9 May 2014 MEDIA STATEMENT Embargoed until 10.00am, Friday 9 May 2014 Fergus Welsh Acting Chief Government Accountant The Treasury Financial Statements of the Government of New Zealand for the Nine Months Ended 31 March 2014 The Financial Statements of the Government of New Zealand for the nine months ended 31 March 2014 were released by the Treasury today. These statements are compared against forecasts based on the Half Year Economic and Fiscal Update (HYEFU), released on 17 December 2013. Core Crown tax revenue was $44.5 billion in the latest nine month reporting period, up 6.3% compared with the same period a year earlier. Tax revenue, however, was 1.8% less than forecast (a narrowing from the 2.8% variance against forecast reported a month ago) reflected across most tax types and continuing the pattern of recent months. Updated tax revenue forecasts will be released as part of the Budget Economic and Fiscal Update on 15 May. Tax revenue outturns in the current fiscal year are not expected to impact on the forecast return to OBEGAL surplus for 2014/15 as the variance-againstforecasts are offset by a stronger outlook for the economy than had been anticipated at HYEFU. While core Crown revenue was $743 million lower than forecast, this was partly offset by core Crown expenses which were also lower than forecast by $423 million and reduced net insurance expenses of $151 million. Overall the operating balance before gains and losses (OBEGAL) was in deficit by $1.7 billion, which was $199 million more than expected. Continued strength in equity markets saw gains recorded on financial instruments of $3.2 billion, which was $1.5 billion ahead of forecast. As a result, the operating balance surplus was $1.3 billion higher than forecasts at $3.3 billion. Net debt was 0.5% higher than forecast at $61.2 billion, equivalent to 27.6% of GDP. This variance was primarily due to a higher than forecast residual cash deficit. While operating cash flows were close to forecast, net capital payments were higher than expected. At 31 March, total Crown assets were $246.5 billion and liabilities were $171.5 billion and the Crown’s share of net worth of $70.5 billion was 1.4% stronger than forecast. March 2014 Actual1 $ million Year to date March 2014 Variance HYEFU to HYEFU Forecast1 $m Variance to HYEFU % Full Year June 2014 HYEFU Forecast2 Core Crown Core Crown tax revenue 44,493 45,322 (829) (1.8) 62,491 Core Crown revenue 49,002 49,745 (743) (1.5) 68,493 Core Crown expenses 52,042 52,465 423 0.8 72,181 Core Crown residual cash (4,937) (4,584) (353) (7.7) (4,076) 84,034 82,819 (1,214) (1.5) 81,628 (322) (0.5) 59,983 Gross debt 3 as a percentage of GDP Net debt4 as a percentage of GDP 38.0% 37.4% 61,178 60,856 27.6% 27.5% (1,664) (1,465) 3,332 2,055 70,503 69,558 35.8% 26.3% Total Crown Operating balance before gains and losses Operating balance Net worth attributable to the Crown (199) (13.6) (2,320) 1,277 62.1 1,639 945 1.4 69,165 1 Using GDP for the year ended 31 December 2013 of $221,417 million (Source: Statistics New Zealand). 2 Using forecast GDP for the year ended 30 June 2014 of $227,793 million (Source:  Treasury). 3 Gross sovereign‐issued debt excluding settlement cash and Reserve Bank bills. 4 Net core Crown debt excluding student loans and other advances.  Net debt may fluctuate during the year largely reflecting the timing of tax receipts. ENDS For enquiries: Kamlesh Patel Office of the Government Accountant Telephone: +64 4 917 6094 E-mail: kamlesh.patel@treasury.govt.nz 2 Financial Statements  of the Government of New Zealand For the Nine Months Ended  31 March 2014 Prepared by the Treasury 9 May 2014   978‐0‐478‐42169‐9 (Print)  978‐0‐478‐42170‐5 (Online)  This document is available on the New Zealand Treasury’s internet site. The URL for this site is http://www.treasury.govt.nz   CONTENTS  Commentary  Summary  2  Analysis  4  Year‐on‐Year Perspective  9  Financial Statements  Statement of Financial Performance  12  The statement outlines the operating results of the total Government (ie, the revenues and expenses of all  departments + Reserve Bank + NZS Fund (core Crown), SOEs (including Air New Zealand), and Crown entities).   Expense by functional class is also shown for total Crown and core Crown.  Analysis of Expenses by Functional Classification  13  Breakdown of expenses by function for total Crown and core Crown.  Statement of Comprehensive Income  14  The statement reports changes in net worth due to the operating balance, items of income or expense that are  recognised directly in net worth, the effect of certain accounting changes, and corrections of errors.  Statement of Cash Flows  15  The statement sets out the cash flows that result from the operating, investing and financing activities of the  Government.  The net cash flows from operations are reconciled to the operating balance reported in the  statement of financial performance.  Statement of Changes in Net Worth  17  The statement provides a reconciliation of opening and closing net worth for the period.  Statement of Financial Position  18  The statement outlines the balance sheet of the total Government (ie, the assets and liabilities of the core Crown,  SOEs, and Crown entities).  Statement of Borrowings  19  The statement outlines total borrowings (split by sovereign‐guaranteed debt and non sovereign‐guaranteed  debt), including the calculation of the core Crown debt indicators.  Statement of Commitments  20  The statement outlines the commitments of the total Government by type and segment.  Statement of Contingent Liabilities and Assets  20  The statement outlines the contingent liabilities and assets of the total Government by type and segment.  Notes to the Financial Statements  21  The notes are an integral part of the financial statements, providing further explanatory material to that  provided in the main statements.  Officer for Enquiries  Kamlesh Patel (phone 64‐4‐917‐6094) (E‐mail: Kamlesh.patel@treasury.govt.nz)  Office of the Government Accountant  The Treasury (1 The Terrace), PO Box 3724, Wellington  NEW ZEALAND  Facsimile:  64‐4‐473‐1151  COMMENTARY SUMMARY  The Financial Statements of the Government provide a record of the Government’s financial performance for the nine  months ended 31 March 2014 and its financial position as at that date.  The March results are reported against forecasts based on the 2013 Half Year Economic and Fiscal Update (HYEFU),  published on 17 December 2013.  At a Glance  Table 1 – Key indicators for the nine months ended 31 March 2014 compared to HYEFU  March 2014 Actual1 $ million Year to date March 2014 Variance HYEFU to HYEFU Forecast1 $m Variance to HYEFU % Full Year June 2014 HYEFU Forecast2 Core Crown Core Crown tax revenue 44,493 45,322 (829) (1.8) 62,491 Core Crown revenue 49,002 49,745 (743) (1.5) 68,493 Core Crown expenses 52,042 52,465 423 0.8 72,181 Core Crown residual cash (4,937) (4,584) (353) (7.7) (4,076) 84,034 82,819 (1,214) (1.5) 81,628 38.0% 37.4% 61,178 60,856 27.6% 27.5% (1,664) (1,465) 3,332 2,055 70,503 69,558 Gross debt 3 as a percentage of GDP Net debt 4 as a percentage of GDP 35.8% (322) (0.5) 59,983 26.3% Total Crown Operating balance before gains and losses Operating balance Net worth attributable to the Crown (199) (13.6) (2,320) 1,277 62.1 1,639 945 1.4 69,165 1 Using GDP for the year ended 31 December 2013 of $221,417 million (Source: Statistics New Zealand). 2 Using forecast GDP for the year ended 30 June 2014 of $227,793 million (Source:  Treasury). 3 Gross sovereign‐issued debt excluding settlement cash and Reserve Bank bills. 4 Net core Crown debt excluding student loans and other advances.  Net debt may fluctuate during the year largely reflecting the timing of tax receipts.   Core Crown includes Ministers, Departments, Offices of Parliament, the NZS Fund and the Reserve Bank of  New Zealand but excludes State‐owned enterprises and Crown entities.  Results for the nine months ended 31 March 2014  Core Crown tax revenue was $44.5 billion in the latest nine month reporting period, up 6.3% compared with the same  period a year earlier.  Tax revenue, however, was 1.8% less than forecast (a narrowing from the 2.8% variance against  forecast reported a month ago) reflected across most tax types and continuing the pattern of recent months.      Updated tax revenue forecasts will be released as part of the Budget Economic and Fiscal Update on 15 May.  Tax  revenue outturns in the current fiscal year are not expected to impact on the forecast return to OBEGAL surplus for  2014/15 as the variance‐against‐forecasts are offset by a stronger outlook for the economy than had been anticipated  at HYEFU.    While core Crown revenue was $743 million lower than forecast, this was partly offset by core Crown expenses which  were also lower than forecast by $423 million and reduced net insurance expenses of $151 million.  Overall the  operating balance before gains and losses (OBEGAL) was in deficit by $1.7 billion, which was $199 million more than  expected.  2 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   Continued strength in equity markets saw gains recorded on financial instruments of $3.2 billion, which was  $1.5 billion ahead of forecast.  As a result, the operating balance surplus was $1.3 billion higher than forecasts at  $3.3 billion.    Net debt was 0.5% higher than forecast at $61.2 billion, equivalent to 27.6% of GDP.  This variance was primarily due  to a higher than forecast residual cash deficit.  While operating cash flows were close to forecast, net capital  payments were higher than expected.    