Commentary for 31 December 2021 reporting by Te Pūkenga subsidiaries

The subsidiaries of Te Pūkenga—New Zealand Institute of Skills and Technology (Te Pūkenga subsidiaries) reported for the first time in their 31 December 2020 financial statements. Those 2020 financial statements covered the initial nine-month period since establishment. For the 31 December 2021 financial statements, the period covered will be the full 12-month period.

Release of the tertiary education institution 2021 model financial statements

Audit New Zealand’s 2021 update to the Tutuki Tertiary Institute tertiary education institution model financial statements are now available on our website.

These model financial statements have been updated to reflect some minor changes in accounting standards, the enactment of the Education and Training Act 2020, and disclosing the impacts of Covid-19.

Page 6 of the model financial statements highlights the main updates to the model financial statements since they were previously published in 2019.

Additional information specific to Te Pūkenga subsidiaries

In addition to providing the model for the general TEI sector, we provide comments on reporting matters related to 31 December 2021 financial statements specific to Te Pūkenga subsidiaries, including guidance on disclosures related to:

If you have any questions about any of the information in this commentary you should contact your audit team.

Are Te Pūkenga subsidiaries required to include a statement of service performance (SSP) in their annual report?

No. It has been confirmed that under the Education and Training Act 2020 that Te Pūkenga subsidiaries are not required to include an SSP in their annual report.

Impact of early adoption of PBE IPSAS 41 – Financial Instruments

Te Pūkenga subsidiaries have elected to early adopt PBE IPSAS 41 in their 31 December 2021 financial statements. PBE IPSAS 41 supersedes PBE IFRS 9 Financial Instruments, which was issued as an interim standard, and most of PBE IPSAS 29 Financial Instruments: Recognition and Measurement. It also amends a lot of the required disclosures in PBE IPSAS 30 Financial Instruments Disclosures.

As Te Pūkenga subsidiaries were unable to adopt PBE IFRS 9, these entities will need to transition from PBE IPSAS 29 to PBE IPSAS 41. The table communicating some of the main differences is included in Appendix 1. We have also included example accounting policies and notes as well as transition disclosures for PBE IPSAS 41 in Appendix 2.

2021 model section Discussion
Basis of preparation Disclosures about subsidiary disestablishment

The Office of the Auditor-General and Te Pūkenga have approved the following self-disclosure in relation to the disestablishment of Te Pūkenga subsidiaries that is to be included in the financial statements.

“The Education and Training Act 2020 (the Act) states that each Te Pūkenga subsidiary continues in existence only until the close of 31 December 2022, at which point all the rights, assets, and liabilities of the Te Pūkenga subsidiary will be transferred to Te Pūkenga.

The Act allows Te Pūkenga to dissolve [name of company] before 31 December 2022 and transfer some or all the rights, assets, and liabilities to Te Pūkenga or another Te Pūkenga subsidiary.

As the company will cease to exist by the close of 31 December 2022, the financial statements have been prepared on a disestablishment basis.

Because the vocational education will continue to be provided after the transfer, no changes were made to the carrying value of assets and liabilities as a result of the disestablishment basis of accounting.”
Our audit reports will include an emphasis of matter paragraph on the disestablishment basis of preparation.
Various What prior year comparatives should be displayed in the financial statements?

The comparative information should cover the period from 1 April 2020 to 31 December 2020 rather than 1 January 2020 to 31 December 2020, as the Te Pūkenga subsidiary did not exist during the period 1 January 2020 to 31 March 2020.

An ITP company could consider disclosing additional comparative information in the notes to the financial statements, as several ITP companies did in the prior year. It is important that this additional comparative information is included in the notes and not on the face of the financial statements and the Te Pūkenga subsidiary should include an explanation for why it’s different.

In considering the requirements of PBE IPSAS 1 Presentation of Financial Statements, paragraphs 66 and 67, which cover the reporting period, each Te Pūkenga subsidiary should disclose that the comparative financial information is for a 9-month period and the current year is for a 12-month period.
This could be completed through updating the reporting period disclosure to state:

“The Company came into existence on 1 April 2020, therefore the reporting period for the comparative financial year is for the 9-month period from 1 April 2020 to 31 December 2020. The reporting period for the current year is for the 12-month period 1 January 2021 to 31 December 2021. Due to the comparative year only covering a 9-month period, the statement of comprehensive revenue and expense, statement of changes in net assets/equity, cash flow statement and related notes are not entirely comparable.”
Various What budget information should be disclosed?

Budget information for the Te Pūkenga subsidiaries shall be included in the financial statements. This is required by section 154(3)(c) of the Crown Entities Act 2004, which requires the financial statements to “include the forecast financial statements prepared at the start of the financial year, for comparison with the actual financial statements.”

Sections 306(2) and 306(3)(b) of the Education and Training Act 2020 require forecast financial information to be presented for both the parent and group financial statements.
Disclosures will need to highlight where the initial budget came from, who approved it, and the basis of preparation. An example of the disclosure is provided below.

The budget figures for the Institute and group have been derived from the budget approved by the Board at the start of the 2021 financial year. Those budget figures have been prepared in accordance with NZ GAAP, using accounting policies that are consistent with those adopted by the Board in preparing these financial statements.

If there are any significant differences in accounting policies, disclose these, including if the adoption of PBE IPSAS 41 was not reflected in those approved budgets.
Note 26 Impacts of Covid-19

Each Te Pūkenga subsidiary will be affected differently by Covid-19. For this reason, each Te Pūkenga subsidiary will need to outline the main effects on the entity’s financial statements due to Covid-19. This would include information about key assumptions concerning the future and other sources of estimation uncertainty. The main effects on performance measures should also be disclosed in the statement of service performance. Our model financial statements include disclosure in Note 26 Impacts of Covid-19.