In the “Annual Report for year ended 30 June 2015

Statement of responsibility

In terms of section 45C of the Public Finance Act 1989, I am responsible, as Director-General of the Department of Conservation, for the preparation of the Department's financial statements, statements of expenses and capital expenditure and for the judgements made in the process of producing those statements.

I have the responsibility for establishing and maintaining, and I have established and maintained, a system of internal control procedures that provide reasonable assurances as to the integrity and reliability of financial reporting.

I have the responsibility for ensuring that end-of-year performance information on each appropriation administered by the Department is provided in accordance with sections 19A to 19C of the Public Finance Act 1989, whether or not that information is included in this Annual Report.

I am responsible for the accuracy of any end-of-year performance information prepared by the Department, whether or not that information is included in the Annual Report.

In my opinion, these financial statements fairly reflect the financial position and operations of the Department for the year ended 30 June 2015, and the forecast financial statements fairly reflect the forecast financial position and operations of the Department for the year ending 30 June 2016.

Lou Sanson

Director-General

11 September 2015

Christeen Mackenzie signature.

Christeen Mackenzie

Deputy Director-General Corporate Services

Chief Financial Officer

11 September 2015

Departmental financial statements

Statement of comprehensive revenue and expense for the year ended 30 June 2015
 

Notes

30/06/14
Actual
$000

30/06/15
Budget*
$000

30/06/15
Revised Budget*
$000

30/06/15
Actual
$000

30/06/16
Forecast*
$000

Revenue

Revenue Crown

 

309,374

299,419

314,965

314,965

310,467

Other revenue

2

37,463

40,132

50,152

43,756

41,132

Total revenue

 

346,837

339,551

365,117

358,721

351,599

Expenses

Personnel costs

3

149,300

145,689

143,590

158,022

143,590

Operating costs

4

116,246

107,539

140,353

108,121

125,346

Depreciation, amortisation and impairment expense

 

32,770

35,967

34,746

35,102

34,799

Capital charge

5

46,049

52,228

48,428

47,265

49,864

Finance costs

 

126

128

-

100

-

Loss on disposal of property, plant and equipment

 

388

-

-

1,165

-

Total expenses

 

344,879

341,551

367,117

349,775

353,599

Net surplus/(deficit)

 

1,958

(2,000)

(2,000)

8,946

(2,000)

Other comprehensive revenue and expense

Gain on property revaluations

 

14,619

2,000

-

4,001

-

Total comprehensive revenue and expense

 

16,577

-

(2,000)

12,947

(2,000)

* The statement of accounting policies provides explanations of these figures which are unaudited.
Refer to Note 1 for an explanation of major variances.

Statement of financial position as at 30 June 2015
 

Notes

30/06/14
Actual
$000

30/06/15
Budget*
$000

30/06/15
Revised Budget*
$000

30/06/15
Actual
$000

30/06/16
Forecast*
$000

Taxpayers' funds

General funds

13

456,880

538,042

459,880

461,360

470,680

Property, plant and equipment revaluation reserves

13

134,514

119,143

134,514

136,746

134,514

Total taxpayers' funds

 

591,394

657,185

594,394

598,106

605,194

Represented by:

Current assets

Cash

 

58,011

86,490

42,701

43,656

11,045

Prepayments

 

1,934

1,252

2,000

2,283

2,000

Inventories

 

1,144

1,063

1,000

837

1,000

Trade and other receivables

7

8,828

8,303

6,000

12,820

6,000

Non-current assets held for sale

 

3,371

-

-

3,371

-

Debtor Crown

8

24,813

20,820

24,813

44,813

74,813

Total current assets

 

98,101

117,928

76,514

107,780

94,858

Non-current assets

Property, plant and equipment

9

558,281

588,719

588,343

548,893

587,543

Intangible assets

10

11,145

16,210

12,412

9,286

10,995

Total non-current assets

 

569,426

604,929

600,755

558,179

598,538

Total assets

 

667,527

722,857

677,269

665,959

693,396

Current liabilities

Trade and other payables

 

18,006

25,899

40,925

12,840

46,252

GST payable

 

2,767

(1,348)

