About us
Notes to the financial statements for the Housing Agency Account for the year ended 30 June 2008
1. Statement of accounting policies
Reporting entity
The Housing Agency Account is administered as an agency of the Crown by Housing New Zealand Corporation in terms of the Housing Act 1955 (the Housing Act). Under the Housing Act, Housing New Zealand Corporation is empowered to act as the agent of the Crown in carrying out the Crown's decisions in relation to acquisition, setting apart, and development of land, and the acquisition of assets, for 'State housing purposes'.
The registered office of Housing New Zealand Corporation (HNZC) is at Level 3, 28 Grey Street, Wellington.
These financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand and with section 34 of the Housing Act.
The Housing Agency Account does not form part of the HNZC Group Accounts.
Statement of Compliance
The financial statements comply with the applicable Financial Reporting Standards, which include New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), as appropriate for public benefit entities.
This is the first set of financial statements prepared based on NZ IFRS. There was no material impact on the comparatives for the year ended 30 June 2008 and therefore comparatives for the year ended have not been restated.
Differential reporting
The Housing Agency Account qualifies for differential reporting as it does not have public accountability and the owners are not separated from the governing body. The Housing Agency Account has taken advantage of all available differential reporting exemptions, except for the cash flow statement.
Measurement basis
The financial statements are presented in New Zealand Dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated.
The accounting principles for measuring and reporting financial performance and financial position, on an historical-cost basis, have been followed by the entity except under the modified historical cost basis, rental properties and freehold land have been revalued under NZ IAS 16, Accounting for Property, Plant and Equipment.
Specific accounting policies
Specific accounting policies that materially affect the measurement of financial performance and financial position have been consistently applied.
Land under development
Land and related developments are stated at the lower of cost and net realisable value, applied on a basis consistent with management's intended development programme. Any decreases in value are charged to the income statement. Net realisable values have been determined by independent registered valuers. Cost is defined as all costs incurred that are directly related to the development of these assets.
Rental property
Rental properties are revalued to fair value, determined by reference to their highest and best use, on an annual basis under NZ IFRS 16 Accounting for Property, Plant and Equipment.
Fair value is determined by reference to market-based evidence, which is the amount which assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller at an arm's length transaction as at the valuation date. Independent values are performed with sufficient regularity to ensure the carrying amount does not differ materially from the asset's fair value at the balance sheet date.
Any surplus arising on the revaluation of freehold land and rental properties is recognised in the asset revaluation reserve. A revaluation deficit greater than the asset revaluation reserve is recognised as an expense in the income statement in the period it arises. Revaluation surpluses that reverse previous revaluation deficits recognised in the income statement are recognised as revenue in the income statement.
Depreciation is calculated on a straight line basis over the estimated useful life of the building as follows:
- Rental properties - 40 years
Land intended for sale
Land intended for sale is stated at the lower of cost and net realisable value, applied on a basis consistent with management's intended disposal programme.
Any decreases in value are charged to the income statement. Net realisable values have been determined by independent registered valuers.
Cost is defined as all costs incurred that are directly related to the purchase of these assets.
Cash
For the purposes of the cash flow statement, cash and cash equivalents were previously represented by advances from the HNZC Group. In June 2008 a bank account was set up and funding received to repay the majority of the advance. In the cash flow statement, cash and cash equivalents has therefore been restated to reflect the actual net cash position.
Receivables
Receivables are stated at their estimated realisable value.
Revenue
Revenue shown in the income statement comprises the amounts received and receivable by the Housing Agency Account for providing rental land to customers and gain on sale of land and buildings. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Housing Agency Account and the revenue can be reliably measured.
Interest income
Interest revenue on mortgages, including interest subsidies from the Crown, and short-term investments is recognised as the interest accrues (using the effective interest method which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.
Income tax
The Housing Agency Account is not liable for taxation, by virtue of section CW 31(2) of the Income Tax Act 2005.
