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• Income statement for the year ended 30 June 2008
• Statement of changes in equity for the year ended 30 June 2008
• Cash flow statement for the year ended 30 June 2008
• Notes to the financial statements of Housing New Zealand Corporation for the year ended 30 June 2008
  • 2. Summary of significant accounting policies
  • 3. Revenues and expenses
  • 4. Income tax
  • 5. Dividends paid and proposed
  • 6. Categories of financial assets and liabilities
  • 7. Receivables and prepayments
  • 8. Mortgage advances
  • 9. Investments
  • 10. Properties intended for sale
  • 11. Property, plant and equipment
  • 12. Intangible assets
  • 13. Properties under development
  • 14. Accounts payable and other liabilities
  • 15. Provisions
  • 16. Financial risk management objectives and policies
  • 17. Reconciliation of net profit after tax with cash flows from operating activities
  • 18. Commitments and contingencies
  • 19. Related party disclosure
  • 20. Mortgage Insurance Scheme claim liability
  • 21. Events subsequent to balance date
  • 22. Budgeted figures
  • 23. Remuneration of employees - $100,000 and over
  • 24. Impacts of adoption of NZ IFRS

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22. Budgeted figures

The unaudited budget figures reported in these financial statements are the financial performance targets included in the Corporation's 2007/08 Statement of Intent.

The Corporation is complying with the New Zealand equivalents to NZ IFRS for the first time at 30 June 2008 and is required to restate its comparative financial statements to reflect the application of NZ IFRS for the comparative period ended 30 June 2007. As reported in note 24, most adjustments required on transition to NZ IFRS have been made against opening retained earnings for the year under review. The Corporation finalised the budgeted figures for 2007/08 included in the 2007/08 Statement of Intent prior to the completion of the restatement of the comparatives to comply with NZ IFRS.

Where necessary, comparative figures have been adjusted to conform with changes in presentation and classification adopted in the current period. However, budgets have not been restated, therefore the NZ IFRS adjustments significantly impact the variance from budget as explained below.

The Corporation's overall financial performance (operating surplus after tax) for the year ended 30 June 2008 shows a $2 million favourable operating variance against budget. The favourable variance is primarily due to a combination of additional operating revenue ($36 million) partially offset by a $34 million higher spend in operating expenses.

The additional revenue primarily relates to the reclassification of net interest on interest rate swaps, due to the adoption of NZ IFRS, between operating income and operating expense. More interest has been earned due to higher market interest rates and higher investment balances than forecast, as well as $4 million in interest received from the Crown repayment of the loan to the Housing Agency Account. The variance for net interest income is $9 million.

No budget was included for the fair value adjustment of interest rate derivatives due to the assumption that those movements would net off. The net actual cost is $2 million in 2008.

Annual appropriation income from the Crown was lower than budget by $6 million, due to lower suspensory loans and Mortgage Insurance Scheme expenses and lower grants being paid out during the course of the year.

The key contributors to the variance in operating expenses are:

• Interest expense - $26 million.
• Fair value adjustment - $10 million.

During the year the Board approved additional funding of $9.5 million over the original budget to be applied to planned and responsive maintenance in accordance with the Corporation's long-term property strategy.

Market rent increases were understated in the budget by $2 million and a further $6.5 million variance to budget is due to reclassification of office accommodation third party rental leases in compliance with NZ IFRS, while the budget which is in other expenses has not been restated.

Demolitions were lower than budget due to a lower number of units being demolished and at a lower value per unit. Direct mortgage expenses were down due to less loans drawn down and lower-than-anticipated claims. The balance of the variance to budget was due to lower overhead costs in the national office in discretionary expenditure areas, particularly in consultants and general expenditure.

While current assets were in line with budget, cash and cash equivalents were significantly higher than budget primarily due to the additional $50 million cash received from the Crown in repayment of the advances to the Housing Agency Account and a reduction in the forecast short-term investment balance.

Other variances to budget in net working capital including receivables and payables are timing related.

The carrying value of derivatives in total is $30 million over budget due to the implementation of NZ IFRS.

Property, plant and equipment variance to budget is $1.7 billion and is primarily due to the recognition of $1.2 billion property revaluations in 2007 (established after budgets were finalised for the 2007/08 Statement of Intent) and $290 million in asset revaluations for the period ended 30 June 2008. The budget may not include an estimate of property valuation changes. The deferred tax liability is higher than budget due to the tax effect of the asset revaluations.

Loans are in total $63 million below budget with more loans with terms of less than 12 months than anticipated in the budget.

The $1.9 million variance in the closing balance of equity is due to the property revaluations in 2007 and 2008 not being included in the Statement of Intent budgets. Note that the Statement of Intent budget includes $1,346 million for the full impact of the restatement of deferred taxation on the revaluation of buildings as a result of the implementation of NZ IFRS. The budget should have included only the movement during the period, with the comparative figures being restated in 2007. The actual figures reflect the restatement of deferred tax in the prior periods.

The variance of $132 million in cash inflows from Crown borrowings is largely offset by the cash outflows in the repayment of other debt. The other variances in the cash flow statement are principally a result of the variances in the income statement and balance sheet detailed above.