The Panel is responsible for the forecast financial statements presented, including the appropriateness of the assumptions underlying the forecast financial statements and all other required disclosures. The preparation of these forecast financial statements requires the Panel to make judgements, estimates and assumptions that affect the application of accounting policies and the forecast amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates and the variation may be material.

Estimates and assumptions used in these forecast financial statements are based on the best information available to the Panel at the time of their preparation. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the forecast financial statements are described in the following significant assumptions. It is not intended to update the forecast financial statements subsequent to publication of these statements.

1. Forecast financial statements for 2006/2007

   The 2006/2007 forecast financial statements include actual results up to the end of April 2007 and an estimate of the outcome for the remaining two months of the year taking account of work on hand and expected developments in the final months of the financial year. These figures are not the same as those included for 2006/2007 in the Panel's 2006 forecast financial statements.

2. Government appropriation

   The Government grant is as per the amount allocated to the Output Class "Administration of the Takeovers Code" for the year 2007/2008. We do not expect any change in that amount over the course of the year.

3. Application fees and costs recoverable

   We assume third party income of $364,000 in 2007/2008, an increase of around 39% over the expected level of third party income of $261,400 in 2006/2007. This increase assumes a continuation of takeover activity at a similar level to that in the present year. Exemption and approval activity is expected to continue at a similar level to 2006/2007. However, there is expected to be increased enforcement activity, and therefore recoveries, arising from the coming into force of the "misleading or deceptive" conduct prohibitions in the Code in the first half of the reporting year.

4. Payment for Securities Commission services

   The Panel expects to spend $1,242,000 on the purchase of services from the Commission. This represents an increase of around 12.1% over the present year's likely expenditure of $1,108,070. The forecast assumes that the Commission will be able to supply professional staff resources to the Panel at the rate of 6.3 full-time equivalents for the full year 2007/2008 at a price of $115 per hour, the same rate as in 2006/2007. The level of demand for Commission services is a reflection of the changed environment following passage of the Takeovers Amendment Act 2006 as well as of the Courts' effective endorsement of the Panel's ability to be heard in proceedings involving Code companies using the scheme of arrangement provisions of the Companies Act to effect changes of control.

5. Members fees

   The Panel expects to spend $380,000 on members' fees in 2007/2008, an increase of 13.4% over expected expenditure of $335,150 in 2006/2007. This increase anticipates a heavier workload for members as a result of the changes being made to the Panel's enforcement powers by the Takeovers Amendment Act 2006 offset by lower fees as a result of delays in the appointment of an Australian member and the possibility of fewer Panel meetings in the second half of the year.

6. Expenses - litigation fund

   The Panel anticipates expenditure of some $70,000 from its policy of seeking to be heard in Court proceedings involving schemes of arrangement under the Companies Act 1993 that affect Code companies.

7. Overall risk of prospective revenue expectations not being met

   These forecast financial statements are presented on the basis that, other than matters stated above under the statement of significant assumptions, there will be no other significant change to the nature of the Panel's operations or its principal activities in the period covered by the forecast financial statements. As long as there is code activity there will be a need for exemptions and approvals because the Code is expressed in reasonably general terms and exemptions are often needed to facilitate code transactions. However the level of Panel income from these sources is difficult to predict with any reliability.

   The level of the Panel's enforcement activity is dependent on the level and nature of takeover market activity. If takeovers are hostile or competitive this is likely to lead to a higher level of Panel involvement and possibly enforcement meetings. The impact of the Panel's expanded enforcement powers is difficult to predict but is expected to be significant. The Panel cannot always recover its costs from the enforcement meetings it holds.

   If there is a lower level of exemptions and approvals than expected and an absence of contested or opposed takeovers then the level of the Panel’s third party revenue could be significantly affected.

   If the Panel's third party revenue fell to $260,000 rather than the predicted $364,000, we would expect the Panel's forecast operating deficit of $125,700 to be little affected. This is because the reduction in revenue is likely to be offset by the likely savings in members' fees, in the cost of Commission services, and in the cost of external legal counsel. At the current rates the Panel does not recover its costs from the fees it is able to charge under the current fees regulations.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The separate forecast financial statements presented here are for the reporting entity, the Takeovers Panel, for the year ended 30 June 2008. The forecast financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP) and are consistent with the accounting policies to be adopted by the Panel for the preparation of financial statements. 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. These are the Panel's first NZ IFRS forecast financial statements.

Measurement System

The forecast financial statements have been prepared on an historical cost basis

Functional and presentation currency

These forecast financial statements are presented in New Zealand dollars ($), which is the Panel's functional currency. All financial information presented in New Zealand dollars has been rounded to the nearest dollar.

Specific Accounting Policies

1. Revenue Recognition

   Government grant is recognised and reported as revenue on receipt of the grant at the beginning of each quarter to which it relates.

   Revenue from application fees is recognised on receipt of an application. Costs recoverable are recognised as revenue on a monthly basis when the relevant services are provided based on the stage of completion of the transaction or when the Panel has made the relevant determination under section 32 of the Takeovers Act 1993. The stage of completion is assessed by reference to the number of hours worked.

   Interest income is recognised as it accrues, based on the effective interest rate inherent in the respective financial instrument.

2. 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. Costs awarded by the Court are recognised in the financial period during which the Court gives its judgment or the parties agree. 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.

3. Taxation

   All items in the financial statements are exclusive of GST with the exception of sundry debtors and prepayments and creditors and accruals which are stated with GST included.

   The Panel is exempt from income tax under the Income Tax Act 1994.

4. 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.

5. 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.

   A financial instrument is recognised when the Panel becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the Panel's contractual rights to the cash flows from the financial assets expire or when the Panel transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, the date the Panel commits itself to the purchase or sale of the asset. Financial liabilities are derecognised when the Panel's obligations specified in the contract expire or are discharged or cancelled.

6. Cash and cash equivalents

   Cash and cash equivalents comprise cash balances on hand and short term deposits held by the Panel. 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 from the date of their acquisition. Short-term deposits are shown at cost.

7. Trade andd other receivables

   Trade and other receivables and GST receivable are stated at cost less impairment losses. Given their short-term nature, the carrying values of trade and other receivables and GST receivable are considered reasonable approximations of their fair values. Appropriate allowances for estimated irrecoverable amounts are recognised in the statement of financial performance when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and its estimated future cash flows.

8. Trade and other payables

   Trade and other payables and GST payable are stated at cost. Given their short-term nature, the carrying values of trade and other payables and GST payable are considered a reasonable approximation of their fair values.

9. Explanation of application of NZ IFRS

   These are the Panel's first forecast financial statements prepared in accordance with NZ IFRS. The accounting policies set out above will be applied in preparing the financial statements for the year ended 30 June 2008. The application of NZ IFRS is consistent with the requirement for all entities in New Zealand to apply NZ IFRS for accounting periods beginning on or after 1 January 2007. Other than presentational and classification differences, the change to NZ IFRS has no other impact on the forecast financial statements. The comparative forecast information presented in these financial statements for the year ended 30 June 2007 has been restated to reflect the presentation and classification changes resulting from the application of NZ IFRS.

10. Changes in Accounting Policies

    There have been no changes to accounting policies since the date of the last forecast financial statements prepared under NZ GAAP other than the application of NZ IFRS.

PREVIOUS | INDEX | BACK TO TOP | NEXT