At 31 March, total Crown assets were $246.5 billion and liabilities were $171.5 billion and the Crown’s share of net  worth of $70.5 billion was 1.4% stronger than forecast.      Further analysis of the March results follows.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 3 ANALYSIS  Table 2 – Key indicator variances for the nine months ended 31 March 2014 compared to HYEFU:    Item/indicator  Key drivers  Variance1  Core Crown      Core Crown  revenue   ($743 million)  Core Crown revenue was lower than forecast mainly due to lower core  Crown tax revenue of $829m spread across most tax types.  The most  significant variances were:  lower than forecast   GST was $264m (2.2%) below forecast ($350m last month) with  around half of this variance due to stronger than expected  earthquake‐related insurance refunds. The remainder of the  variance reflects some weakness in the macroeconomic drivers of  GST.   Source deductions were $220m (1.2%) below forecast.  This  variance is timing related, which we expect to reverse out by year  end.   Other individuals’ tax was $163m (4.7%) below forecast.  We  believe that this variance will persist as an earlier judgement about  the relationship between receipts and revenue in the HYEFU  forecast has not eventuated.   Customs and Excise duties were $97m (3.1%) below forecast.  The  majority of this variance was in relation to tobacco excise, where  the forecast was revised up at HYEFU in response to stronger‐than‐ forecast outturns that occurred prior to the usual December  seasonal peak.  However, it is now apparent that the strength was  timing‐related rather than permanent, so the bulk of this variance is  expected to persist to the end of the fiscal year.   Corporate tax was $73m (1.3%) below forecast.  Most of the  provisional tax timing differences from last month ($372m below  forecast) have now reversed out.    Core Crown  expenses  $423 million  lower than forecast  Core Crown expenses at $52.0b were 0.8% below forecast.  Excluding  the top‐down expense adjustment of $725m, underlying expenses were  $1.1b lower than expected spread across a number of departments.   The largest of the variances were:     Treaty expenses were $465m below forecast for March year‐to‐date  due to delays in finalising treaty settlements.  This is largely timing  related, with some settlements expected to be finalised by June and  the remainder likely to fall into future years.   NZ Defence Force spending was $99m below forecast.  $41m of this  variance is expected to reverse by 30 June 2014, $28m relates to  changes in the capital profile and the balance is due to small  variances across a number of cost categories.     MBIE had underspends of $94m across all their business units.   Health spending was $81m lower than forecast largely due to deficit  support for DHBs that was forecast but has not occurred.      1  4     Favourable variances against forecast have a positive sign and unfavourable variances against forecast have a negative sign.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 Item/indicator  Variance1  Key drivers    Core Crown  residual cash  deficit  ($353 million)  higher than forecast    The residual cash deficit was $353m higher than forecast largely due to  the following:    Core Crown tax receipts were tracking below forecast ($552m).   The main portion of this was a lower GST intake ($237m) and  customs and excise duties ($134m) consistent with the lower  revenue.  When taxes received from the NZS Fund are included  (which reflected their strong year to date performance) the  variance reduced to $283m lower than forecast.   Net purchase of investments were $170m higher than forecast  largely due to Canterbury earthquake insurance receipts of $290m  forecast to be returned to Ministry of Health from the DHBs in  December now being delayed.  This variance was partially offset by  deficit support (for DHBs) that was forecast to be paid but which  has not occurred.   Net purchases of physical assets were $157m higher than forecast.   Excluding the top‐down adjustment of $270m, capital purchases  were $113m lower than forecast.  Corrections capital projects  incurred $45m less than forecast reflecting the largest portion of  this variance.   Personnel and other operating payments were $141m higher than  forecast.  Excluding the top‐down adjustment of $725m, operating  payments were $584m lower than forecast.  The lower cash  payments were consistent with the lower than forecast core Crown  expenses discussed above (excluding non‐cash impacts such as  Treaty).  Offsetting these unfavourable variances were:   Gross debt   ($1,214 million)  higher than forecast  Net debt  ($322 million)  higher than forecast   Other receipts were $285m higher than forecast.  This result was  mainly due to the Ministry of Education receiving $174m for the  settlement of insurance claims arising from the Canterbury  earthquakes which had not been forecast in the current year.  Also  included was $77m cash received by Treasury in relation to  unforecast recoveries from the Deposit Guarantee Scheme.  Gross debt at $84.0b was higher than forecast at 38.0% of GDP.  This  higher debt reflects expected Government bond repurchases which did  not occur.   Net debt was higher than forecast at $61.2b, or 27.6% of GDP.  The  $322m higher than forecast net debt was largely due to the higher than  expected residual cash deficit explained earlier.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 5 Item/indicator  Variance1  Key drivers  Total Crown      Operating  balance before  gains and losses  deficit  ($199 million)  The OBEGAL deficit at $1.7b was $199m higher than forecast.  higher than forecast  The key driver of the OBEGAL variance was lower core Crown revenue  ($743m), partly offset by lower core Crown expenses ($423m) as  previously discussed.  In addition, EQC reported a higher than forecast  OBEGAL of $151m due to an updated actuarial valuation of EQC’s  claims liability (resulting in a reduction in the claims liability and  reinsurance receivables).    Operating  balance  $1,277 million  While the OBEGAL deficit was relatively close to forecast, net gains  were tracking $1.5b ahead.  Of the $1.5b more favourable gains, the  NZS Fund net gains made up $1.2b of the variance.  higher than forecast  Net worth  attributable to  the Crown  6 $945 million  higher than forecast  Net worth was higher than forecast, at $70.5b, largely reflecting the  operating balance result mentioned above.  In addition, revaluations of  Defence assets were performed at December resulting in a decrease in  the revaluation reserve of around $300m.     Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 Table 3 – Fiscal strategy and financial results  Fiscal Strategy 31 Mar 2014 Ref Financial Results Taxation as a % of GDP Operating revenue Ensure sufficient operating  revenue to meet the operating  balance objective Operating balance Return to an operating  surplus sufficient to meet the  Government's net capital  requirements, including  contributions to the New  Zealand Superannuation  Fund, and ensure consistency  with the debt objective Debt Manage total debt at prudent  levels ensuring net debt  remains consistently below  35% of GDP and then brought  back to a level no higher than  20% of GDP by 2020 Annual    Actual Forecast Variance $m $m $m 2 Variance % Forecast $m 26.8% 27.3% Core Crown taxation revenue  ... 44,493  45,322  (829) (1.8) 62,491  ... combined with other core  Crown revenue ... 4,509  4,423  86 1.9 6,002  (52,042) (52,465) 423 0.8 (72,181) ... and with SOE and Crown  entity results and core Crown  gains and losses... 6,372  4,775  1,597 33.4 5,327  ... result in an operating  surplus or deficit... 3,332  2,055  1,277 62.1 1,639  (7,662) (5,684) (1,978) (34.8) (6,513) ... and some items do not  impact cash ... 736  29  707 ‐   2,618  ... leaving operating cash  flows  to ... (3,594) (3,600) 6 ... meet the capital  expenditure budget ... (1,344) (1,187) ... and make advances (e.g. to  ... make advances (e.g. to  students and DHBs) students and DHBs)... (1,597) ... and receive proceeds from  government share offers .... ... fund core Crown  expenses... Operating expenses To control the growth in  spending so that over time, core Crown expenses are  reduced to below 30% of GDP 31 Mar 2014 ...with income in SOEs, CEs and the NZS Fund retained... 1 27.4% 0.2 (2,256) (157) (13.2) (2,447) (1,396) (201) (14.4) (1,863) 1,598  1,599  (1) (0.1) 2,490  With the residual cash  ... (4,937) (4,584) (353) (7.7) (4,076) ... when combined with  opening net debt ... 55,835  55,835  406  437  ... results in a closing net  debt   ... 61,178  60,856  ...  and as a % of GDP 27.6% 27.5% ... and fair value movements   and other changes in  financial assets and financial  liabilities ... ‐   ‐   31 7.2 (322) (0.5) 55,835 72  59,983  26.3%   1 GDP for the nine months ended 31 March 2014 (actual and forecast) is the actual data for the year ended 31 December 2013 (Source:  Statistics New Zealand) pro‐rated for nine months.  2 Percentage variances between the actual and comparative balances exceeding 500% are not shown.    Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 7 Figure 1 – Application of core Crown cash flows ($billions)  This diagram shows how the Operating Balance translates into cash available to the core Crown and how this cash  was spent.  