFRS), publishing its full NZ IFRS financial statements for the year ending 30 June 2006. The Commission has commenced a project to identify the impacts of adopting NZ IFRS. The project is not yet sufficiently far advanced to be able to identify the specific impacts although they are not expected to be significant..

...PREV | CONTENTS | NEXT...