Statement of Accounting Policies
REPORTING ENTITY
The Takeovers Panel is a body corporate established by the Takeovers Act 1993. The financial
statements presented here are prepared pursuant to section 154 of the Crown Entities Act 2004.
The Panel is an independent Crown entity for legislative purposes and a public benefit entity for the
purposes of complying with Generally Accepted Accounting Practices in New Zealand (NZ GAAP).
The financial statements of the reporting entity, the Panel, for the year ended 30 June 2008 were
authorised for issue by the Panel on 18 August 2008.
The Panel's primary function is the regulation of corporate takeovers in New Zealand.
BASIS OF PREPARATION
Statement of compliance
These financial statements have been prepared in accordance with NZ GAAP. They comply with
New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other
applicable Financial Reporting Standards, as appropriate for public benefit entities.
Basis of measurement
The accounting principles recognised as appropriate for the measurement and reporting of results
and financial position on an historical cost basis have been applied.
Functional and presentational currency
These financial statements are presented in New Zealand dollars ($) which is the entity's functional
currency.
Use of estimates and judgements
The process of applying accounting policies requires the Panel to make judgements, estimates and
assumptions that affect the reported amounts of assets, liabilities, income and expenses. The
estimates and associated assumptions are based on past experience and various other factors that are
believed to be reasonable under the circumstances. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and in any future periods
affected.
Standards, amendments and interpretations issued that are not yet effective and have not been early adopted
Standards, amendments and interpretations issued but not yet effective that have not been early adopted, and which are relevant to the Panel, include:
NZ IAS 1 Presentation of Financial Statements (revised 2007) replaces NZ IAS 1 Presentation of Financial Statements (issued 2004) and is effective for reporting periods beginning on or after 1 January 2009. 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 the Crown in its capacity as "owner". The revised standard gives the Panel the option of presenting items of income and expense and components of other comprehensive income either in a single statement of comprehensive income with subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). The Panel intends to adopt this standard for the year ending 30 June 2010, and is yet to decide whether it will prepare a single statement of comprehensive income or a separate income statement followed by a statement of comprehensive income.
First year of preparation under NZ IFRS
This is the first set of financial statements prepared using NZ IFRS, and comparatives for the year ended 30 June 2007 have been restated to NZ IFRS accordingly. Reconciliations of equity and surplus/(deficit) for the year ended 30 June 2007 under NZ IFRS to the balances reported in the 30 June 2007 financial statements are detailed in note 12.
The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing an opening NZ IFRS Statement of Financial Position as at 1 July 2006.
Significant accounting policies
Significant accounting policies set out below have been applied consistently to all periods presented in these financial statements.
- Cash and cash equivalents
Cash and cash equivalents comprise cash balances on hand, held in bank accounts and short term
deposits that form part of the Panel's day-to-day cash management. They are short term, highly
liquid investments that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in values. They are held for the purpose of meeting short term
cash commitments and have short maturities of three months or less.
- Term deposits
This category only includes term deposits with maturities greater than three months. These
deposits are loans and receivables under NZ IFRS. Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market.
Loans and receivables are recognised initially at fair value plus transaction costs and subsequently
measured at amortised cost using the effective interest rate method.
- Trade and other receivables
Debtors and other receivables are initially measured at fair value and subsequently measured at
amortised cost using the effective interest method, less any provision for impairment.
- GST
All items in financial statements are exclusive of GST with the exception of trade and other
receivables and trade and other payables which are stated with GST included.
The statement of cash flows has been prepared on a net GST basis. That is, cash receipts and
payments are presented exclusive of GST. A net GST presentation has been chosen to be
consistent with the presentation of the Statement of Financial Performance and Statement of
Financial Position. The net GST component of operating activities reflects the net GST paid to
and received from the Inland Revenue Department. The GST component has been presented on
a net basis as the gross amounts would not provide meaningful information for financial
statement purposes.
- Trade and other payables
Creditors and other payables are initially measured at fair value and subsequently measured at
amortised cost using the effective interest method.
- Financial instruments
A financial instrument is recognised when the Panel becomes party to a financial contract. 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.
Financial instruments comprise trade and other receivables, cash and cash equivalents, term
deposits and trade and other payables.
- Income tax
The Panel is exempt from income tax under the Income Tax Act 2004.
- Revenue recognition
Government grant is recognised as revenue when earned and is reported in the financial period
to which it relates. Revenue from application fees and costs recoverable is recognised when the
relevant services are provided or when the Panel has made the relevant determination under
section 32 of the Takeovers Act 1993.
