Draft Long Term Plan 2012-2022 - Hurunui District Council

www.hurunui.govt.nzThe Council recognises a liability and an expense for bonuseswhere contractually obliged or where there is a past practicethat has created a constructive obligation.Long service leave and retiring gratuityThe retiring gratuity and long service leave liability is assessed onan actuarial basis using current rates of pay taking into accountyears of service, years to entitlement and the likelihood staff willreach the point of entitlement.ProvisionsProvisions are recognised when the Group has a presentobligation as a result of a past event (either legal or constructive),and it is probable that the Group will be required to settle thatobligation. Provisions are measured at management’s bestestimate of the expenditure required to settle the obligationat balance date, and are discounted to present value wherethe effect is material. Provisions are not recognised for futureoperating losses.As operator of the Waikari Landfill, the Council has a legalobligation under the resource consent to provide ongoingmaintenance and monitoring services at the landfill site afterclosure. A provision for post-closure costs is recognised as aliability when the obligation for post-closure costs arises.The provision is measured based on the present value offuture cash flows expected to be incurred, taking into accountfuture events including new legal requirements, and knownimprovements in technology, where there is sufficient evidencethat these events will occur. The provision includes all othercosts associated with landfill post-closure.Amounts provided for landfill post-closure are capitalised to thelandfill asset where they give rise to future economic benefitsto be obtained. Components of the capitalised landfill asset aredepreciated over their useful lives. The discount rate used is arate that reflects current market assessments of the time valueof money and the risks specific to the liability.Goods and Services TaxThese financial statements have been prepared exclusive of GST,except for receivables and payables, which are GST inclusive.Where GST is not recoverable as an input tax, it is recognisedas part of the related asset or expenseBudget Figuresbudget figures have been prepared in accordance NZ GAAPand are consistent with the accounting policies adopted by theCouncil for the preparation of the financial statements.Cost AllocationHDC has derived the net cost of service for each significantactivity of the Council using a system of cost allocation.Direct Costs are charged directly to significant activities.Indirect costs are charged to significant activities based on costdrivers and related activity/usage information. ‘Direct’ costs arethose costs directly attributable to a significant activity.‘Indirect costs’ are those costs, which cannot be identified in aneconomically feasible manner with a specific significant activity.The costs of internal services not directly charged to activitiesare allocated as overheads using appropriate cost drivers suchas actual usage, staff numbers and the like.Critical Accounting Estimates and AssumptionsThe preparation of prospective financial statements inconformity with NZ IFRS requires management to makejudgments, estimates and assumptions that affect the applicationof policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions arebased on historical experience and various other factors that arebelieved to be reasonable under the circumstances, the resultsof which form the basis of making the judgments about carryingvalues of assets and liabilities that are not readily apparent fromother sources.Management has exercised the following critical judgments inapplying the accounting policies to the preparation of the 2012-2022 Long Term Plan. Judgments have been made over useful livesof property, plant and equipment and intangible assets, landfillaftercare provision, probability of reaching vesting date for longservice liability, sick leave provisions, valuations of infrastructuralassets and the long term effects on HDC’s assets as a result ofthe Canterbury earthquakes. Therefore, actual results may differfrom these estimates.The judgments and underlying assumptions are reviewed on anongoing basis. Revisions to accounting estimates are recognisedin the period to which the estimate is revised if the revisionaffects only that period or the period of the revision and futureperiods if the revision affects both current and future periods.The budget figures are those approved by the Council at thebeginning of the year after a period of consultation with thepublic as part of the Long Term Plan or Annual Plan process. The160