Basis of Consolidation
The consolidated financial statements include the University and its subsidiaries and associates.
In the consolidated financial statements, subsidiaries have been included by aggregating like items of assets, liabilities, revenues, expenses and cashflows on a line by line basis. All inter-entity transactions are eliminated on consolidation.
Associates are those entities over which the University has the capacity to affect substantially, but not unilaterally determine, the financial and/or operating policies. The University's share of surplus is included in the consolidated Statement of Financial Performance and the share of post acquisition increase in net assets is included in the consolidated investments in the Statement of Financial Position.
Budget Figures are from the budget approved by the Finance Committee on 23 November 2005.
The budget figures have been prepared in accordance with generally accepted accounting practice and are consistent with the accounting policies adopted by the Council for the preparation of the financial statements.
Goods and Services Tax (GST) is excluded from these financial statements, with the exception of accounts receivable and accounts payable.
Income Tax has not been provided for in these accounts as the University has been recognised as a charitable organisation by the IRD and is therefore exempt from income tax.
Research Grants and Subsidies, Donations and Bequests to the University are recognised as income when money is received, or entitlement to receive money is established; except where fulfillment of any restrictions attached to these monies is not probable.
Government Grants to the University are recognised as income on entitlement.
Student tuition fees are recognised as revenue on a course percentage of completion basis.
Foreign currency transactions throughout the year have been converted into New Zealand currency at the ruling rate of exchange at the dates of the transactions. Foreign currency balances, as at 31 December 2006, are valued at the exchange rates prevailing on that date. Foreign Exchange gains/losses are recognised in the Statement of Financial Performance.
Equity is the community's interest in the University and Group and is measured as the difference between total assets and total liabilities. Equity is disaggregated and classified into a number of reserves to enable clearer identification of the specified uses that Council and Group make of its accumulated surpluses. The components of equity are:
Asset Revaluation Reserve
University Created Reserves
Accounts Receivable are shown at estimated realisable value after providing for bad and doubtful debts.
Investments are valued at cost except for Local Authority Stock, Government Stock, and Transferable Certificates of Deposit, which are valued at face value, which is not materially different from cost.
Inventories are valued at the lower of cost (determined on a weighted average basis) and net realisable value. This valuation includes allowances for slow moving and obsolete inventories. No account is taken of other minor stocks in academic schools and administrative departments, which are expensed as issued.
Provision is made in respect of the University's liability for staff annual and long service leave where the employee is entitled to that leave as at 31 December 2006.
Additionally provision has been made, where applicable, using an actuarial valuation for retirement gratuities and long service leave. This valuation, as at 31 December 2006 , was undertaken by Mercer Human Resource Consulting Limited (Actuaries). The actuarial valuation determines the extent of anticipated entitlements payable under employment contracts and brings to account a liability using the present value measurement basis, which discounts expected future cash outflows.
To the extent that it is anticipated that the liability will arise during the following year the entitlements are recorded as Current Liabilities. The remainder of the anticipated entitlements are recorded as Non-Current Liabilities.
Property, Plant and Equipment:
Land and Buildings
In 1996 the land occupied by the University campus was transferred by the Crown to Waikato-Tainui, as part of the Crown's settlement of the Raupatu claim. The University leases back the land from Waikato-Tainui. Compensation was paid to the University in 1996 by the Crown to fund the University's financial obligations under the lease.
The majority of Buildings recognised in the financial statements, including the previous Hamilton Teachers' College buildings, are still subject to the legal transfer of ownership from the Ministry of Education. The University is of the opinion that as at 31 December 2006 it is in substance the owner of these Buildings and assumes all the normal risks and rewards of ownership.
Land and Buildings are reviewed annually for current values and, if significant movements have occurred, revalued. Land and Buildings were revalued as at 31 December 2006 by Attewell Gerbich Havill Limited in conjunction with DTZ New Zealand (Registered Valuers), on a fair value basis. The value of land and non specialised buildings was determined using market based evidence. All other buildings were valued at Optimised Depreciated Replacement Cost.
University Owned Infrastructural Assets are reviewed annually for current values and, if significant movements have occurred, revalued. Infrastructural Assets were revalued as at 31 December 2006 by Opus International Consultants Limited on a fair value basis using the Optimised Depreciated Replacement Cost method.
The Library Collection is valued on the basis of historical cost less accumulated depreciation.
Additions between valuations are recorded at cost less accumulated depreciation.
Assets Under Construction/Work in Progress is valued on the basis of expenditure incurred and Certified Gross Progress Claim Certificates up to 31 December. Work in Progress is not depreciated. The total cost of a project is transferred to the relevant asset class on its completion and then it is depreciated.
All Other Property, Plant and Equipment are valued at historical cost less accumulated depreciation.
Land is not depreciated.
Buildings are depreciated on a straight line basis that will write off the cost or valuation of Buildings over their estimated total useful life.
The useful lives and associated depreciation rates for Buildings are estimated as follows:
| ||Useful Lives:||Residual Values|
as a percentage of
Infrastructural Assets are depreciated on a straight line basis that will write off the cost or valuation of the Infrastructural Assets over their estimated total useful life.
| ||Useful Lives:||Residual Values:|
The Library Collection is depreciated on a straight line basis that will write off the cost over its useful life. The useful lives are estimated at 35 years for books and 15 years for periodicals.
Teaching and research equipment is depreciated at 15% per annum on a diminishing value basis.
Computer equipment excluding servers is depreciated on a straight line basis that will write off the cost within four years.
Computer servers are depreciated on a straight line basis that will write off the cost within five years.
Computer software is depreciated on a straight line basis that will write off the cost within four years.
Computer software for the student enrolment and library systems are depreciated on a straight line basis that will write off the cost within ten years.
Other Property, Plant and Equipment are depreciated on a diminishing value basis dependent on their assessed useful life and at rates which vary from 5 to 20%.
Finance leases, which effectively transfer to the University substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the present value of the minimum lease payments. The leased assets and corresponding liabilities are disclosed and the leased assets are depreciated over the period the University is expected to benefit from their use.
Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the leased items, are included in the determination of the operating profit in equal instalments over the lease term.
Statement of Cashflows
Cash means cash balances on hand, held in bank accounts, demand deposits and other highly liquid investments in which the University invests as part of its day-to-day cash management.
Operating activities include cash received from all income sources of the University and record the 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 the change in equity and debt capital structure of the University.
Financial Instruments form part of the University's everyday operations. These financial instruments include Bank Accounts, Short Term Deposits, Trade and Accounts Receivable, Trade and Accounts Payable and Term Borrowings, all of which are recognised in the Statement of Financial Position.
Revenue and expenses in relation to all financial instruments are recognised in the Statement of Financial Performance.