Borrowing costs
Interest is not capitalised but expensed in the year it relates to.
Changes in accounting policies
There have been no changes in accounting policies. Since the adoption of NZ IFRS, all accounting policies have been applied on a consistent basis.
2. Operating Expenses
| 2008 ($000) |
2007 ($000) | |
| Interest | 3,964 | 3,903 |
| Management fee | 1,383 | 1,176 |
| Consultants | 207 | 50 |
| Depreciation (rental property) | 74 | 39 |
| Premises security | 65 | 60 |
| Property maintenance | 59 | 25 |
| Legal costs | 27 | 0 |
| Insurance | 24 | 24 |
| Rates | 9 | 107 |
| Valuation fees | 6 | 29 |
| Other expenses | 68 | 30 |
| Total operating expenses | 5,886 | 5,443 |
Audit fees are paid by the Corporation.
3. Land under development
| 2008 ($000) |
2007 ($000) | |
| Land | 89,743 | 90,187 |
Land is held at the lower of cost or net realisable value. Land value comprises properties transferred from various sections of the Crown under the Public Works Act 1981. The cost related to these parcels of land as at 30 June 2008 amounted to $89.7 million (2007, $90.2 million). The parcels of land under development have been valued as at 30 June 2008, by Quotable Value New Zealand, a company employing Registered and Qualified Valuers, with the Principal Registered Valuer for the valuation being Kerry Stewart (PG Dip Env Audit, MBA, ANZIV, SNZPI). The fair value is $180.4 million (2007, $178.2 million).
4. Rental properties
| 2008 ($000) |
2007 ($000) | |
| Land | 4,369 | 2,129 |
| Buildings | 4,517 | 2,354 |
| 8,886 | 4,483 |
Rental properties comprising land and improvements were revalued as at 30 June 2008 at fair value in accordance with NZ IFRS 16 Accounting for Property, Plant and Equipment.
The valuation was carried out by Quotable Value New Zealand, a company employing Registered and Qualified Valuers, with the Principal Registered Valuer for the valuation being Kerry Stewart (PG Dip Env Audit, MBA, ANZIV, SNZPI).
The total gross amount of the valuation excluding properties intended for sale, and excluding selling and other costs, was $8.9 million (2007, $4.5 million).
The revaluation effect relating to rental properties was an increase of $0.2 million (2007, $0.2 million).
5. Land intended for sale
| 2008 ($000) |
2007 ($000) | |
| Land intended for sale | 34 | 34 |
Land intended for sale is held at the lower of cost or net realisable value. Land intended for sale was valued as at 30 June 2007 at fair value. The valuation was carried out by Quotable Value New Zealand, a company employing Registered and Qualified Valuers, with the Principal Registered Valuer for the valuation being Kerry Stewart (PG Dip Env Audit, MBA, ANZIV, SNZPI).
The net realisable value is $7.3 million (2007, $3.0 million).
6. Reconciliation of net surplus with cash flows from operating activities
| 2008 ($000) |
2007 ($000) | |
| Net deficit | (5,024) | (4,667) |
| Add/(less) non cash items | ||
| Depreciation | 74 | 39 |
| Gain on sale of fixed assets | (32) | 0 |
| Capitalised interest | 0 | 1,163 |
| Movement in working capital | ||
| Increase/(decrease) in payables | (2,537) | 155 |
| Decrease in receivables and prepayments | 533 | 154 |
| Net cash inflow/(outflow) from operating activities | (6,986) | (3,156) |
The movement in the working capital for payables excludes $0.2 million (2007, $2.6 million) relating to investing and financing activities.
The movement in receivables does not include any amounts (2007, nil) relating to investing and financing activities.
