dave June 23, 2018 No Comments
Wellington's CentrePort suffered extensive damage in the November 2016 earthquake.

ROBERT KITCHIN/STUFF
Wellington’s CentrePort suffered extensive damage in the November 2016 earthquake.

New Zealand’s ports are under pressure to agree on a basis for presenting financial results, with the Auditor-General saying the current variations could mask the underlying performance of different businesses.

In a letter to the chief executives New Zealand’s major ports, deputy auditor-general Greg Schollum said the agency had identified “considerable variation” in the various port companies’ reported returns, in part created by different methods of valuing assets.

“These different approaches mask the underlying performance of many entities in the sector and make them difficult to compare,” Schollum wrote.

“We are concerned that this affects the ability of shareholders, Parliament and the public to assess the performance of the individual port companies and the sector as a whole.”

In the year to June 30, 2017, return on equity across the ports averaged just under 9 per cent, but ranged from less than 3 per cent to more than 25 per cent, with Schollum putting part of the variation down to different accounting methods.

Nine of the 12 port companies measured some asset classes at fair value, but across the nine the measures were not consistent. “These differences have a significant effect on the return on equity reported.”

A lack of transparency meant it was harder for shareholders to assess the merits of capital investment, which totalled $290 million across the sector in 2016/17.

“Because of the different valuation approaches, it is difficult to form a view about whether this capital expenditure was a good use of shareholders’ funds.”

Schollum urged the port companies to review the way assets were valued.

“We consider that it is more appropriate to use fair value and to assess the fair value based on the expected cash flows to be generated. This will provide the most useful financial information to stakeholders, should help inform investment decisions, and will make company and sector performance more transparent.”

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