10,000

3,089

10,000

Employee entitlements

11

17,568

15,308

12,500

14,639

12,500

Finance leases

 

658

624

650

618

650

Provisions

12

11,855

779

-

3,789

-

Return of operating surplus

6

990

-

-

7,014

-

Revenue in advance

 

9,443

6,818

5,000

10,029

5,000

Total current liabilities

 

61,287

48,080

69,075

52,018

74,402

Non-current liabilities

Employee entitlements

11

13,483

17,144

13,000

14,366

13,000

Finance leases

 

824

448

800

540

800

Provisions

12

539

-

-

929

-

Total non-current liabilities

 

14,846

17,592

13,800

15,835

13,800

Total liabilities

 

76,133

65,672

82,875

67,853

88,202

Net assets

 

591,394

657,185

594,394

598,106

605,194

* The statement of accounting policies provides explanations of these figures which are unaudited.
Refer to Note 1 for an explanation of major variances.

Statement of changes in taxpayers' funds for the year ended 30 June 2015
 

Notes

30/06/14
Actual
$000

30/06/15
Budget*
$000

30/06/15
Revised Budget*
$000

30/06/15
Actual
$000

30/06/16
Forecast*
$000

Balance at 1 July

 

575,600

611,818

591,394

591,394

596,394

Total comprehensive revenue and expense

 

16,577

-

(2,000)

12,947

(2,000)

Distributions to Crown

Asset transfers

 

(536)

-

-

(795)

-

Return of operating surplus

6

(990)

-

-

(7,014)

-

Contributions from Crown

Asset transfers

 

743

-

-

1,574

-

Capital contributions

 

-

45,367

5,000

-

10,800

Balance at 30 June

 

591,394

657,185

594,394

598,106

605,194

* The statement of accounting policies provides explanations of these figures which are unaudited.
Refer to Note 1 for an explanation of major variances.

Statement of cash flows for the year ended 30 June 2015
 

Notes

30/06/14
Actual
$000

30/06/15
Budget*
$000

30/06/15
Revised Budget*
$000

30/06/15
Actual
$000

30/06/16
Forecast*
$000

Cash flows – operating activities

Receipts from Revenue Crown

 

313,301

299,419

314,965

294,965

310,467

Receipts from other revenue

 

37,149

42,271

51,906

40,035

41,132

Payments to employees

 

(156,814)

(143,789)

(146,680)

(159,929)

(141,129)

Payments to suppliers

 

(102,701)

(99,691)

(139,007)

(120,982)

(130,995)

Payments for capital charge

 

(46,049)

(52,228)

(48,428)

(47,265)

(49,864)

Net cash flow from operating activities

14

44,886

45,982

32,756

6,824

29,611

Cash flows – investing activities

Receipts from sale of property, plant and equipment

 

653

5,600

-

958

-

Purchase of property, plant and equipment

 

(28,641)

(53,000)

(48,766)

(18,561)

(50,166)

Purchase of intangibles

 

(3,905)

(4,300)

(4,300)

(1,888)

(2,400)

Net cash flow from investing activities

 

(31,893)

(51,700)

(53,066)

(19,491)

(52,566)

Cash flows – financing activities

Capital contributions

 

-

45,367

5,000

-

10,800

Finance lease payments

 

(596)

-

-

(698)

-

Return of operating surplus to the Crown

 

(6,193)

-

-

(990)

-

Net cash flow from financing activities

 

(6,789)

45,367

5,000

(1,688)

10,800

Net increase/(decrease) in cash

 

6,204

39,649

(15,310)

(14,355)

(12,155)

Opening cash balance

 

51,807

46,841

58,011

58,011

23,200

Closing cash balance

 

58,011

86,490

42,701

43,656

11,045

* The statement of accounting policies provides explanations of these figures which are unaudited.
The Goods and Services tax (net) component of operating activities has been included under supplier payments and reflects the net GST paid to and received from Inland Revenue. The GST components have been presented on a net basis as the gross amounts do not provide meaningful information for financial statement purposes.