7. Financial instruments
| 30 June 2008 | |||||
| Loans and receivables ($000) |
Fair value through the income statement ($000) |
Available for sale ($000) |
Other fiancial liabilities ($000) |
Total ($000) | |
| Financial assets | |||||
| Trade and other receivables | 64 | 0 | 0 | 0 | 64 |
| Total financial assets | 64 | 0 | 0 | 0 | 64 |
| Financial liabilities | |||||
| Borrowings from HNZC Group | 0 | 0 | 0 | 971 | 971 |
| Trade and other payables | 0 | 0 | 0 | 544 | 544 |
| Total financial liabilities | 0 | 0 | 0 | 1,515 | 1,515 |
| 30 June 2007 | |||||
| Loans and receivables ($000) |
Fair value through the income statement ($000) |
Available for sale ($000) |
Other fiancial liabilities ($000) |
Total ($000) | |
| Financial assets | |||||
| Trade and other receivables | 597 | 0 | 0 | 0 | 597 |
| Total financial assets | 597 | 0 | 0 | 0 | 597 |
| Financial liabilities | |||||
| Borrowings from HNZC Group | 0 | 0 | 0 | 40,914 | 40,914 |
| Trade and other payables | 0 | 0 | 0 | 2,869 | 2,869 |
| Total financial liabilities | 0 | 0 | 0 | 43,783 | 43,783 |
8. Transactions with related parties
The Crown wholly owns the Housing Agency Account. The Housing Agency Account undertakes some transactions with statutory corporations, state-owned enterprises and government departments on an arm's length basis. These transactions are not considered to be related party transactions as defined in NZ IAS 24 Related Party Disclosures.
In the year to 30 June 2008, the Housing New Zealand Corporation Group, including Hobsonville Land Company Limited, provided management services to the Housing Agency Account. A management fee of $1.4 million (2007, $1.2 million) was charged by Housing New Zealand Corporation and Hobsonville Land Company Limited for these services.
The Housing New Zealand Corporation administers the Housing Agency Account as an agency of the Crown in terms of the Housing Act 1955.
As at 30 June 2008, the total amount owing from the Housing Agency Account to the Corporation is $1 million (2007, $38.6 million). The amount owing to Hobsonville Land Company Limited is nil (2007, $2.2 million) and to Housing New Zealand Limited is nil (2007, $0.1 million).
Housing New Zealand Corporation charged interest on the average monthly balance owed by the Housing Agency Account, at the 3-month bank bill rate (8.4-9.2%). Interest charged in the year was $4.0 million (2007, $2.7 million).
9. Segment information
The Housing Agency Account predominantly operates in one industry, being the ownership of land, and in one geographical segment, being New Zealand, for reporting purposes.
10. Impact of adoption of NZ IFRS
There have been no material impacts as a result of the adoption of NZ IFRS from previous New Zealand Generally Accepted Accounting Practice (NZ GAAP).
11. Contingent asset
On 30 June 2008, Housing New Zealand Corporation, acting as agent for the Housing Agency Account, and the Ministry of Education reached agreement as to the site for a primary school in the Hobsonville development. Land (3.6 hectares) will be transferred to the Ministry of Education when appropriate development consents have been obtained and the site development completed. This transfer will not occur in the next financial year.
12. Commitments
The principal development project is the Hobsonville airbase in Auckland. Hobsonville Land Company Limited, a wholly-owned subsidiary of Housing New Zealand Corporation, is masterplanning the Crown-led staged development of the former airbase into a sustainable mixed community of more than 3,000 homes, of which up to 15% will provide for affordable home ownership and up to 15% will contribute to Housing New Zealand Corporation's social housing objectives.
Hobsonville Land Company Limited and AV Jennings Ltd signed a partnering Precinct Development Agreement (PDA) on 10 April 2008, for the first stage development of the former Hobsonville airbase. The $300 million Precinct One development covered by the PDA involves 30 hectares, broader site infrastructure and the construction of 650 homes, being a mix of detached and terraced homes and apartments. Subject to consents civil works are scheduled to start in late 2008 and house building in 2009.