Operating balance surplus Back out SOE/CE NZSF retained surpluses Non‐cash items working capital movements Core Crown operating cash deficit Core Crown cash proceeds and (distributions) for capital items (1.3) Residual cash deficit (funding required) Purchase of  physical assets (e.g.  schools) 3.3 + (7.7) + 0.8 = (3.6) 1.6 (1.6) Net proceeds from  government share  offers Advances and  capital injections  (e.g. student loans,  DHBs)   8 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 = (4.9) YEAR‐ON‐YEAR PERSPECTIVE  Table 4 – Comparison with previous year  March 2014 March 2013 Actual  $m  Actual  $m  Change1 $m Change % 44,493 4,509 41,864 3,968 2,629 541 6.3 13.6 49,002 45,832 3,170 6.9 17,126 191 11,030 9,085 3,015 2,576 1,368 1,487 1,543 494 584 344 271 238 2,690 16,803 208 10,780 8,878 3,950 2,522 1,303 1,544 1,512 460 582 319 204 353 2,750 323 (17) 250 207 (935) 54 65 (57) 31 34 2 25 67 (115) (60) 1.9 (8.2) 2.3 2.3 (23.7) 2.1 5.0 (3.7) 2.1 7.4 0.3 7.8 32.8 (32.6) (2.2) 52,042 52,168 (126) (0.2) 1,376 1,386 (10) (0.7) (1,664) (4,950) 3,286 66.4 Total gains/(losses) Other operating items 4,808 188 7,258 210 (2,450) (22) (33.8) (10.5) Operating Balance 3,332 2,518 Core Crown residual cash (4,937) (7,632) Gross debt2  84,034 84,243 Net debt3 61,178 58,483 Statement of Financial Performance Core Crown revenue Taxation revenue Other revenue Total Core Crown Revenue Core Crown expenses Social security and welfare GSF pension expenses Health Education Core government services Law and order Defence Transport and communications Economic and industrial services Primary services Heritage, culture and recreation Environmental protection Housing and community development Other Finance costs Total Core Crown Expenses Net surplus of SOE/CE's (and inter‐segment  eliminations) OBEGAL 814 32.3 2,695 35.3 Debt indicators 1 Due to the seasonal nature of some expenditure it is not appropriate to annualise these changes.  2 Gross sovereign‐issued debt excluding settlement cash and Reserve Bank bills.  3 Net core Crown debt excluding NZS Fund, student loans and other advances.  (209) 2,695 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 (0.2) 4.6   9 Revenue and Expenses  Core Crown taxation revenue for the nine months ended 31 March 2014 increased by $2,629 million (6.3%) on the  same period last year.  Source deductions continued to show strong growth, up 6.6% on last year.  In addition,  corporate tax and GST also grew by 7.6% and 6.6% respectively.   Total core Crown expenses were similar to the same period last year, with the following movements:  Functional expense  Movement from  previous year  Main drivers of the change  Increases:      Social security and welfare  + $323 million  Indexation of welfare benefits and increase in recipient  numbers, particularly NZ Superannuitants.  Health  + $250 million      Funding provided in the 2013 Budget to maintain and  improve existing service levels.  Education  + $207 million  Funding provided in the 2013 Budget to maintain and  improve existing service levels.  Decreases:      Core government services  ‐ $935 million  Costs associated with earthquake‐damaged horizontal water  infrastructure in Canterbury were recognised in March 2013,  increasing expenses in the previous year.  Other functional classes  + $29 million    Total   ‐$126 million    Gains  Total net gains were $4,808 million in the nine months to March 2014, which was $2,450 million lower than the  previous year.  Net gains in relation to financial instruments were $2,265 million lower than in the prior year due  largely to substantial gains by ACC and NZSF in the year to March 2013.    Debt  Gross debt has decreased by $209 million or 0.2% from March 2013 largely owing to higher issuance of debt in the  prior year to meet cash deficits.   Net debt has increased by $2,695 million over the same time, largely owing to a  reduction in financial assets.      10 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 FINANCIAL STATEMENTS STATEMENT OF FINANCIAL PERFORMANCE  for the nine months ended 31 March 2014  Year to 30 Jun 2013 Actual $m 58,134 5,172 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Note Revenue 41,455 Taxation revenue 3,787 Other sovereign revenue Actual Forecast $m $m Variance $m % Annual Forecast $m 2 44,039 44,948 (909) (2.0) 61,969 2 4,063 4,001 62 1.5 5,276 63,306 Total Revenue Levied through the 45,242      Crown's Sovereign Power 48,102 48,949 (847) (1.7) 67,245 16,713 12,479 Sales of goods and services 12,234 12,119 115 0.9 16,592 2,324 2,511 (187) (7.4) 3,378 2,748 2,842 (94) (3.3) 3,767 2,939 2,148 Interest revenue and dividends 3,697 2,700 Other revenue 3 23,349 Total revenue earned through 17,327      the Crown's operations 17,306 17,472 (166) (1.0) 23,737 86,655 62,569 Total revenue (excluding gains) 65,408 66,421 (1,013) (1.5) 90,982 22,708 Expenses Social assistance and official 16,909      development assistance 4 17,312 17,337 25 0.1 23,338 19,935 14,889 Personnel expenses 5 15,166 15,186 20 0.1 20,246 6 3,248 3,351 103 3.1 4,666 6 25,872 27,020 1,148 4.2 38,350 4,812 36,163 3,316 Depreciation and amortisation 26,771 Other operating expenses 4,358 3,245 Interest expenses 7 3,344 3,316 (28) (0.8) 4,418 3,031 2,389 Insurance expenses 8 2,130 2,401 271 11.3 3,439 220 ‐   ‐   Forecast new operating spending 6 ‐   ‐   ‐   ‐   ‐   ‐   Top‐down expense adjustment 6 ‐   (725) (725) (100.0) 91,007 (62) (4,414) 67,519 Total expenses (excluding losses) 67,072 Minority interests share of operating ‐        balance before gains/losses 67,886 814 1.2 (1,375) 93,302 ‐   ‐   ‐   ‐   ‐   (1,664) (1,465) (199) (13.6) (2,320) 9 3,231 1,737 1,494 86.0 2,234 10 1,577 1,613 (2.2) 1,486 4,808 3,350 1,458 43.5 3,720 188 170 18 10.6 239 ‐   ‐   ‐   ‐   ‐   (4,950) Operating balance before gains/(losses) Net gains/(losses) on financial 7,270 5,496      instruments Net gains/(losses) on non‐financial 3,706 10,976 395 (32) 6,925 1,762      instruments 7,258 Total gains/(losses) Net surplus/(deficit) from associates 210      and joint ventures ‐   Minority interests share of net gains/losses 2,518 Operating balance 3,332 2,055           The accompanying notes and accounting policies are an integral part of these statements.  12 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 (36) 1,277 62.1 1,639   ANALYSIS OF EXPENSES BY FUNCTIONAL CLASSIFICATION  for the nine months ended 31 March 2014  Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m 26,268 286 13,856 13,366 3,960 3,670 1,766 9,052 8,375 2,351 1,579 989 528 603 4,358 ‐   ‐   19,326 213 10,387 9,218 3,920 2,678 1,279 6,643 6,412 1,858 922 765 300 353 3,245 ‐   ‐   91,007 67,519 Total Crown expenses excluding losses Current Year Actual vs Forecast Annual Actual Forecast Variance Forecast $m $m $m % $m Total Crown expenses Social security and welfare GSF pension expenses Health Education Core government services Law and order Defence Transport and communications Economic and industrial services Heritage, culture and recreation Primary services Housing and community development Environmental protection Other Finance costs Forecast new operating spending Top‐down expense adjustment 19,920 199 10,590 9,712 2,758 2,737 1,341 6,494 5,568 1,721 1,264 843 343 238 3,344 ‐   ‐   20,011 198 10,645 9,773 2,898 2,824 1,422 6,626 5,906 1,769 1,280 863 376 704 3,316 ‐   (725) 91 (1) 55 61 140 87 81 132 338 48 16 20 33 466 (28) ‐   (725) 67,072 67,886 814 0.5 (0.5) 0.5 0.6 4.8 3.1 5.7 2.0 5.7 2.7 1.3 2.3 8.8 66.2 (0.8) ‐   (100.0) 1.2 27,305 291 14,464 13,369 4,755 3,820 1,852 9,285 8,096 2,398 1,838 1,157 603 806 4,418 220 (1,375) 93,302 Below is an analysis of core Crown expenses by functional classification.  Core Crown expenses include expenses incurred by the Crown, Departments and the Reserve Bank, but not Crown entities and SOEs. Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m 22,741 278 14,498 12,504 4,294 3,456 1,804 2,255 1,978 804 659 283 530 603 3,619 ‐   ‐   16,803 208 10,780 8,878 3,950 2,522 1,303 1,544 1,512 582 460 204 319 353 2,750 ‐   ‐   70,306 52,168 Core Crown expenses excluding losses Current Year Actual vs Forecast Actual Forecast $m $m Core Crown expenses Social security and welfare GSF pension expenses Health Education Core government services Law and order Defence Transport and communications Economic and industrial services Heritage, culture and recreation Primary services Housing and community development Environmental protection Other Finance costs Forecast new operating spending Top‐down expense adjustment % Annual Forecast $m 0.3 ‐   0.7 0.5 4.7 2.5 6.2 0.1 4.2 9.6 1.8 7.5 8.3 66.2 (0.1) ‐   (100.0) 23,246 282 14,997 12,558 5,067 3,630 1,901 2,285 2,226 882 816 434 602 806 3,604 220 (1,375) Variance $m 17,126 191 11,030 9,085 3,015 2,576 1,368 1,487 1,543 584 494 271 344 238 2,690 ‐   ‐   17,181 191 11,111 9,133 3,165 2,643 1,458 1,489 1,611 646 503 293 375 704 2,687 ‐   (725) 55 ‐   81 48 150 67 90 2 68 62 9 22 31 466 (3) ‐   (725) 52,042 52,465 423 0.8 72,181       The accompanying notes and accounting policies are an integral part of these statements.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 13  STATEMENT OF COMPREHENSIVE INCOME for the nine months ended 31 March 2014  Year to 30 Jun 2013 Actual $m 7,019 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Actual Forecast $m $m Operating Balance (including minority 2,518      interest) 3,332 2,055 Variance $m 1,277 % 62.1 Annual Forecast $m 1,639 Other comprehensive income 1,367 (50) Revaluation of physical assets (344) (111) (233) (209.9) Effective portion of changes in value of cash 94      flow hedges (74) (70) (4) (5.7) (7) Net change in fair value of cash flow hedges 1      transferred to operating balance ‐   (3) 3 100.0 (1) (18) Net change in fair value of cash flow hedges ‐        transferred to the hedged item 6 2 4 200.0 2 305 41 ‐   Foreign currency translation differences (10)       for foreign operations (33) (7) (26) (371.4) (6) 36 Valuation gains/(losses) on investments      available for sale taken to reserves (2) (94) (8) (86) ‐   (3) ‐   (539) (13) (210) 13 (329) 100.0 (156.7) 7 1,690 1 Other movements 34 Total other comprehensive income 46 5 8,709 2,552 Total comprehensive income 2,793 1,845 948 51.4 1,644 153 8,556 Attributable to: ‐    ‐ minority interest 2,552  ‐ the Crown ‐   2,793 ‐   1,845 ‐   948 ‐   51.4 ‐   1,644 8,709 2,552 Total comprehensive income 2,793 1,845 948 51.4 1,644                     The accompanying notes and accounting policies are an integral part of these statements.  