Statement of commitments as at 30 June 2015
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Commitments by category

Capital commitments

Property, plant and equipment

6,646

3,017

Intangible assets

122

-

Total capital commitments

6,768

3,017

Operating commitments

Non-cancellable accommodation leases

27,876

25,835

Other non-cancellable leases

3,212

3,044

Total operating commitments

31,088

28,879

Total commitments

37,856

31,896

Commitments by term

Less than 1 year

14,868

11,453

1–2 years

6,889

7,079

2–5 years

13,269

10,075

Greater than 5 years

2,830

3,289

Total commitments

37,856

31,896

Capital commitments

Capital commitments are the aggregate amount of capital expenditure contracted for the acquisition of property, plant, equipment and intangible assets that have not been paid or recognised as a liability at the balance sheet date.

Non-cancellable operating lease commitments (accommodation and other)

The Department leases property, plant and equipment in the normal course of its business. The majority of these leases are for premises, motor vehicles and computer hardware and have a non-cancellable leasing period ranging from 3–10 years.

The Department's non-cancellable operating leases have varying terms, escalation clauses and renewal rights. There are no restrictions placed on the Department by any of its leasing arrangements.

Statement of contingent liabilities and contingent assets
as at 30 June 2015
 

30/06/14
Actual
$000

30/06/15
Actual
$000

Public liability claims

3,026

940

Total contingent liabilities

3,026

940

The public liability claims relate to claims against the Department and are disclosed without prejudice. The Department's contingent liabilities are broken down as follows:

 

30/06/14
Maximum Exposure
$000

30/06/15
Maximum Exposure
$000

Court and Tribunal proceedings and other potential claims:

53 proceedings and potential claims of which 7 are quantifiable. The remaining 46 claims cannot be quantified. The contingent liability for the 7 quantifiable claims is shown below.

Costs to clean asbestos and dioxin contaminated land

1,815

15

Claims for damage caused by events originating from public conservation land

943

910

Other quantifiable proceedings and potential claims

268

15

Total court and tribunal proceedings and other potential claims

3,026

940

The Department is aware that further sites requiring remediation (due to mining, asbestos, pollution, or other means) may exist throughout New Zealand and could require remediation at some point. As these potential sites are unknown, the Department does not currently have a commitment to restore the sites, thus no provision or contingent liabilities are recognised in their regard at 30 June 2015.

Indemnities

The Director-General of Conservation has a delegation from the Minister of Finance under the Public Finance Act 1989 to agree to indemnities in access agreements over private land. This provides access, for the public and the staff of the Department, to land managed by the Department.

One new indemnity was granted in 2014/15 for staff access to conservation land.

Contingent assets

The Department has no contingent assets (2014: nil).

Statement of trust monies
for the year ended 30 June 2015
 

As at 30/06/14
$000

Contributions
$000

Distributions
$000

Net Interest
$000

As at 30/06/15
$000

Conservation Project Trust

1,315

627

(690)

23

1,275

NZ Walkway Trust

11

-

-

-

11

National Parks Trust

121

69

(54)

3

139

Bonds/Deposits Trust

7,779

114

(867)

230

7,256

Total

9,226

810

(1,611)

256

8,681

The Department has delegated authority to operate these trust accounts under sections 66 and 67 of the Public Finance Act 1989.

Trust accounts are mainly used to hold bonds and deposits from operators working on public conservation land, including those contracted by the Department. These are repaid when the operators have been cleared of all obligations.

The accompanying accounting policies and notes form part of, and should be read in conjunction with, these financial statements.

Statement of accounting policies

Reporting entity

The Department of Conservation (the Department) is a government department as defined by section 2 of the Public Finance Act 1989. The relevant legislation governing the Department's operations includes the Public Finance Act and the Conservation Act 1987. The Department's ultimate parent is the New Zealand Crown.

In addition, the Department has reported on Crown activities and the trust monies that it administers.

The primary objective of the Department is to provide services to the public rather than making a financial return. For financial reporting purposes, the Department of Conservation is a public benefit entity (PBE) and its financial statements have been prepared in accordance with Tier 1 PBE standards.

The financial statements of the Department are for the year ended 30 June 2015. The financial statements were authorised for issue by the Director-General of the Department on 11 September 2015.

Basis of preparation

The financial statements of the Department have been prepared on a going concern basis, and in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand generally accepted accounting practices (NZ GAAP).

