2011-2012 Annual Report - Full Version - PDF - Palmerston North ...

Notes to the Financial StatementsPalmerston North City CouncilNote 1Statement of accounting policiesfor the year ended 30 June 2012Financial Statements Note 1REPORTING ENTITYPalmerston North City Council (PNCC) is a territorial localauthority governed by the Local Government Act 2002 andis domiciled in New Zealand.The parent ‘council’ financial statements are the Council asa separate legal entity. The Palmerston North City Council‘group’ financial statements incorporate the PalmerstonNorth City Council, its 100% share of its subsidiaryPalmerston North Airport Limited (PNAL) and the followingCouncil Controlled Organisations (CCO’s):• Caccia Birch Trust Board,• Globe Theatre Trust Board,• Palmerston North Performing Arts Trust Board,• Regent Theatre Trust Board, and• Te Manawa Museums Trust Board.The primary objective of PNCC is to provide goodsor services for the community or social benefit ratherthan making a financial return. Accordingly, PNCC hasdesignated itself and the group as public benefit entities forthe purposes of New Zealand equivalents to InternationalFinancial Reporting Standards (NZ IFRS).The financial statements of PNCC are for the year ended30 June 2012. The financial statements were authorised forissue by Council on 26 September 2012.BASIS OF PREPARATIONStatement of complianceThe financial statements of PNCC have been prepared inaccordance with the requirements of the Local GovernmentAct 2002, which includes the requirement to comply withNew Zealand generally accepted accounting practice (NZGAAP).These financial statements have been prepared inaccordance with NZ GAAP. They comply with NZ IFRS,and other applicable Financial Reporting Standards, asappropriate for public benefit entities.Measurement baseThe financial statements have been prepared on a historicalcost basis, modified by the revaluation of land and buildings,infrastructural assets, investment property, biological assetsand certain financial instruments (including derivativeinstruments).Functional and presentation currencyThe financial statements are presented in New Zealanddollars and all values are rounded to the nearest thousanddollars ($’000). The functional currency of PNCC is NewZealand dollars.Changes in accounting policiesThere have been no changes in accounting policies duringthe financial year.138Palmerston North City Council Annual Report 2011/12PNCC has adopted the following revisions to accountingstandards during the financial year, which have had only apresentational or disclosure effect:• NZ IAS 24 Related Party Disclosures (revised 2009) iseffective for reporting periods beginning on or after1 January 2011. The revised standard amends thedefinition of a related party, clarifies that commitmentsbetween related parties are required to be disclosedand makes some information disclosure concessionsavailable to local government.Standards, amendments and interpretationsissued that are not yet effective and have notbeen early adoptedStandards, amendments, and interpretations, issued butnot yet effective that have not been early adopted, andwhich are relevant to PNCC include:• NZ IFRS 9 Financial Instruments (issued 2009) iseffective for reporting periods beginning on or after 1January 2013. The standard is the first phase of a threephase review to replace NZ IAS 39 Financial InstrumentsRecognition and Measurement. NZ IFRS 9 uses a singleapproach to determine whether a financial asset ismeasured at amortised cost or fair value based on howthe financial instrument is managed and contractualcash flow plus requires a single impairment method tobe used. PNCC will adopt NZ IFRS 9 for the year ending30 June 2014 and has not yet quantified the potentialimpact of the new standard.• The External Reporting Board and the New ZealandAccounting Standards Board have issued for comment41 Exposure Drafts of new accounting standards. It isproposed that these will apply to Public Benefit Entitiesfrom the period commencing 1 July 2014 and willreplace currently applied standards. PNCC will adoptthe proposed new standards, once adopted, and hasnot yet quantified the potential impact of the newstandards.SIGNIFICANT ACCOUNTING POLICIESBasis of consolidationThe purchase method is used to prepare the consolidatedfinancial statements, which involves adding together likeitems of assets, liabilities, equity, income and expenses ona line-by-line basis. All significant intra-group balances,transactions, income and expenses are eliminated onconsolidation.SubsidiariesPNCC consolidates as subsidiaries in the group financialstatements all entities where PNCC has the capacityto control their financing and operating policies so asto obtain benefits from the activities of the entity. Thispower exists where PNCC controls the majority votingpower on the governing body or where such policieshave been irreversibly predetermined by PNCC or wherethe determination of such policies is unable to materiallyimpact the level of potential ownership benefits that arisefrom the activities of the subsidiary.