14 (74) Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   STATEMENT OF CASH FLOWS  for the nine months ended 31 March 2014  Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Actual Forecast $m $m Variance $m % Annual Forecast $m 56,413 4,806 16,651 2,694 5,933 40,390 3,715 12,600 1,840 4,085 Cash Flows From Operations  Cash was provided from Taxation receipts Other sovereign receipts Sales of goods and services Interest and dividends Other operating receipts 42,954 3,839 12,023 2,125 4,709 43,449 3,798 12,344 2,340 4,790 (495) 41 (321) (215) (81) (1.1) 1.1 (2.6) (9.2) (1.7) 61,139 4,831 16,476 3,112 6,565 86,497 62,630 Total cash provided from operations 65,650 66,721 (1,071) (1.6) 92,123 17,630 45,211 2,781 ‐   ‐   17,714 47,967 2,872 ‐   (725) 84 2,756 91 ‐   (725) 0.5 5.7 3.2 ‐   (100.0) 65,622 67,828 2,206 3.3 91,001 (1,107) 1,135 102.5 1,122 16.8 16.4 (13.8) 24.4 (30.8) ‐   ‐   (100.0) (7,423) (5,284) (563) (2,085) 27 2,490 (206) 450 Cash was disbursed to Social assistance and official development       assistance Personnel and operating payments Interest payments Forecast new operating spending Top‐down expense adjustment 22,780 58,450 4,369 ‐   ‐   17,280 44,482 2,631 ‐   ‐   85,599 64,393 Total cash disbursed to operations 898 (1,763) Net cash flows from operations 28 23,787 63,974 4,395 220 (1,375) Cash Flows From Investing Activities Cash was provided from/(disbursed to) Net purchase of physical assets Net purchase of shares and other securities Net purchase of intangible assets Net (issue)/repayment of advances Net acquisition of investments in associates  Net proceeds from Government share offer Forecast new capital spending Top‐down capital adjustment (5,169) 6,342 (581) (1,405) 280 1,547 ‐   ‐   (3,689) (1,995) (335) (1,122) 90 ‐   ‐   ‐   1,014 (7,051) Net cash flows from investing activities Net cash flows from (8,814)     operating and investing activities 1,912 (3,993) (4,183) (446) (1,247) 108 1,498 ‐   ‐   (4,800) (5,003) (392) (1,649) 156 1,498 ‐   270 807 820 (54) 402 (48) ‐   ‐   (270) (8,263) (9,920) 1,657 16.7 (12,594) (8,235) (11,027) 2,792 25.3 (11,472) 325 6,318 190 5,487 135 831 71.1 15.1 246 4,947 665 ‐   170 1,698 ‐   Cash Flows From Financing Activities 234 5,476 390 12,087 (2,926) 1,667 (634) (20) 2,130 4,042 10,686 (2,510) ‐   Cash was provided from/(disbursed to) Issues of circulating currency Net issue/(repayment) of Government bonds Net issue/(repayment) of foreign currency      borrowing Net issue/(repayment) of other New Zealand      dollar borrowing Dividends paid to minority interests 11,634 Net cash flows from financing activities 2,820 Net movement in cash 10,686 Opening Cash Balance 583 (889) ‐   (82) 1,438 ‐   (2,327) ‐   (161.8) ‐   6,337 7,033 (696) (9.9) 7,061 (1,898) 14,924 (3,994) 14,924 2,096 ‐   52.5 ‐   (4,411) 14,924 (261) (88.2) Foreign‐exchange gains/(losses) on 196 14,924 (169)      opening cash  13,337 Closing Cash Balance (557) 12,469 (296) 10,634 1,835 17.3 (292) 10,221   The accompanying notes and accounting policies are an integral part of these statements.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 15  STATEMENT OF CASH FLOWS (CONTINUED)  for the nine months ended 31 March 2014  Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Actual Forecast $m $m Variance $m % Annual Forecast $m Reconciliation Between the Net Cash Flows from  Operations and the Operating Balance 898 7,270 3,706 10,976 (4,812) (684) (497) 385 1,106 299 (4,203) (1,302) 257 (94) 32 (2) 363 (746) 6,925 (1,763) Net Cash Flows from Operations Items included in the operating balance      but not in net cash flows from operations Gains/(losses) 5,496 Gains/(losses) on financial instruments Gains/(losses) on non‐financial 1,762      instruments 7,258 Total gains/(losses) Other Non‐cash Items in Operating Balance (3,316) Depreciation and amortisation Write‐down on initial recognition of (563)      financial assets Impairment of financial assets 8      (excluding receivables) Non‐cash movement in defined benefit 292      retirement plan liabilities 2,527 Non‐cash movement in insurance liabilities 129 Other (923) Total other non‐cash Items Movements in Working Capital Increase/(decrease) in receivables Increase/(decrease) in accrued interest Increase/(decrease) in inventories Increase/(decrease) in prepayments Decrease/(increase) in deferred revenue (2,517) (307) (47) 412 97 308 Decrease/(increase) in payables/provisions (2,054) Total movements in working capital 2,518 Operating Balance 28 (1,107) 1,135 102.5 1,122 3,231 1,737 1,494 86.0 2,234 1,577 4,808 1,613 3,350 (36) 1,458 (2.2) 43.5 1,486 3,720 (3,248) (3,351) 103 3.1 (4,666) (660) (608) (52) (8.6) (785) (7) (45) 38 84.4 (130) 355 3,197 189 (174) 401 4,575 166 (46) (1,378) 23 (11.5) (30.1) 13.9 1,138 (1,312) (115.3) (2,901) (363) (51) 403 28 1,554 (1,330) (2,172) (273) 24 357 88 650 (1,326) (729) (90) (75) 46 (60) 904 (4) (33.6) (33.0) (312.5) 12.9 (68.2) 139.1 (0.3) (1,449) 3,332 2,055 62.1 1,639                 The accompanying notes and accounting policies are an integral part of these statements.  16 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 1,277 484 2,956 387 (1,754) (1,166) 243 8 (2) 19 (551)   STATEMENT OF CHANGES IN NET WORTH  for the nine months ended 31 March 2014  Year to 30 Jun 2013 Actual $m 59,780 7,019 1,367 260 (10) 73 8,709 167 1,371 (16) 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Actual Forecast $m $m 59,780 Opening net worth 70,011 70,011 Variance $m Annual Forecast % $m ‐   ‐   70,011 2,518 Operating balance (including minority interest) (50) Net revaluations 91 Transfers to/(from) reserves (Gains)/losses transferred to the 2    statement of financial performance (9) Other movements 3,332 (344) (168) 2,055 (111) (78) 1,277 (233) (90) 62.1 (209.9) (115.4) 1,639 (74) (8) (1) (26) (3) (18) 2 (8) 66.7 (44.4) (1) 88 2,552 Total comprehensive income ‐   Gain/(loss) on Government share offers in SOEs Increase in minority interest from Government ‐      share offers ‐   Transactions with minority interests 2,793 (361) 1,845 (358) 948 51.4 (3) (0.8) 1,644 (550) 2,423 102 2,564 103 (141) (1) (5.5) (1.0) 3,676 114 70,011 62,332 Closing net worth 74,968 74,165 803 1.1 74,895 1,940 68,071 Attributable to: 432  ‐ minority interest 61,900  ‐ the Crown 4,465 70,503 4,607 69,558 (142) 945 (3.1) 1.4 5,730 69,165 70,011 62,332 Closing net worth 74,968 74,165 803 1.1 74,895                                   The accompanying notes and accounting policies are an integral part of these statements.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 17  STATEMENT OF FINANCIAL POSITION  as at 31 March 2014  As at 30 Jun 2013 Actual $m As at 31 Mar 2013 Actual $m Current Year Actual vs Forecast Note Assets 13,337 Cash and cash equivalents 18,434 Receivables Marketable securities, deposits and 44,000 47,234      derivatives in gain 17,359 16,618 Share investments 22,613 23,484 Advances 1,140 1,187 Inventory 2,295 2,602 Other assets 109,833 107,940 Property, plant & equipment 1  9,593 9,580 Equity accounted investments  2,776 2,597 Intangible assets and goodwill ‐   ‐   Forecast for new capital spending ‐   ‐   Top‐down capital adjustment 14,924 19,883 244,416 243,013 Total assets 4,691 11,160 1,714 100,087 37,712 11,903 7,138 4,847 10,863 1,615 105,806 37,973 12,329 7,248 174,405 180,681 Total liabilities Liabilities Issued currency Payables Deferred revenue Borrowings Insurance liabilities Retirement plan liabilities Provisions 70,011 62,332 Total assets less total liabilities 10,862 57,068 141 Net Worth 6,193 Taxpayer funds 55,798 Revaluation reserve (91) Other reserves 68,071 61,900 Total net worth attributable to the Crown 1,940 70,011 Net worth attributable to 432     minority interest 62,332 Total net worth Actual $m Forecast        Variance $m $m 12 12 12,469 16,337 10,634 17,918 1,835 (1,581) 17.3 (8.8) 10,221 18,968 12 12 12 46,161 20,107 24,017 1,089 2,883 110,768 9,757 2,862 ‐   ‐   44,758 20,595 24,095 1,164 2,734 111,711 9,758 2,802 ‐   (270) 1,403 (488) (78) (75) 149 (943) (1) 60 ‐   270 3.1 (2.4) (0.3) (6.4) 5.4 (0.8) ‐   2.1 ‐   100.0 44,522 21,289 24,359 1,148 2,268 113,277 9,876 2,878 206 (450) 246,450 245,899 551 5,015 10,271 1,686 104,086 33,430 10,835 6,159 4,881 10,896 1,626 105,263 31,811 10,963 6,294 171,482 171,734 74,968 13 15 16 17 18 18 18 18 0.2 248,562 (2.7) 5.7 (3.7) 1.1 (5.1) 1.2 2.1 4,936 11,955 1,695 104,354 33,430 10,880 6,417 252 0.1 173,667 74,165 803 1.1 74,895 13,918 56,665 (80) 12,580 56,947 31 1,338 (282) (111) 70,503 69,558 945 1.4 69,165 4,465 4,607 (142) (3.1) 5,730 74,968 74,165 803 1.1 74,895 (134) 625 (60) 1,177 (1,619) 128 135 1.  Tertiary education institutions constitute most equity accounted investments.                   The accompanying notes and accounting policies are an integral part of these statements.  