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These statements have been compiled on the basis of government policies and the department’s purchase agreement with the Prime Minister at the time the statements were finalised.
These forecast financial statements comply with generally accepted accounting practice. The measurement base applied is historical cost adjusted for revaluations of assets. Revaluations are made to reflect the forecast service potential or economic benefit to be obtained through the control of assets.
The accrual basis of accounting has been used for the preparation of these financial statements.
These statements have been prepared on a going-concern basis.
The budget figures are those presented in the Budget estimates (main estimates) and those amended by the supplementary estimates and any transfer made by Order in Council under Section 5 of the Public Finance Act 1989.
All statements are GST-exclusive, with the exception of the Statement of Forecast Financial Position where the entries for creditors and payables and debtors and receivables are GST-inclusive.
The amount of GST owing to or from the Inland Revenue Department at balance date, being the difference between output GST and input GST, is included in creditors, payables or debtors as appropriate.
All fixed assets have been valued on historical cost basis. All individual assets or groups of assets are capitalised if their purchase cost is $2,000 or greater.
Gains and losses arising from the sale or disposal of assets have been included in the Statement of Financial Performance.
All fixed assets have been depreciated on a straight-line basis that reflects
the decline in service potential of the asset during the reporting period.
Specific rates of depreciation used for the various classes of fixed assets
are as follows:
| Fixtures and fittings | 10% |
| IT equipment | 33% |
| Office equipment | 20% |
| Furniture | 20% |
| Motor vehicles | 25% |
| Kitchen equipment, e.g. domestic appliances | 20% |
| Major plant and machinery | 10% |
| Minor plant and machinery | 20% |
| Ground improvements | 14% |
The department is exempt from the payment of income tax in terms of the Income Tax Act 1994. Accordingly, no charge for income tax has been provided for.
The department is party to financial arrangements in the form of bank accounts, accounts receivable, accounts payable, and accruals as part of its everyday operations. These are reflected in the Statement of Financial Position at their fair value. Revenue and expenses in relation to the financial instruments are recognised in the Statement of Financial Performance in arriving at the operating surplus.
Direct costs are expenses incurred from activities in producing outputs.
These costs are charged directly to the related output classes. Direct costs
represent 90 per cent of total departmental appropriation for output costs
in 2004/05. (This compares with 91 per cent in 2003/04.)
Indirect costs are expenses incurred by corporate services and by the office of the chief executive. Indirect costs are allocated to each output class in proportion to the level of appropriations in relation to the total vote. Indirect costs will represent 10 per cent of total departmental appropriations for output costs in 2004/05. (This compares with 11 per cent in 2003/04.)
The department leases office premises and photocopiers. As all risks and ownership are retained by the lessor, these leases are classified as operating leases. Operating lease costs are expensed in the period in which they are incurred.
Provision is made in respect of the department’s liabilities for annual, retirement and long-service leave. Annual leave entitlements have been calculated on an actual entitlement basis at current rates of pay. Long-service leave and retirement leave have been calculated on an actuarial basis, based on the present value of expected future entitlements.
Future payments are disclosed as commitments at the points where a contractual
obligation arises, to the extent that they are equally unperformed obligations.
Commitments relating to employment agreements are not disclosed.
Contingent liabilities are disclosed at the point at which the contingency is evident.
There have been no changes in accounting policies, including cost allocation
accounting policies. All policies have been applied on bases consistent with
those used in the previous period.