These annual financial statements are the first set of financial statements presented in accordance with PBE International Public Sector Accounting Standards (IPSAS). Under PBE IPSAS standards, entities are required to treat revenue from non-exchange and exchange transactions differently. A non-exchange transaction arises where one entity receives value from or gives value to another entity without directly receiving approximate equal value in exchange.

Donations, gifts, bequests and grants are treated as a non-exchange transaction by the Department except in cases where an explicit conditional clause is present. Where a stipulation is included in the transaction requiring the Department to either consume the benefits or service potential embodied in an asset in a specific way or return this to the transferor, revenue is recognised in proportion to the extent to which the contractual obligations embodied in the arrangement have been satisfied.

Where under PBE IPSAS 23 a non-exchange transaction leads to an asset being recognised, the Department is required to recognise revenue equivalent to the asset measured. The impact of applying the revenue recognition criteria of PBE IPSAS 23 to the prior two financial years' transactions would not affect the comparability of the Department's financial statements. To maintain ease of readability and avoid undue confusion resulting from minor changes to prior period amounts, these amounts have not been restated in the financial statements.

The financial statements are presented in New Zealand dollars, and all values are rounded to the nearest thousand dollars ($000). The functional currency of the Department is New Zealand dollars.

The statements have been prepared on a historical cost basis, modified by the revaluation of certain items of property, plant and equipment.

Standards issued and not yet effective and not early adopted

In October 2014 the PBE suite of accounting standards was updated to incorporate requirements and guidance for the not-for-profit sector. These updated standards apply to PBEs with reporting periods beginning on or after 1 April 2015. The Department will apply these updated standards in preparing its 30 June 2016 financial statements. The Department expects there will be minimal or no change in applying these updated accounting standards.

Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

Budget and forecast figures

The budget and the revised budget figures are based on the Supplementary Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2015 (the Budget is 2014 Budget Economic and Fiscal Update [the Estimates Budget BEFU 2014] and the Revised Budget is the Supplementary Estimates Budget 2015).

The budget and forecast figures have been prepared in accordance with NZ GAAP, using accounting policies that are consistent with those adopted in preparing these financial statements.

As required by the Public Finance Amendment Act 2013, forecast information has been included for the following financial year. The aim is to provide the reader with further context around the year's result by providing next year's forecast for comparison purposes.

The forecast figures are based on the Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2016 (the Forecast is 2015 Budget Economic and Fiscal Update [BEFU 2015]). The forecast financial statements were authorised for issue on 21 May 2015.

The forecast figures reflect the Department's purpose, strategic intentions and activities and are based on estimates and assumptions that may occur during the 2015/16 year. The forecast figures have been prepared in accordance with PBE FRS42 Prospective Financial Statements and have been based on existing government and ministerial policies and expectations at the time the BEFU 2015 was issued.

The main assumptions adopted on 21 May 2015 were:

  • The Department's vision, intermediate outcomes and deliverables are substantially the same as the previous year.
  • Revenue and expenses are reasonable estimates of income and costs expected to be incurred, based on experience across the Department.
  • Estimated information at 30 June 2015 was used as the opening position for the 30 June 2016 year forecasts.

Revenue

The Department derives revenue through the provision of outputs to the Crown, for services to third parties, and from donations, gifts, bequests and grants. This revenue is recognised and reported in the financial period to which it relates in accordance with the requirements of PBE IPSAS 9 (Revenue from exchange transactions) and PBE IPSAS 23 (Revenue from non-exchange transactions).

Revenue is measured at the fair value of consideration received.

Revenue Crown

Revenue from the Crown is measured based on the Department's funding entitlement for the reporting period. The funding entitlement is established by Parliament when it passes the Appropriation Acts for the financial year. The amount of revenue recognised takes into account any amendments to appropriations approved in the Appropriation (Supplementary Estimates) Act for the year and certain other unconditional funding adjustments formally approved prior to balance date.

There are no conditions attached to the funding from the Crown. However, the Department can incur expenses only within the scope and limits of its appropriations.

The fair value of Revenue Crown has been determined to be equivalent to the funding entitlement. As instructed by the OAG, Revenue Crown is treated as a non-exchange transaction.