18 % Annual Forecast $m Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 10.6 (0.5) (358.1) 12,080 56,911 174   STATEMENT OF BORROWINGS  as at 31 March 2014  As at 30 Jun 2013 Actual $m 57,377 4,084 199 7,575 3,188 1,454 26,210 100,087 75,684 24,403 100,087 84,873 (587) 84,286 As at 31 Mar 2013 Actual $m 61,809 4,326 201 7,315 2,658 1,372 28,125 Current Year Actual vs Forecast Government bonds1 Treasury bills Government retail stock Settlement deposits with Reserve Bank Derivatives in loss Finance lease liabilities Other borrowings 105,806 Total borrowings 80,804 Sovereign‐guaranteed debt 25,002 Non sovereign‐guaranteed debt 105,806 Total borrowings Net Debt: 2 90,934 Core Crown borrowings Add back NZS Fund holdings of sovereign‐ (745)      issued debt and NZS Fund borrowings 90,189 Gross sovereign‐issued debt 3 4 Actual Forecast $m $m 62,236 61,677 3,240 3,384 187 196 6,349 7,094 2,561 2,363 1,505 1,559 28,008 28,990 Variance $m % (559) (0.9) 144 4.3 9 4.6 745 10.5 (198) (8.4) 54 3.5 982 3.4 Annual Forecast $m 60,456 3,470 196 7,094 2,187 1,535 29,416 104,086 105,263 1,177 1.1 104,354 78,444 25,642 78,671 26,592 227 950 0.3 3.6 77,526 26,828 104,086 105,263 1,177 1.1 104,354 89,665 88,998 (667) (0.7) 87,571 (520) (470) 50 10.6 (617) (0.7) 87,122 89,145 88,528 (449) 62,984 66,223 Less core Crown financial assets 65,850 63,540 2,310 3.6 63,660 21,302 23,966 Net core Crown debt 23,295 24,988 1,693 6.8 23,462 13,126 13,557 Core crown advances 13,644 13,633 (0.1) 13,785 34,428 37,523 Net core Crown debt (incl NZS Fund)5 36,939 38,621 1,682 4.4 37,247 24,239 22,235 (2,004) (9.0) 22,736 61,178 60,856 (322) (0.5) 59,983 89,145 88,528 (617) (0.7) 87,122 (6,711) (7,309) (597) (8.2) (7,094) 1,600 1,600 ‐   ‐   1,600 84,034 82,819 (1,214) (1.5) 81,628 21,407 55,835 84,286 (7,902) 1,600 77,984 Add back NZS Fund holdings of core Crown 6 20,960    financial assets and NZS Fund fin assets Net core Crown debt (excl NZS Fund and  58,483 advances)7 Gross Debt: 90,189 Gross sovereign‐issued debt3 Less Reserve Bank settlement cash and  (7,546)      Reserve Bank bills Add back changes to DMO borrowing due  8      to settlement cash 1,600 84,243 Gross sovereign‐issued debt excluding Reserve  Bank settlement cash and Reserve bank bills (11) Notes on gross and net debt: 1.  Government bonds includes $395 million of infrastructure bonds. 2.  Core Crown borrowings in this instance includes unsettled purchases of securities (classified as accounts payable in the statement of financial position). 3.  Gross Sovereign‐Issued Debt (GSID) represents debt issued by the sovereign (the core Crown) and includes Government stock held by the New Zealand Superannuation Fund (NZS Fund), ACC and EQC.  4.  Core Crown financial assets exclude receivables. 5.  Net Core Crown Debt represents GSID less financial assets.  This can provide information about the sustainability of the Government's accounts, and is used by some international agencies when determining the creditworthiness of a country. 6.  Adding back the NZS Fund assets provides the financial liabilities less financial assets of the Core Crown, excluding those assets set aside to meet part of the future cost of New Zealand superannuation.  7.  Net Core Crown Debt (excluding NZS Fund and advances) excludes financial assets which are held for public policy rather than treasury management purposes. 8.  The Reserve Bank has used $1.6 billion of settlement cash to purchase reserves that were to have been funded by the NZ Debt Management Office borrowing. Therefore, the impact of settlement cash on GSID is adjusted by this amount.   The accompanying notes and accounting policies are an integral part of these statements.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 19  STATEMENT OF COMMITMENTS  as at 31 March 2014  As at 31 Mar 2014 $m As at 30 Jun 2013 $m As at 31 Mar 2013 $m Capital Commitments Specialist military equipment Land and buildings Other property, plant and equipment Other capital commitments Tertiary Education Institutions 422 961 5,126 898 169 549 717 5,478 790 169 111 804 6,373 661 255 Total capital commitments 7,576 7,703 8,204 Operating Commitments Non‐cancellable accommodation leases Other non‐cancellable leases Tertiary Education Institutions 2,626 2,550 466 2,792 2,735 466 2,471 3,431 282 Total operating commitments 5,642 5,993 6,184 13,218 13,696 14,388 Total commitments Total Commitments by Segment Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations Total commitments   3,722 5,344 5,006 (855) 13,218 4,226 5,296 5,078 (904) 13,696 3,494 6,306 5,509 (921) 14,388     STATEMENT OF CONTINGENT LIABILITIES AND ASSETS  as at 31 March 2014  As at 31 Mar 2014 $m As at 30 Jun 2013 $m As at 31 Mar 2013 $m Quantifiable Contingent Liabilities Guarantees and indemnities Uncalled capital Legal proceedings and disputes Other contingent liabilities 158 5,738 656 490 225 6,286 707 432 183 5,864 410 392 Total quantifiable contingent liabilities 7,042 7,650 6,849 Total Quantifiable Contingent Liabilities by Segment Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations 6,685 43 314 ‐   7,350 35 265 ‐   6,598 79 172 ‐   Total quantifiable contingent liabilities 7,042 7,650 6,849 Quantifiable Contingent Assets Core Crown Crown entities  State owned enterprises Inter‐segment eliminations 164 4 ‐   ‐   245 4 21 ‐   338 8 21 ‐   Total quantifiable contingent assets 168 270 367 A list of unquantified contingent liabilities is included on the Treasury's website  http://www.treasury.govt.nz/government/financialstatements/yearend/jun13/067.htm The accompanying notes and accounting policies are an integral part of these statements.  20 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   NOTES TO THE FINANCIAL STATEMENTS    NOTE 1:  Accounting Policies  Reporting Entity  These financial statements are the consolidated financial statements for the Government reporting entity as specified  in Part III of the Public Finance Act 1989.  This comprises:   Ministers of the Crown   Crown Entities (excluding Tertiary Education Institutions)    Government Departments   State‐Owned Enterprises (SOEs)   Offices of Parliament    Air New Zealand Limited   New Zealand Superannuation Fund   Organisations listed in Schedule 4 and 4A of the Public Finance  Act 1989   Reserve Bank of New Zealand    Organisations listed in Schedule 5 of the Public Finance Act 1989  A schedule of the entities that are included in the Government reporting entity was set out on pages 87 ‐ 89 of the  2013 Half Year Economic and Fiscal Update released on 17 December 2013.  With the exception of the 30 June 2013 comparative figures, all actual, forecast and comparative figures presented in  these financial statements are unaudited.  Basis of Preparation and General Accounting Policies  These unaudited interim financial statements of the Government reporting entity comply with generally accepted  accounting practice and with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) as  applicable for public benefit entities, including NZ IAS 34 Interim Financial Reporting.  The Government reporting  entity is a public benefit entity.  The measurement base applied is historical cost adjusted for revaluations of property, plant and equipment (where  appropriate), commercial forests; and marketable securities, deposits and equity investments held for trading  purposes.  The accrual basis of accounting has been used unless otherwise stated.  These financial statements have been prepared on a going concern basis.  These interim financial statements have  been prepared using the same accounting policies and methods of computation as, and should be read in conjunction  with, the information included in the Financial Statements of the Government of New Zealand for the year ended  30 June 2013.  Specific Accounting Policies  The specific accounting policies of the Crown are detailed on the Treasury’s internet site:  http://www.treasury.govt.nz/publications/guidance/reporting/accounting  Forecasts  The annual forecasts in these financial statements are for the year to 30 June 2014.  The accounting policies underlying the preparation of forecasts are set out in the Statement of Accounting Policies  reproduced in full on the Treasury’s internet site http://www.treasury.govt.nz/budget/forecasts/hyefu2013.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 21  NOTES TO THE FINANCIAL STATEMENTS    NOTE 1:  Accounting Policies (continued)  Comparative Figures  When presentation or classification of items in the financial statements is amended or accounting policies are  changed voluntarily, comparative figures have been restated to ensure consistency with the current period unless it is  impracticable to do so.  Variance Percentages  Percentage variances between the actual and comparative balances exceeding 500% are not shown.  Judgements and Estimates  The preparation of these financial statements requires judgements, estimates and assumptions that affect the  application of policies and reported amounts of assets and liabilities, income and expenses.  For example, the present  value of large cash flows that are predicted to occur a long time into the future, as with the settlement of ACC  outstanding claim obligations and Government Superannuation retirement benefits, depends critically on judgements  regarding future cash flows, including inflation assumptions and the risk free discount rate used to calculate present  values.  The estimates and associated assumptions are based on historical experience and various other factors that  are believed to be reasonable under the circumstances.  Actual results may differ from these estimates.   A second area of uncertainty relates to the immature nature of the claims experience available to assist in estimating  the claims and provisions arising from the Canterbury earthquakes.  