The University of Waikato - Te Whare Wananga o WaikatoThe University of Waikato - Te Whare Wananga o Waikato

2006 Annual Report

   
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Notes to the Financial Statements 

Note 14: FRS 41

Impact of the Adoption of International Financial Reporting Standards
In December 2002 the Accounting Standards Review Board ("ASRB") announced that New Zealand reporting entities would be required to apply New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS") for reporting periods commencing on or after 1 January 2007. The ASRB also allowed the option of adopting NZ IFRS earlier to the mandatory adoption date, allowing adoption from 1 January 2005.

The University of Waikato has determined that the University is a public benefit entity as defined by NZ IFRS as the focus of the University is to provide educational and research services to the community. The University has also determined that it will not adopt NZ IFRS early. As a consequence of this decision the University will report in compliance with NZ IFRS (with Public Benefit Entity exemptions) for first time for the year ended 31 December 2007.

The University worked jointly with six other Universities in New Zealand to identify specific issues arising from the transition to NZ IFRS that would impact the sector. The Audit Committee of the University is provided with progress reports from this working group and will be involved in all key decisions in regards to Accounting Policies.

The University was required to complete an opening New Zealand Equivalents to IFRS balance sheet. This balance sheet was prepared during 2006 and audited in February 2007. An explanation of how the transition from superseded policies to NZ IFRS has affected the University's financial position is set out in the following table and the notes that accompany the table.

Statement of Financial Position
As at 1 January 2006
University
Assets Notes Existing Policies
NZ$000
Effect of Transition
NZ$000
NZ IFRS
NZ$000
Current Assets
Cash and Bank   188 - 188
Accounts Receivable c 3,956 464 4,420
Prepayments   2,973 - 2,973
Short Term Investments   23,182 - 23,182
Inventories   1,012 - 1,012
Non-current assets classified as held for sale - - -
Total Current Assets   31,311 464 31,775

Non Current Assets
Investments   887 - 887
Intangibles a - 6,890 6,890
Property, Plant and Equipment a,b 242,625 ( 5,267 ) 237,358
Total Non Current Assets   243,512 1,623 245,135
Total Assets
  274,823 2,087 276,910

Liabilities
Current Liabilities
Income in Advance c 7,551 5,128 12,679
Accounts Payable   11,736 - 11,736
Current Portion of Employee Entitlements e 11,405 15 11,420
Current Portion of Term Liabilities d 80 7,302 7,382
Total Current Liabilities   30,772 12,445 43,217
 
Non Current Liabilities
Term Portion of Employee Entitlements   7,055 - 7,055
Term Liabilities b,d 7,817 ( 6,032 ) 1,785
Total Non Current Liabilities   14,872 ( 6,032 ) 8,840
 
Equity
General Equity   155,873 ( 50 ) 155,823
Asset Revaluation Reserve   63,934 389 64,323
University Created Reserves   6,574 ( 4,664 ) 1,910
Restricted Reserves   2,798 - 2,798
Total Equity   229,179 ( 4,325 ) 224,854
 
Total Liabilities and Equity   274,823 2,087 276,910

a Intangibles

The University has a large amount of software which has been capitalised with fixed assets under the superseded policies. NZ IAS 38

'Intangible Assets' requires that the software is recorded as an intangible asset and amortised over its useful life.

b Finance Lease Asset and Liability

During the IFRS conversion process a full review of our leases revealed that a lease the University had previously been treating as an operating lease was in fact a finance lease. The buildings will become the property of the University at the expiry of the lease.

The buildings have been recognised at market value at the inception of the lease and a corresponding liability was recognised as this was lower than the present value of the minimum future lease payments at inception. The building was revalued as at 1 January 2005 and is being depreciated over 100 years in accordance with similar buildings.

c Research Income

Under the superseded policies most research income was recognised as it was received. Research contracts which had benchmarks specified would use these benchmarks for income recognition. Under NZ IFRS 18 'Revenue' the University is required to recognise research income in relation to the stage of completion of the project. The University has chosen to calculate the stage of completion by using the proportion of costs incurred at balance date.

d Term Liabilities

A loan facility with ASB which was previously treated as a non-current liability has been reclassified as a current liability in terms of NZ IAS 1 'Presentation of Financial Statements'. In addition an EECA loan at nil interest has been restated at fair value.

e Sick Leave Accrual

Most University staff have an unlimited sick leave entitlement which requires no accrual. School Support Services and some cleaning/caretaking staff have an annual enititlement and provision to carry forward unused sick leave. This accual has been calculated based on average excess sick leave used over the past three years.

The University expects that changes of policy that will have an ongoing material effect on the University's accounts are those relating to research revenue, intangibles and biological assets.

Future developments of the currently adopted NZ IFRS may take place prior to the University's adoption in 2007. Therefore the actual impact of adopting NZ IFRS may vary from the information presented.



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