The Panel is responsible for the forecast financial statements presented, including the appropriateness of the assumptions underlying the forecast financial statements and all other required disclosures. The preparation of these forecast financial statements requires the Panel to make judgements, estimates and assumptions that affect the application of accounting policies and the forecast amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates and the variation may be material.

Estimates and assumptions used in these forecast financial statements are based on the best information available to the Panel at the time of their preparation. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the forecast financial statements are described in the following significant assumptions. It is not intended to update the forecast financial statements subsequent to publication of these statements.

1. Forecast financial statements for 2008/2009
   The 2008/2009 forecast financial statements contained in these statements include actual results up to the end of March 2009 and an estimate of the outcome for the remaining three months of the year taking account of work on hand and expected developments in the final months of the financial year. These figures are not the same as those included for 2008/09 in the Panel's 2009 forecast financial statements.
2. Government appropriation
   The Government appropriation is as per the amount allocated to the Output Class "Administration of the Takeovers Code" for the year 2009/2010.
3. Application fees and costs recoverable
   We assume third party income of $299,000 in 2009/2010, an increase of around 11% over the expected level of income in 2008/2009. This increase assumes a lower level of exemption activity offset by a higher level of recoveries from enforcement activity compared to that in the present year.
4. Relocation and premises costs
   The Panel expects to incur one-off fit-out and set up costs arising from its relocation. It is planned that the relocation will be in the first quarter of the year. The Panel has received funding of $150,000 from the Crown for this purpose.
5. Payment for staff salaries
   The Panel expects to spend $860,000 on staff payments in 2009/10. The increase in staff payments over the forecast cost of $743,000 for these payments in 2008/09 arises because four of the Panel's employees were employed by the Securities Commission for the first two months of the financial year. It also anticipates employment of an accountant/administrator once the Panel relocates. This replaces expenditure which the Panel currently makes to the Commission for the use of an accountant employed by the Commission.
6. Members' fees
   The Panel expects to spend $270,000 on members' fees in 2009/2010, a decrease of 7.5% over expected expenditure in 2008/2009. This decrease reflects the outcome of the decision made by the Panel to reduce the number of regular meetings held each year from 8 meetings to 6 meetings, and to hold some meetings by video conference.
7. Payment for Securities Commission Services
   The Panel is the employer of its own full time staff. As a result of a reduction in the rate payable by the Panel to the Commission compared to that anticipated at the start of the year, the cost of services purchased from the Commission for 2008/09 is forecast to be lower than the amount budgeted. As the Panel expects to relocate to its own premises by the end of the first quarter it only expects to spend $96,000 on the purchase of services from the Commission during 2009/10, mostly being for overhead costs.
8. Overall risk of forecast revenue expectations not being met
   These forecast financial statements are presented on the basis that, other than matters stated above under the statement of significant assumptions, there will be no other significant change to the nature of the Panel's operations or its principal activities in the period covered by the forecast financial statements. As long as there is Code activity there will be a need for exemptions and approvals because the Code is expressed in reasonably general terms and exemptions are often needed to facilitate code transactions. However the level of Panel income from these sources is difficult to predict with any reliability.
   
   The level of the Panel's enforcement activity is dependent on the level and nature of takeover market activity. If takeovers are hostile or competitive this is likely to lead to a higher level of Panel involvement and possibly enforcement meetings. The impact of the Panel's expanded enforcement powers is difficult to predict. The Panel cannot always recover its costs from the enforcement meetings it holds.
   
   If there is a lower level of exemptions and approvals than expected and an absence of contested or opposed takeovers then the level of the Panel's third party revenue would be significantly affected.
   
   If the Panel's third party revenue fell to $200,000 rather than the predicted $299,000, with no reduction in staff costs, we would expect some reduction in members' fees and external legal costs, and the Panel's forecast operating deficit of $20,000 could increase by around $70,000 to $90,000.

STATEMENT OF SIGNFICANT ACCOUNTING POLICIES

Basis of preparation

The separate forecast financial statements presented here are for the reporting entity, the Takeovers Panel, for the year ended 30 June 2010. The forecast financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP) and are consistent with the accounting policies to be adopted by the Panel for the preparation of financial statements. They comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for public benefit entities. These are the Panel's third NZ IFRS forecast financial statements.

Measurement System

The accounting principles recognised as appropriate for the measurement and reporting of results and financial position on an historical cost basis have been applied.