Actuarial valuations of these liabilities using the  best available information have been used, however it is common in such cases for adjustments to be required as the  claims experience develops.  The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are  recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the  revision and future periods if the revision affects both current and future periods.  22 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 NOTES TO THE FINANCIAL STATEMENTS     Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Actual Forecast $m $m Variance $m % Annual Forecast $m NOTE 2:  Sovereign Revenue (Accrual) Taxation Revenue (accrual) Individuals Source deductions Other persons Refunds Fringe benefit tax 22,330 5,210 (1,644) 480 16,508 3,762 (966) 357 26,376 19,661 Total individuals 8,747 (151) 420 2 4,786 (109) 289 ‐   9,018 Corporate Tax Gross companies tax Refunds Non‐resident withholding tax Foreign‐source dividend w/holding payments 17,602 3,826 (879) 376 17,827 3,952 (829) 362 (225) (126) (50) 14 (1.3) (3.2) (6.0) 3.9 23,825 5,263 (1,465) 480 20,925 21,312 (387) (1.8) 28,103 5,163 (130) 283 8 5,355 (137) 256 (1) (192) 7 27 9 (3.6) 5.1 10.5 ‐   9,197 (193) 394 2 4,966 Total corporate tax 5,324 5,473 (149) (2.7) 9,400 1,631 516 Other Income Tax 1,234 Resident w/holding tax on interest income 254 Resident w/holding tax on dividend income 1,227 282 1,270 276 (43) 6 (3.4) 2.2 1,673 460 2,147 1,488 Total other income tax 1,509 1,546 (37) (2.4) 2,133 37,541 26,115 Total income tax 27,758 28,331 (573) (2.0) 39,636 25,125 (9,920) Goods and Services Tax 18,554 Gross goods and services tax (7,336) Refunds 20,240 (8,281) 20,104 (7,881) 136 (400) 0.7 (5.1) 27,298 (10,700) 15,205 11,218 Total goods and services tax 11,959 12,223 (264) (2.2) 16,598 902 1,191 677 1,061 133 158 139 40 21 872 1,180 673 1,169 137 159 134 45 25 30 11 4 (108) (4) (1) 5 (5) (4) 3.4 0.9 0.6 (9.2) (2.9) (0.6) 3.7 (11.1) (16.0) 1,155 1,618 901 1,401 168 208 183 65 36 4,322 4,394 (72) (1.6) 5,735 Other Taxation Road user charges Petroleum fuels excise1 Alcohol excise1 Tobacco excise1 1,066 1,529 913 1,235 178 214 174 45 34 800 1,107 698 1,025 144 162 133 31 22 5,388 4,122 Total other indirect taxation Other customs duty Gaming duties Motor vehicle fees Approved issuer levy and cheque duty Energy resources levies 20,593 15,340 Total indirect taxation 16,281 16,617 (336) (2.0) 22,333 58,134 41,455 Total taxation revenue 44,039 44,948 (909) (2.0) 61,969 2,751 257 205 850 2,641 254 201 905 110 3 4 (55) 4.2 1.2 2.0 (6.1) 3,444 338 268 1,226 4,063 4,001 62 1.5 5,276 48,102 48,949 (847) (1.7) 67,245 Other Sovereign Revenue (accrual) ACC levies Fire Service levies EQC levies Other miscellaneous items 3,437 331 242 1,162 2,554 250 174 809 5,172 3,787 Total other sovereign revenue 63,306 45,242 Total sovereign revenue 1.  Includes excise on domestic production and excise‐equivalent duties on imports. Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   23  NOTES TO THE FINANCIAL STATEMENTS     Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Actual Forecast $m $m Variance $m % Annual Forecast $m NOTE 2 (continued):  Sovereign Receipts (Cash) 22,188 5,194 (2,251) 465 16,506 2,983 (1,600) 331 25,596 18,220 Total individuals 8,665 (597) 451 1 6,078 (430) 325 ‐   8,520 Corporate Tax Gross companies tax Refunds Non‐resident withholding tax Foreign‐source dividend w/holding payments 17,577 3,235 (1,582) 346 17,671 3,247 (1,515) 346 (94) (12) (67) ‐   (0.5) (0.4) (4.4) ‐   23,715 5,667 (2,084) 478 19,576 19,749 (173) (0.9) 27,776 6,572 (419) 262 ‐   6,656 (452) 256 ‐   (84) 33 6 ‐   (1.3) 7.3 2.3 ‐   9,516 (641) 392 2 5,973 Total corporate tax 6,415 6,460 (45) (0.7) 9,269 1,635 516 Other Income Tax 1,160 Resident w/holding tax on interest income 270 Resident w/holding tax on dividend income 1,156 287 1,183 281 (27) 6 (2.3) 2.1 1,672 460 2,151 1,430 Total other income tax 1,443 1,464 (21) (1.4) 2,132 36,267 25,623 Total income tax 27,434 27,673 (239) (0.9) 39,177 24,539 (9,783) Goods and Services Tax 17,914 Gross goods and services tax (7,351) Refunds 19,348 (8,161) 19,083 (7,776) 265 (385) 1.4 (5.0) 26,428 (10,200) 14,756 10,563 Total goods and services tax 11,187 11,307 (120) (1.1) 16,228 874 1,384 1,717 156 140 41 21 872 1,481 1,754 157 134 46 25 2 (97) (37) (1) 6 (5) (4) 0.2 (6.5) (2.1) (0.6) 4.5 (10.9) (16.0) 1,155 1,887 2,201 206 183 66 36 4,333 4,469 (136) (3.0) 5,734   Other Taxation Road user charges Excise duties Customs duty Gaming duties Motor vehicle fees Approved issuer levy and cheque duty Energy resources levies 1,064 1,818 2,035 216 179 44 34 797 1,435 1,623 162 134 31 22 5,390 4,204 Total other indirect taxation 20,146 14,767 Total indirect taxation 15,520 15,776 (256) (1.6) 21,962 56,413 40,390 Total tax receipts collected 42,954 43,449 (495) (1.1) 61,139 2,788 257 208 586 2,718 254 211 615 70 3 (3) (29) 2.6 1.2 (1.4) (4.7) 3,423 338 271 799 3,839 3,798 41 1.1 4,831 46,793 47,247 (454) (1.0) 65,970 Other Sovereign Receipts (cash) ACC levies Fire Service levies EQC levies Other miscellaneous items 3,524 331 274 677 2,721 250 209 535 4,806 3,715 Total other sovereign receipts 61,219 24 Income Tax Receipts (cash) Individuals Source deductions Other persons Refunds Fringe benefit tax 44,105 Total sovereign receipts Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   NOTES TO THE FINANCIAL STATEMENTS    Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Actual Forecast $m $m Variance $m % Annual Forecast $m NOTE 3:  Interest Revenue and Dividends 2,382 557 By type 1,756 Interest revenue 392 Dividends 1,847 477 1,979 532 (132) (55) (6.7) (10.3) 2,689 689 2,939 2,148 Total interest revenue and dividends 2,324 2,511 (187) (7.4) 3,378 2,104 1,270 856 (1,291) 1,572 894 632 (950) 1,817 841 658 (992) 1,888 868 652 (897) (71) (27) 6 (95) (3.8) (3.1) 0.9 (10.6) 2,501 1,187 873 (1,183) 2,939 2,148 Total interest revenue and dividends 2,324 2,511 (187) (7.4) 3,378 8,086 1,281 1,047 914 63 52 29 29 1,434 389 867 490 285 368 996 8,092 1,287 1,045 916 63 52 29 29 1,457 385 871 497 285 374 1,017 6 6 (2) 2 ‐   ‐   ‐   ‐   23 (4) 4 7 ‐   6 21 0.1 0.5 (0.2) 0.2 ‐   ‐   ‐   ‐   1.6 (1.0) 0.5 1.4 ‐   1.6 2.1 10,890 1,697 1,416 1,233 63 52 29 29 1,966 547 1,156 670 379 548 1,295 16,330 16,399 69 0.4 21,970 By source  Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations NOTE 4:  Transfer Payments and Subsidies 10,235 ‐   ‐   ‐   1,738 1,330 782 812 2,018 575 1,177 611 384 596 1,290 21,548 7,590 ‐   ‐   ‐   1,316 996 589 632 1,496 396 889 465 289 413 1,058 New Zealand superannuation Jobseeker support and emergency benefit Supported living payment Sole parent support Domestic purposes benefit Invalids benefit Sickness benefit Unemployment benefit Family tax credit Other working for families tax credits Accommodation assistance  Income related rents Disability assistance Student allowances Other social assistance benefits 16,129 Total social assistance grants 723 Subsidies 537 KiwiSaver 663 594 (69) (11.6) 795 437 Other transfer payments 243 Official development assistance 319 344 25 7.3 573 17,312 17,337 25 0.1 23,338 22,708 16,909 Total transfer payments and subsidies NOTE 5:  Personnel Expenses 6,037 10,966 2,949 (17) 19,935 4,438 8,251 2,209 (9) Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations 14,889 Total personnel expenses 4,601 8,373 2,202 (10) 15,166 4,636 8,372 2,183 (5) 15,186 35 (1) (19) 5 20 0.8 ‐   (0.9) 100.0 0.1 6,155 11,190 2,908 (7) 20,246 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   25  NOTES TO THE FINANCIAL STATEMENTS    Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m Current Year Actual vs Forecast Actual Forecast $m $m % Annual Forecast $m 3.1 4.2 ‐   (100.0) 4,666 38,350 220 (1,375) Variance $m NOTE 6:  Operating Expenses By type Depreciation and amortisation Other operating expenses Forecast new operating spending Top‐down expense adjustment 4,812 36,163 ‐   ‐   3,316 26,771 ‐   ‐   40,975 30,087 Total operating expenses By source Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations 37,943 18,649 11,539 (27,156) 28,069 13,365 8,586 (19,933) 40,975 30,087 Total operating expenses 3,248 25,872 ‐   ‐   3,351 27,020 ‐   (725) 103 1,148 ‐   (725) 29,120 29,646 526 1.8 41,861 27,440 13,808 7,983 (20,111) 27,804 14,063 8,036 (20,257) 364 255 53 (146) 1.3 1.8 0.7 (0.7) 39,078 19,439 11,086 (27,742) 29,120 29,646 526 1.8 41,861 NOTE 7:  Interest Expenses 4,312 46 By type 3,213 Interest on financial liabilities 32 Interest unwind on provisions 3,315 29 3,282 34 (33) 5 (1.0) 14.7 4,371 47 4,358 3,245 Total interest expenses 3,344 3,316 (28) (0.8) 4,418 3,619 235 1,248 (744) 2,750 178 851 (534) 2,690 165 857 (368) 2,687 167 888 (426) (3) 2 31 (58) (0.1) 1.2 3.5 (13.6) 3,604 221 1,198 (605) 4,358 3,245 Total interest expenses 3,344 3,316 (28) (0.8) 4,418 2,405 (344) 62 12 (5) 2,388 (31) 34 10 ‐   (17) 313 (28) (2) 5 (0.7) ‐   (82.4) (20.0) ‐   3,457 (38) 6 14 ‐   2,130 2,401 271 11.3 3,439 2,774 274 100 83 1,493 52 20 172 1,281 222 80 (89) 85.8 426.9 400.0 (51.7) 1,982 111 19 122 3,231 1,737 1,494 86.0 2,234 By source Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations NOTE 8:  Insurance Expenses By entity ACC EQC Southern Response  Other insurance expenses Inter‐segment eliminations 3,133 (103) (22) 19 4 2,266 105 14 18 (14) 3,031 2,389 Total insurance expenses NOTE 9:  Gains and Losses on Financial        Instruments 26 By source  Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations 5,081 1,192 354 643 3,915 1,496 (58) 143 7,270 5,496 Net gains/(losses) on financial instruments Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   NOTES TO THE FINANCIAL STATEMENTS    Year to 30 Jun 2013 Actual $m 9 months to 31 Mar 2013 Actual $m   Current Year Actual vs Forecast Actual $m Forecast $m Variance $m % Annual Forecast $m NOTE 10:  Gains and Losses on Non‐Financial      Instruments 1,251 2,369 86 By type 1 918 Actuarial gains/(losses) on GSF liability  2 686 Actuarial gains/(losses) on ACC liability  158 Other Net gains/(losses) on non‐financial 3,706 1,762      instruments 1,298 2,309 100 (1) 1,082 619 61 ‐   3,706 1,762      instruments By source  Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations Net gains/(losses) on non‐financial NOTE 11: Operating Balance By source  Core Crown Crown entities  State‐owned Enterprises Inter‐segment eliminations 371 5,877 614 63 (1,300) 3,712 408 (302) 6,925 2,518 Total operating balance 713 539 174 32.3 539 1,084 (220) 1,326 (252) (242) 32 (18.3) 12.7 1,326 (379) 1,577 1,613 (36) (2.2) 1,486 505 1,082 (10) ‐   318 1,295 (7) 7 187 (213) (3) (7) 58.8 (16.4) (42.9) (100.0) 1,577 1,613 (36) (2.2) 305 2,946 665 (584) (852) 2,707 529 (329) 1,157 239 136 (255) 135.8 8.8 25.7 (77.5) (1,356) 2,832 614 (451) 3,332 2,055 1,277 62.1 1,639 266 1,221 (26) 25 1,486 1.  