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

Note 21Provisions Council GroupActual Actual Actual Actual2012 2011 2012 2011$000 $000 $000 $000CURRENTLandfill aftercare provision 285 243 285 243Building weather tightness claims 442 688 442 688Revenue received in advance 73 96 73 96Restructuring provision - 168 - 168Total current provisions 800 1,195 800 1,195NON-CURRENTLandfill aftercare provision 913 1,092 913 1,092Revenue received in advance 134 204 134 204Total non-current provisions 1,047 1,296 1,047 1,296Council & GroupLandfill Building Revenue Restructuringaftercare weather received in provisiontightness claims advance$000 $000 $000 $000Balance at 1 July 2010 1,505 540 422 -Additional provisions made during the year - 225 - 168Amounts used during the year (248) (77) (122) -Discount unwind (note 4) 78 - - -Balance at 30 June 2011 1,335 688 300 168Additional provisions made during the year - 150 13 -Amounts used during the year (207) (396) (106) (168)Discount unwind (note 4) 70 - - -Balance at 30 June 2012 1,198 442 207 -Landfill aftercare provision◊◊◊◊PNCC, as owner and operator of the Awapunilandfill since 1952, has a legal obligationunder resource consent to provide ongoingmaintenance and monitoring of its landfill postclosure.The landfill closed at the end of January2007. Post closure activities include leachate,water, gas monitoring and remedial measuressuch as ongoing site maintenance, drainagesystems and wastewater treatment, final claycapping, soil covering and vegetation.Estimates of future monitoring costs andremedial works have been made by councilengineers. These engineering estimates arethe basis upon which PNCC has established thisfinancial provision. The provision includes allexpected future costs and obligations associatedwith landfill post-closure.The provision has been estimated taking intoaccount and based upon known technology,existing knowledge and current legalrequirements for the remaining closure andongoing maintenance and monitoring costs. Theamount of the provision is the present valueof future cash flows expected to be incurred,using a discount rate of 4.75% and 6.0%. PNCCengineers and accountants review the amountof the landfill provision at least once a year.The long term nature of the landfill liabilitymeans that there are inherent uncertainties inestimating costs that will be incurred.Cash outflows for post-closure remedial workshave already begun and are expected to◊◊◊continue over the next year (until 2013), withconsent monitoring costs expected to continuefor up to 17 years (until 2029).Landfill post-closure remedial works arecapitalised to the landfill asset where they giverise to future economic benefits. Componentsof the capitalised landfill asset are thendepreciated over their useful lives.The landfill provision of $1.198m (2011 $1.335m)is made up of closure costs $0.195m (2011$0.298m) and aftercare costs $1.003m (2011$1.037m).No reimbursement from other sources outside ofPNCC is expected.Building weather tightness claims◊ PNCC has unresolved weather tightness claims.Refer to note 27 for further details. PNCC isunable to assess it’s exposure to these claimswith the cost of any successful claims againstPNCC expected to be substantially coveredunder PNCC’s insurance policies.◊PNCC also has exposure to possible calls relatingto professional indemnity insurance cover,mainly relating to weather tightness claims.Refer to note 27 for further details. PNCC hasbeen advised that further calls may be requiredfor past pool periods.◊ PNCC has made a provision of $442,000 (2011$688,000) to cover future weather tightnessclaims and future insurance pool calls, althoughthe potential liability and timing of any paymentFinancial Statements Note 21Palmerston North City Council Annual Report 2011/12167