Interest income is recognised as it accrues, based on the effective interest rate inherent in the
respective financial instrument. The effective interest rate exactly discounts estimated future cash
receipts through the expected life of the financial asset to that asset's net carrying amount. The
method applies this rate to the principal outstanding to determine interest income each period.
- Cost allocation policy
For the purposes of the Statement of Service Performance direct costs are charged directly to outputs. Indirect costs are allocated on the basis of direct labour hours spent on each output.
- Litigation fund
Interest income and expenditure on approved litigation fund matters are reported as income and expenditure of the Panel in the financial period in which they were derived or incurred. Reimbursements from the Crown to top up the fund are reported as income in the period to which the Panel's claim for reimbursement relates. The balance of the fund is disclosed as a component of equity in the statement of financial position.
- Impairment
At each balance date financial assets such as receivables are assessed for impairment. Trade and other receivables are individually assessed for impairment. This assessment is also made with reference to previous experience with debtors. The recoverable amount is the present value of the estimated future cash flows. An impairment loss is recognised in the Statement of Financial Performance whenever the carrying amount of an asset exceeds its recoverable amount. Any reversal of impairment losses is also recognised in the income statement.
- Short term employee benefits
Employee entitlements represent the Panel's liability for employee annual leave entitlements and salaries accrued up to balance date. This has been calculated on an accrued entitlement basis which involves recognising the undiscounted amount of short term employee benefits expected to be paid in exchange for service that an employee has already rendered. This is calculated at current remuneration rates.
- Contingent assets and contingent liabilities
Contingent assets are disclosed if it is probable that the benefits will be realised. Contingent liabilities are disclosed if the possibility that they will crystallise is not remote.
- Changes in accounting policy
There have been no changes in accounting policies since the date of the last audited financial
statements.
SECURITIES COMMISSION SERVICES
Although the Panel is an independent Crown entity it does not yet have its own premises or
equipment and up until April 2008 did not employ any of its own staff. Instead these services have
been provided by the Securities Commission in terms of an agreement negotiated between the Panel
and the Commission on an arm's length basis. The Panel pays the Commission on the basis of the
hours worked by Commission staff on Panel business. Payments are at a rate that covers the cost of
salaries and overheads including the use of premises and equipment and totalled $1,026,778 for the
year (2007 $1,124,316).
During April and May 2008 the Panel became the employer of its three senior staff. From
1 September 2008 the Panel will be the employer of all its dedicated staff. The Panel pays the
Commission only an overhead contribution in respect of the staff the Panel employs.
The payments to the Commission are paid in advance at the start of each quarter and are reconciled
to actual usage at the end of the quarter. The amount due to the Commission at 30 June 2008 was
$6,052 (2007 $3,413 Credit). This is included in trade and other payables in the Statement of
Financial Position.
LITIGATION FUND
The Panel operates a litigation fund started with an appropriation of $675,000 (GST not applicable)
made by Parliament several years ago. The fund is to be used for litigation costs that are incurred by
the Panel as it enforces compliance with the Takeovers Code or responds to litigation brought
against it. In the 2006/07 Output Agreement with the Minister the scope of the litigation fund was
widened to include involvement in Court proceedings under the scheme of arrangement or
amalgamation provisions of the Companies Act affecting Code companies. It is being held on short
term deposit.
Parliament made a further appropriation of $500,000 (GST inclusive) for the year ended 30 June
2008 to top up the fund to the set level of $675,000. The Panel has not had to draw from this
appropriation during the year.
A summary of the movements in the fund during the year is as follows:
| |
|
|
 |
| Government grant received |
- |
49,669 |
| Recovery of costs |
- |
55,000 |
| Interest received |
54,982 |
43,292 |
| Interest accrued |
3,740 |
2,337 |
| Expenditure on approved litigation |
- |
(92,263) |
|
|
|
| Surplus (deficit) for the year
|
58,722 |
58,035 |
| Opening balance |
696,832 |
638,797 |
|
|
|
| Closing balance |
$755,554 |
$696,832 |
|
|
|
| |
This is comprised of:
Cash and cash equivalents |
|
|
| - Call account |
26,651 |
24,865 |
| - Short term deposits |
434,393 |
400,599 |
| Term deposits |
290,770 |
269,031 |
| Interest receivable |
3,740 |
2,337 |
|
|
|
|
$755,554 |
$696,832 |
|
|
|