The most recent GSF valuation was as at 28 February 2014. 2.  The most recent ACC valuation was as at 31 December 2013, updated monthly for changes to discount rates. Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   27  NOTES TO THE FINANCIAL STATEMENTS    As at 30 June 2013 $m As at 31 Mar 2013 $m Current Year Actual vs Forecast Actual $m Forecast $m Variance $m % Annual Forecast $m NOTE 12:  Financial Assets and Sovereign Receivables 14,924 8,184 11,699 8,288 13,202 3,588 2,291 1,123 17,359 3,775 34,346 118,779 13,337 7,117 11,317 8,701 13,013 2,131 2,069 1,770 16,618 5,218 37,816 Cash and cash equivalents  Tax receivables Trade and other receivables Student loans Kiwibank mortgages  Long‐term deposits IMF financial assets Other advances1 Share investments Derivatives in gain Other marketable securities  119,107 Total financial assets and sovereign receivables 12,469 8,279 8,058 8,716 14,343 3,273 2,153 958 20,107 4,428 36,307 10,634 9,067 8,851 8,629 14,439 2,322 2,505 1,027 20,595 3,110 36,821 1,835 (788) (793) 87 (96) 951 (352) (69) (488) 1,318 (514) 17.3 (8.7) (9.0) 1.0 (0.7) 41.0 (14.1) (6.7) (2.4) 42.4 (1.4) 10,221 8,712 10,256 8,484 14,784 2,167 2,524 1,091 21,289 2,845 36,986 119,091 118,000 1,091 0.9 119,359 2,109 (501) 876 570 (2,433) 12.3 (2.7) 3.6 2.4 (40.8) 18,319 18,509 24,899 21,307 (6,835) Financial assets by entity Debt Management Office Reserve Bank of New Zealand NZ Superannuation Fund Other core Crown Intra‐segment eliminations 17,799 19,342 22,549 23,209 (7,788) 27,212 19,055 22,354 22,260 (14,083) 19,220 17,851 25,212 23,896 (8,394) 17,111 18,352 24,336 23,326 (5,961) 75,111 76,798 Total core Crown segment 77,785 77,164 621 0.8 76,199 28,243 5,401 9,075 (1,422) 27,185 6,105 10,842 (3,690) 28,795 3,986 8,958 (1,776) 28,452 2,629 8,193 (1,763) 343 1,357 765 (13) 1 52 9 (0.7) 30,752 2,035 8,008 (1,929) 41,297 40,442 Total Crown entities segment 39,963 37,511 2,452 6.5 38,866 20,058 20,334 Total State‐owned Enterprises segment 20,710 20,964 (254) (1.2) 21,558 (17,687) (18,467) Inter‐segment eliminations (19,367) (17,639) (1,728) (9.8) (17,264) 118,779 119,107 Total financial assets  119,091 118,000 1,091 0.9 119,359 ACC portfolio EQC portfolio Other Crown entities Intra‐segment eliminations 1.  Other advances include finance lease receivables. 28 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 NOTES TO THE FINANCIAL STATEMENTS    As at 30 June 2013 $m Current Year Actual vs Forecast As at 31 Mar 2013 $m Actual $m Forecast $m Variance $m % Annual Forecast $m NOTE 13:  Property, Plant and Equipment 34,453 25,784 17,930 13,555 3,865 3,094 2,617 2,296 1,035 5,204 109,833        29,507        51,823        28,503               ‐ 33,371 24,846 17,934 13,787 3,765 3,114 2,495 2,308 1,033 5,287 Net Carrying Value By class of asset: Land (valuation)1 Buildings (valuation) State highways (valuation) ‐ excluding land Electricity generation assets (valuation) Electricity distribution network (cost) Specialist military equipment (valuation) Specified cultural and heritage assets (valuation) Aircraft (excl military) (valuation) Rail network (valuation) ‐ excluding land Other plant and equipment (cost) 107,940 Total net carrying value          29,007          50,309          28,624                 ‐ By source: Core Crown Crown entities State‐owned Enterprises Inter‐segment eliminations      109,833        107,940 Total net carrying value          9,580 8,003          5,364          3,256          2,887          1,374          3,989             8,713 8,353             5,428             3,256             2,703             1,398             3,520 Land breakdown by usage 1 Housing stock State highway corridor land Conservation estate Rail network corridor land Schools Commercial (SOE) excluding rail Other        34,453          33,371 Total land 34,390 26,273 18,729 13,523 4,031 2,226 2,621 2,446 1,126 5,403 34,386 26,029 18,681 13,752 4,110 3,016 2,557 2,559 1,202 5,419 4 244 48 (229) (79) (790) 64 (113) (76) (16) ‐   0.9 0.3 (1.7) (1.9) (26.2) 2.5 (4.4) (6.3) (0.3) 35,085 26,322 19,049 13,673 4,166 3,186 2,563 2,657 1,128 5,448     110,768     111,711 (943) (0.8) 113,277      29,736      52,734      29,241            ‐ (300) (266) (377) ‐   (1.0) (0.5) (1.3) ‐        30,562      53,485      29,230            ‐     110,768     111,711 (943) (0.8)     113,277 29,436 52,468 28,864 ‐          9,575        8,003        5,359        3,257        2,863        1,317        4,016        9,566        8,003        5,366        3,251        2,887        1,410        3,903       34,390       34,386 9 ‐   (7) 6 (24) (93) 113 0.1 ‐   (0.1) 0.2 (0.8) (6.6) 2.9 4        9,539 8,153 5,389 3,232        2,880        1,414        4,478 ‐         35,085 1.  Land relating to state highways, the rail network and conservation which had previously been included within the state highways, rail network and  specified cultural and heritage assets categories has been reclassified to the Land category.      121,717          5,779         (1,471)         (2,047)         (1,182)        121,717             3,931               (657)                 (93)           (1,275) Schedule of movements Cost or valuation Opening balance Additions Disposals Net revaluations Other      122,796        123,623 Total cost or valuation        13,133            (659)         (3,587)          3,697              379          13,133               (137)                 ‐             3,138               (451) Accumulated depreciation and impairment Opening balance Eliminated on disposal Eliminated on revaluation Depreciation expense and impairment losses Other 122,796 4,559 (633) (256) (101)   122,796        4,972          (330)            (28)          (130)     126,365     127,280 (915)      12,963          (259)             87        2,784             22 ‐   (118) 87 (105) 164      12,963          (141)            ‐        2,889          (142)        12,963          15,683 Total accumulated depreciation and impairment       15,597       15,569      109,833        107,940 Total property, plant and equipment ‐   (413) (303) (228) 29     110,768     111,711 28 (943) ‐   (8.3) (91.8) ‐   22.3 122,796 7,925 (496) 12 25 (0.7)     130,262 ‐   (83.7) ‐   (3.6) 115.5 0.2 12,963 (52)   ‐   4,030 44       16,985 (0.8)     113,277 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   29  NOTES TO THE FINANCIAL STATEMENTS    As at 30 June 2013 $m As at 31 Mar 2013 $m Current Year Actual vs Forecast Actual $m Forecast $m Variance $m % Annual Forecast $m NOTE 13 (continued):  Property, Plant and Equipment          2,041          1,521              472              578              201              966             1,403             1,040                333                409                130                616 Additions ‐ by functional classification Transport and communications Economic and industrial services Education Health Defence Other          5,779             3,931 Total additions 1,599 911 352 346 249 1,102 1,666 1,026 331 572 234 1,143 (67) (115) 21 (226) 15 (41)         4,559         4,972 (413) (4.0) (11.2) 6.3 (39.5) 6.4 (3.6) 2,609 1,301 688 746 506 2,075 (8.3)         7,925 NOTE 14:  NZ Superannuation Fund 595 (983) 559 (840) 595 (428) (165) 4,374 408 Revenue (845) Less: current tax expense 1 (103) Less: other expenses 3,469 Add gains/(losses) (127) 2,626 (121) 1,389 3,821 2,929 Operating balance 2,218 (6.1) 96.3 782 (554) 6 1,237 5.0 89.1 (159) 1,776 1,435 783 54.6 1,845 ‐   54.6 (164.3) 22,549 1,845 19 18,703 3,821 25 18,703 Opening net worth 2,929 Operating balance 1 Other movements in reserves 22,549 2,218 (9) 22,549 1,435 14 ‐   783 (23) 22,549 21,633 Closing net worth 24,758 23,998 760 3.2 24,413 23,419 (2,055) 1,185 comprising: 22,354 Financial assets (1,903) Financial liabilities 1,182 Net other assets 25,212 (1,600) 1,146 24,336 (1,494) 1,156 876 (106) (10) 3.6 (7.1) (0.9) 24,899 (1,632) 1,146 22,549 21,633 Closing net worth 24,758 23,998 760 3.2 24,413 64,149 595 983 Core Crown revenue (excl NZS Fund) 45,832 Core Crown revenue 408 Less NZS Fund revenue 845 Add back NZS Fund intra‐segment revenue 49,002 559 840 49,745 595 428 (743) (36) 412 (1.5) (6.1) 96.3 68,493 782 554 64,537 46,269 Core Crown revenue (excl NZS Fund) 49,283 49,578 (295) (0.6) 68,265 (4,414) 595 142 983 (4,950) 408 67 845 (1,664) 559 109 840 (1,465) 595 114 (428) (199) (36) (5) 412 (13.6) (6.1) (4.4) 96.3 (2,320) 782 150 554 (3,884) (4,446) OBEGAL excluding NZS Fund (1,274) (2,374) 244 10.3 (2,398) OBEGAL excluding NZS Fund Total Crown OBEGAL Less NZS Fund revenue Add back NZS Fund external expenses Add back NZS Fund tax 1.  