Functional and presentation currency

These forecast financial statements are presented in New Zealand dollars ($), which is the Panel's functional currency. All financial information presented in New Zealand dollars has been rounded to the nearest dollar.

Specific Accounting Policies

1. Revenue Recognition
   
   Government grant is recognised as revenue when earned and is reported in the financial period to which it relates. Revenue from application fees and costs recoverable is recognised when the relevant services are provided or when the Panel has made the relevant determination under section 32 of the Takeovers Act 1993.
   
   Interest income is recognised as it accrues, based on the effective interest rate inherent in the respective financial instrument. The effective interest rate exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. The method applies this rate to the principal outstanding to determine interest income each period.
2. Litigation Fund
   
   Interest income and expenditure on approved litigation fund matters are reported as income and expenditure of the Panel in the financial period in which they were derived or incurred. Costs awarded by the Court are recognised in the financial period during which the Court gives its judgement or the parties agree. Reimbursements from the Crown to top-up the fund are reported as income in the period in which the Panel's claim for reimbursement relates.
   
   The balance of the fund is disclosed as a component of equity in the statement of financial position.
3. GST
   
   All items in financial statements are exclusive of GST with the exception of trade and other receivables and trade and other payables which are stated with GST included.
   
   The statement of cash flows has been prepared on a net GST basis. That is, cash receipts and payments are presented exclusive of GST. A net GST presentation has been chosen to be consistent with the presentation of the statement of comprehensive income and statement of financial position. The net GST component of operating activities reflects the net GST paid to and received from the Inland Revenue Department. The GST component has been presented on a net basis as the gross amounts would not provide meaningful information for financial statement purposes.
4. Financial Instruments
   
   A financial instrument is recognised when the Panel becomes party to a financial contract. All financial instruments are recognised in the statement of financial position and all revenues and expenses in relation to financial instruments are recognised in the statement of comprehensive income.
   
   Financial instruments comprise trade and other receivables, cash and cash equivalents, term deposits and trade and other payables.
5. Cost Allocation Policy
   
   For the purposes of the statement of service performance direct costs are charged directly to outputs. Indirect costs are allocated on the basis of direct labour hours spent on each output.
6. Income Tax
   
   The Panel is exempt from income tax under the Income Tax Act 2007.
7. Trade and other receivables
   
   Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.
8. Trade and other payables
   
   Creditors and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method.
9. Cash and cash equivalents
   
   Cash and cash equivalents comprise cash balances on hand, held in bank accounts and short term deposits that form part of the Panel's day-to-day cash management. They are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in values. They are held for the purpose of meeting short term cash commitments and have short maturities of three months or less.
10. Term Deposits
    
    This category only includes term deposits with maturities greater than three months. These deposits are loans and receivables under NZ IFRS. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method.
11. Impairment
    
    At each balance date financial assets such as receivables are assessed for impairment. Trade and other receivables are individually assessed for impairment. This assessment is also made with reference to previous experience with debtors. The recoverable amount is the present value of the estimated future cash flows. An impairment loss is recognised in the statement of financial performance whenever the carrying amount of an asset exceeds its recoverable amount. Any reversal of impairment losses is also recognised in the income statement.
12. Depreciation
    
    The following classes of property, plant and equipment have been depreciated over their economic lives on the following bases:

13. Short term employee benefits
    
    Employee entitlements represent the Panel's liability for employee annual leave entitlements and salaries accrued up to balance date. This has been calculated on an accrued entitlement basis which involves recognising the undiscounted amount of short term employee benefits expected to be paid in exchange for service that an employee has already rendered. This is calculated at current remuneration rates.
14. Contingent assets and contingent liabilities
    
    Contingent liabilities are disclosed if the possibility that they will crystallise is not remote. Contingent assets are disclosed if it is probable that the benefits will be realised.
15. Explanation of application of NZ IFRS
    
    These are the Panel's third forecast financial statements prepared in accordance with NZ IFRS. The accounting policies set out above will be applied in preparing the financial statements for the year ended 30 June 2010. The application of NZ IFRS is consistent with the requirement for all entities in New Zealand to apply NZ IFRS for accounting periods beginning on or after 1 January 2007. Other than presentational and classification differences, the change to NZ IFRS has no other impact on the forecast financial statements. The comparative forecast information presented in these financial statements for the year ended 30 June 2009 are stated in accordance with NZ IFRS.
16. Changes in Accounting Policies
    
    There have been no changes to accounting policies since the date of the last forecast financial statements prepared under NZ GAAP other than the application of NZ IFRS.

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