Cost allocation

The Department has determined the cost of outputs using the following cost allocation methodology.

Direct costs are those costs directly attributed to an output. Indirect costs are those costs that cannot be identified, in an economically feasible manner, with a specific output.

Direct costs assigned to outputs

Direct costs are charged directly to outputs. Depreciation and capital charge are charged on the basis of asset utilisation. Personnel costs are charged on the basis of actual time incurred.

For the year ended 30 June 2015, direct costs were 59 percent of the Department's costs (2014: 57 percent).

Indirect costs assigned to outputs

Indirect costs are assigned to outputs based on the proportion of direct staff hours for each output.

For the year ended 30 June 2015, indirect costs accounted for 41 percent of the Department's costs (2014: 43 percent).

Financial instruments

Financial assets and financial liabilities are initially measured at fair value plus transaction costs.

Cash on hand

Cash on hand includes petty cash and the amount in the current account bank balance.

Trade and other receivables

Short-term trade and other receivables are recorded at face value, less any provision for impairment.

Impairment of a receivable is established when there is objective evidence that the Department will not be able to collect amounts due according to the original terms of the receivable.

The amount of the impairment is the difference between the asset's carrying amount and the amount expected to be received on settlement. Overdue receivables that are renegotiated are reclassified as current (that is, not past due).

Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Operating leases

An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an asset. Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term.

The Department leases vehicles, office premises and office equipment. As all the risks and benefits of ownership are retained by the lessor, these leases are classified as operating leases and are expensed in the period in which the costs are incurred.

Property, plant and equipment

Property, plant and equipment consists of land, buildings, infrastructure, visitor assets, fencing assets, cultural assets, vessels, motor vehicles, furniture and fittings and other plant and equipment.

Property, plant and equipment is measured at cost or valuation, less accumulated depreciation and impairment losses.

Revaluations

The Department's geographically spread asset portfolio comprises a high number of relatively low-value assets. In many instances the assets are not able to be measured against a reliable trading market and seldom, if ever, trade in the open market (due to their nature and/or location). For this reason the depreciated replacement cost approach to value is deemed the appropriate methodology to determine fair value.

The carrying values of revalued assets are assessed annually to ensure that the carrying amount does not differ materially (a threshold of 7.5 percent is used) from their fair value and are revalued at least every 5 years. If there is a material difference, then the off-cycle asset classes are revalued. Additions between valuations are recorded at cost.

Asset classes measured at valuation include land, buildings, infrastructure, visitor assets and fencing. Aside from land, asset classes measured at valuation are done so using an indexation model.

The indexation model uses the appropriate capital goods index published by Statistics New Zealand to determine the movement in asset values over the intervening period. Where an asset class is revalued, the application of the indexation model and the values produced are reviewed and approved by an independent valuer. Land is valued using assessments conducted in accordance with the Rating Valuation Act 1998.

The net revaluation results are charged to other comprehensive revenue and expense and are accumulated to an asset revaluation reserve in equity for that class of asset. Where this would result in a debit balance in the asset revaluation reserve, this balance is not recognised in other comprehensive revenue and expense but is recognised in surplus or deficit. Any subsequent increase on revaluation that reverses a previous decrease in value recognised in surplus or deficit will be recognised first in surplus or deficit up to the amount previously expensed, and then recognised in other comprehensive revenue and expense.

Table 13: The useful lives of property, plant and equipment have been estimated as follows.

Asset

Estimated Useful Life

Visitor assets

Campsites and amenity areas

10–50 years

Signs

10 years

Tracks

15 years

Roads (surface only)

25 years

Buildings/huts

35–65 years

Structures

25–100 years

   

Other fixed assets

Administrative buildings

20–40 years

Plant, field and radio equipment

Plant and field equipment

10 years

Radio equipment

5–10 years

Furniture, computers, other office equipment

5 years

Motor vehicles

Vehicles—passenger

4 years – 6 years 8 months with a 30% residual value

Vehicles—utilities

5 years – 6 years 8 months with a 30–40% residual value

Vessels

Engines

10 years

Hulls

15 years

Infrastructure

Industrial fire equipment

45 years

Landscaping

44 years

Roads

10–100 years

Sewerage

64 years

Solid waste

38 years

Stream control

98 years

Water supply

60 years

Fences

25–40 years

In accordance with PBE IPSAS 17 Property, plant and equipment, the useful lives of property, plant and equipment are assessed annually to determine whether they are appropriate and the future depreciation charge adjusted accordingly. In some circumstances, and particularly for revalued assets, this may lead to instances where the estimated useful lives vary, but not materially, from the useful lives presented above.