NZS Fund other expenses include deferred tax expense/(credits). 30 (36) 412 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   NOTES TO THE FINANCIAL STATEMENTS    As at 30 June 2013 $m As at 31 Mar 2013 $m Current Year Actual vs Forecast Actual $m Forecast $m Variance $m % Annual Forecast $m NOTE 15:  Payables 7,616 3,544 11,160 8,062 Accounts payable 2,801 Taxes repayable 10,863 Total payables 7,151 3,120 7,474 3,422 323 302 4.3 8.8 7,568 4,387 10,271 10,896 625 5.7 11,955 27,233 5,004 1,525 56 (388) 27,015 3,848 1,293 63 (408) (218) (1,156) (232) 7 (20) (0.8) (30.0) (17.9) 11.1 (4.9) 29,146 3,152 1,071 61 ‐   33,430 31,811 (1,619) (5.1) 33,430 367 940 3,085 413 977 3,105 46 37 20 11.1 3.8 0.6 488 987 3,177 5 (20) 5.0 (4.8) ‐   391 NOTE 16:  Insurance liabilities 29,446 6,869 1,744 67 (414) 28,927 7,588 1,849 44 (435) ACC liability EQC property damage liability Southern Response (formerly AMI Insurance) Other insurance liabilities Inter‐segment eliminations 37,712 37,973 Total insurance liabilities NOTE 17:  Provisions 96 438 101 418 123 1,494 6 Provision for ETS Credits1 1,038 Provision for National Provident Fund guarantee 3,058 Provision for employee entitlements Provision for Canterbury Red Zone support 477      package 1,359 Provision for Infrastructure costs Provision for weathertight services 185      financial assistance package 1,125 Other provisions  119 1,114 120 1,160 1 46 0.8 4.0 114 1,260 7,138 7,248 Total provisions 6,159 6,294 135 2.1 6,417 179 977 3,374 222 769 1.  Further information on the ETS, and the Kyoto net asset (included as an intangible asset in these financial statements) can be found on the Ministry for the Environment's climate change website www.climatechange.govt.nz NOTE 18: Changes in Net Worth 3,520 6,925 167 250 10,862 3,520 Opening taxpayers funds 2,518 Operating balance excluding minority interests Gain/(loss) on Government share offers in  ‐       state‐owned enterprises 155 Transfers from/(to) other reserves 10,862 3,332 6,193 Closing taxpayers funds 13,918 12,580 (361) 85 10,862 2,055 ‐   1,277 ‐   62.1 10,862 1,639 (358) 21 (3) 64 (0.8) 304.8 (550) 129 1,338 10.6 12,080 57,068 (74) (83) 56,001 1,335 (268) 56,001 Opening revaluation reserve (50) Net revaluations (153) Transfers from/(to) other reserves 57,068 (344) (59) 57,068 (111) (10) ‐   (233) (49) ‐   (209.9) (490.0) 57,068 55,798 Closing revaluation reserve 56,665 56,947 (282) (0.5) 56,911 432 1,508 432 Opening minority interests ‐   Net movements 1,940 2,525 1,940 2,667 ‐   (142) ‐   (5.3) 1,940 3,790 1,940 432 Closing minority interests 4,465 4,607 (142) (3.1) 5,730 (173) 314 (173) Opening other reserves 82 Net movements 141 (221) 141 (110) ‐   (111) ‐   (100.9) 141 33 141 (91) Closing other reserves (80) 31 (111) (358.1) 174 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014   31  NOTES TO THE FINANCIAL STATEMENTS    Year to 30 Jun 2013 $m 9 months to 31 Mar 2013 $m Current Year Actual vs Forecast % Annual Forecast $m (0.6) 3.2 1.9 15.0 0.5 1.8 2.7 ‐   (100.0) 62,314 728 1,604 2,795 (23,787) (43,446) (3,619) (220) 1,375 Actual $m Forecast $m Variance $m 44,269 580 1,262 1,858 (17,630) (31,700) (2,233) ‐   ‐   44,552 562 1,238 1,615 (17,713) (32,284) (2,295) ‐   725 (3,594) (3,600) (1,344) (682) (915) 1,598 ‐   ‐   (1,457) (651) (745) 1,599 ‐   270 113 (31) (170) (1) ‐   (270) 7.8 (4.8) (22.8) (0.1) ‐   (100.0) (2,691) (842) (1,021) 2,490 (206) 450 NOTE 19:  Core Crown residual cash 57,808 651 1,553 2,385 (22,780) (40,412) (3,729) ‐   ‐   41,473 491 1,180 1,647 (17,280) (30,882) (2,184) ‐   ‐   Core Crown Cash Flows from Operations Tax receipts Other sovereign receipts Interest, profits and dividends Sale of goods & services and other receipts Transfer payments and subsidies Personnel and operating costs Finance costs Forecast for future new operating spending Top‐down expense adjustment (283) 18 24 243 83 584 62 ‐   (725) (4,524) (5,555) Net core Crown operating cash flows (1,231) (342) (1,308) 1,663 ‐   ‐   (740) (261) (1,076) ‐   ‐   ‐   (1,218) (2,077) Net Core Crown capital cash flows (1,343) (984) (359) (36.5) (1,820) (5,742) (7,632) Residual cash deficit (4,937) (4,584) (353) (7.7) (4,076) 6,466 (148) (815) 7,024 (1,537) (355) (558) 1,389 (460) (7.9) 90.4 (129.6) 8,013 (3,067) (235) 5,503 5,132 371 7.2 Net purchase of physical assets Net increase in advances Net purchase of investments Net proceeds from partial share sales  Forecast for future new capital spending Top‐down capital adjustment 6 0.2 (2,256) The residual cash deficit is funded as follows: 15,458 (9,982) (5,404) 72 Debt programme cash flows Market: 12,087      Issue of government bonds ‐        Repayment of government bonds 1 (2,811)      Net issue/(repayment) of short‐term borrowing 9,276 Total market debt cash flows ‐   (499) 100 Non market: ‐        Issue of government bonds ‐        Repayment of government bonds ‐        Net issue/(repayment) of short‐term borrowing ‐   ‐   ‐   ‐   (401) ‐   ‐   401 ‐   ‐   100.0 ‐   (399) ‐   Total non‐market debt cash flows ‐   (401) 401 100.0 772 16.3 (327) 9,276 Total debt programme cash flows 5,503 4,731 4,711 ‐   (745) (100) (845) 3,866 Other borrowing cash flows (3,047) Net (repayment)/issue of other New Zealand 2,235      dollar borrowing Net (repayment)/issue of foreign currency (551)      borrowing 645 (128) 773 ‐   113 1,447 1,684 Total other borrowing cash flows (607) (14) (593) ‐   (25) 5,699 234 (1,311) Investing cashflows Other net sale/(purchase) of marketable (678)      securities and deposits 390 Issues of circulating currency (3,040) Decrease/(increase) in cash (855) 325 571 (1,610) 190 1,287 755 135 (716) 46.9 71.1 (55.6) (1,446) 246 1,435 4,622 (3,328) Total investing cash flows 174 130.6 235 353 7.7 4,076 4,494 5,742 7,632 Residual cash deficit funding (1,252) 41 4,937 114 (133) 4,584 1.  Short‐term borrowing consists of Treasury Bills and Euro‐Commercial Paper (ECP).     32 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 (1,366) ‐   (138)   NOTES TO THE FINANCIAL STATEMENTS    Note 20:   Government Share Offer Programme    Meridian Energy Limited  On 23 October 2013 the price and allocations in relation to Meridian Energy Limited (Meridian) instalment receipts  that were sold were confirmed (settled on 30 October for the NZX portion and 31 October for the ASX portion).  The  Government sold instalment receipts representing 48.98% of its shares in Meridian and will receive gross cash  proceeds of $1.883 billion once the final instalment is paid.  The Crown has received $1.255 billion cash proceeds from  the first instalment with the final instalment of $627.5 million payable on 15 May 2015.  The table below outlines the net assets of Meridian and the summary core Crown results of the partial share  sale:   Meridian  At date of share issue             $m  Property, plant and equipment  Financial assets  Other assets  Borrowings  Other liabilities  Net Assets  Carrying amount of minority interests (48.98%)    Gross proceeds  6,790   519   130   (1,297)  (1,546)  4,596  2,251    1,883  (33)  (21)  1,829  422  2,251  Present value discounting for the deferral of final instalment1  Estimated direct costs2  Net proceeds  Estimated loss on disposal to minority interests  Carrying amount of minority interests (48.98%)    Air New Zealand Limited  The Air New Zealand partial share sale was completed by 25 November 2013.  The Government sold around  221 million of the shares it owned in Air New Zealand at a sale price of $1.65.  The sale raised approximately  $365 million in gross proceeds for the Government and resulted in an estimated gain on disposal of $52 million.  Year to date impact of the sales  Overall, the estimated impact of the partial sale (of Meridian and Air New Zealand) for this financial year on the  Government’s key fiscal indicators at 31 March 2014 was as follows:  Indicator  Excluding proceeds from sales $m  Core Crown residual cash  (6,535)  Impact of sales Including proceeds from sales $m  $m  1,598  (4,937)  Net debt  62,776  (1,598)  61,178    The core Crown has recorded an estimated loss on disposal of $373 million from both sales.  In addition to the core  Crown’s direct investment, a number of Crown Financial Institutions (CFI’s) have also invested in the companies as  part of their normal investment activities.  These investments have the effect of reducing the total Crown’s estimated  loss on disposal to $361 million.  1   The present value discount represents the difference between the present value of the receivable in today’s dollars of $594.5 million and the  nominal value of $627.5 million to be received in May 2015.  2   Direct costs are the costs that were deducted from the share sale proceeds received by the Crown.  Financial Statements of the Government of New Zealand – nine months ended 31 March 2014 33  NOTES TO THE FINANCIAL STATEMENTS    Note 21:   Subsequent events    The Genesis Energy share offer was completed by 17 April and raised approximately $733 million in gross proceeds for  the Crown.  This sale has not been included in these financial statements.  The Government will continue to hold a  controlling interest in Genesis Energy; as a result Genesis Energy will continue to be fully consolidated in the financial  statements of the Government.  The key change to the financial statements will be an increase in the minority interest  share of the assets and liabilities in the statement of financial position, and a reduction in net core Crown debt.      34 Financial Statements of the Government of New Zealand – nine months ended 31 March 2014