Annual report 2012
being completed, deferred income is recognised and
is released over the specific period using the stage of
completion method.
Student tuition fees
Revenue from tauira tuition fees is recognised over the
period in which the course is taught by reference to the
stage of completion of the course as at the balance sheet
date. Stage of completion is measured by reference to
the days of course completed as a percentage of total
days for each course.
Rental income
Rental income is recognised in the surplus or deficit on
an accrual basis.
Interest
Revenue is recognised as the interest accrues (using the
effective interest method which applies the interest 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.
16. Donations
Donations are received by Te Wānanga o Aotearoa from
the subsidiary company, Open Wānanga Limited. These
donations are recognised as revenue in the surplus or
deficit in the period in which they are received.
Financial arrangement between the parent and
subsidiary
Open Wānanga Limited has provided educational
delivery services to Te Wānanga o Aotearoa since 2001.
Open Wānanga Limited invoices Te Wānanga o Aotearoa
as these services are performed. However funds flow
between the organisations as they are needed and
because of this an inter-entity debt has arisen. At least
annually, the two entities consider the value of the inter-
entity debt. In the past a dividend has been declared
by Open Wānanga Limited in order to manage the value
of the debt. This has been technically incorrect since
2008. Moving forward a donation will be paid by Open
Wānanga Limited.
Why this has been technically incorrect since 2008
The form of the dividend/debt arrangements
implemented from 2008 to 2012 by Te Wānanga
o Aotearoa and its subsidiaries is incorrect. The
arrangements were not consistent with the subsidiaries
constitutions; in particular clause 4.2 provides that the
shares in the company do not carry any right to receive
dividends. However clauses 2.1.2 and 2.2.2 do provide
for profits not reinvested in the company to be applied
by the company by way of distribution to Te Wānanga
o Aotearoa or otherwise exclusively for charitable
purposes, being purposes consistent with the purposes
and activities of Te Wānanga o Aotearoa. On this basis
the substance of the dividend/debt arrangements made
from 2008 to 2012 were permitted.
What has been done and when to remedy the situation
Te Wānanga o Aotearoa is the sole shareholder of Open
Wānanga Limited. Distributions from Open Wānanga
Limited can be in the form of “donations”, “gifts” or
“grants” for charitable purposes. Distributions are not
distributions to Te Wānanga o Aotearoa in their capacity
as shareholders. Therefore Te Wānanga o Aotearoa
and its subsidiary are able to remedy the position by
unwinding the dividend arrangements and implementing
replacement distribution (donation) arrangements. The
documentation required to remedy the position will seek
to do so retrospectively, with effect from the date of the
original arrangements.
17. Equity
Equity is measured as the difference between total
assets and total liabilities. Equity is disaggregated and
classified into a number of reserves. The components of
equity are:
• retained earnings
• property revaluation reserves
• capital contribution
Property revaluation reserve
This reserve relates to the revaluation of property, plant,
and equipment to fair value.
18. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST except:
• where the GST incurred on a purchase of goods
and services is not recoverable from the taxation
authority, in which case the GST is recognised as part
of the cost of acquisition of the asset or as part of
the expense item as applicable
• receivables and payables are stated with the amount
of GST included.
The net amount of GST recoverable from or payable to
the taxation authority is included as part of receivables
or payables in the statement of financial position.
The net GST paid to, or received from the taxation
authority , including the GST relating to investing and
financing activities, is classified as a net operating cash
flow in the statement of cash flows.
Commitments and contingencies are disclosed exclusive
of GST.
19. Budget figures
Budget figures are those approved by Te Mana
Whakahaere at the beginning of the year. Budget figures
are prepared in accordance with NZ GAAP and are
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