Additions

Assets under construction are recognised at cost and are not depreciated. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value as at the date of acquisition.

Disposals

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount of the asset. Gains and losses on disposals are included in surplus or deficit. When a revalued asset is sold, the amount included in the property, plant and equipment revaluation reserve in respect of the disposed asset is transferred to general taxpayer funds.

Depreciation

Depreciation is provided on a straight-line basis on all property, plant and equipment other than land, cultural assets and assets under construction, at rates that will write off the cost (or valuation) of the assets to their estimated residual values over their useful lives (see table 13).

Community assets

The nation's land and historic buildings managed by the Department are the nation's natural and historic heritage. As these community assets belong to the Crown, their valuation is reflected in the 'Schedule of assets – Crown as administered by the Department of Conservation'. Typically this land includes the national, conservation and forest parks as well as Crown reserve land.

Intangible assets

Software acquisition and development

Costs that are directly associated with the development of software for internal use by the Department are recognised as an intangible asset.

Amortisation

Computer software is amortised on a straight line basis over a period of 5–7 years.

Impairment

All intangible assets measured at cost, including those not yet in use, are reviewed for impairment at balance date. Any impairment in the value of an intangible asset is included in the surplus or deficit.

Statement of cash flows

Operating activities include cash received from all revenue sources of the Department and cash payments made for the supply of goods and services.

Investing activities are those activities relating to the acquisition and disposal of non-current assets.

Financing activities comprise capital injections by, or repayment of capital to, the Crown, as well as finance lease principal repayments.

Goods and Services Tax (GST)

All items in the financial statements, including appropriation statements, are stated exclusive of goods and services tax (GST), except for receivables and payables, which are stated on a GST-inclusive basis. Where GST is not recoverable as input tax, then it is recognised as part of the related asset or expense.

Income tax

Government departments are exempt from income tax as public authorities. Accordingly, no charge for income tax has been provided for.

Taxpayers' funds

Taxpayers' funds represent the Crown's investment in the Department and are measured as the difference between total assets and total liabilities. Taxpayers' funds are disaggregated and classified as general funds and property, plant and equipment revaluation reserves. The latter relate to the revaluation of fixed assets to fair value.

Trade and other payables

Short-term trade and other payables are recorded at their face value.

Employee entitlements

Short-term employee entitlements

Employee entitlements expected to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay.

These include salaries and wages accrued up to balance date; annual leave earned but not yet taken at balance date; retiring and long service leave entitlements expected to be settled within 12 months; and sick leave.

Long-term employee entitlements

Employee entitlements due to be settled beyond 12 months after the end of the reporting period in which the employee renders the related service, such as long service leave and retiring leave, are calculated on an actuarial basis. The calculations are based on:

  • Likely future entitlements accruing to staff, based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement, and contractual entitlements information.
  • The present value of the estimated future cash flows.

Provisions

The Department recognises a provision for future expenditure of uncertain amount or timing when:

  • There is a present obligation (either legal or constructive) as a result of a past event.
  • It is probable that an outflow of future economic benefits will be required to settle the obligation.
  • A reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation.

Critical accounting estimates and assumptions

In preparing these financial statements, estimates and assumptions have been made concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Valuation of certain items of property, plant and equipment

Note 9 provides detail in respect of the valuation of property, plant and equipment.

Commitments

Expenses yet to be incurred on non-cancellable contracts that have been entered into on or before balance date are disclosed as commitments to the extent that there are equally unperformed obligations.

Cancellable commitments that have penalty or exit costs explicit in the agreement on exercising that option to cancel are included in the statement of commitments at the lower of the remaining contractual commitment and the value of the penalty or exit cost.

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