Annual Enterprise Survey: 2006 financial year (provisional)

Introduction

The Annual Enterprise Survey (AES) is New Zealand’s most comprehensive source of financial statistics and provides annual financial performance and financial position information about industry groups operating within New Zealand. The industries covered in the survey contribute approximately 90 percent of New Zealand’s gross domestic product (GDP). AES is an important source of data for GDP as it is used to calculate detailed annual National Accounts.

Data used in this survey is collected from a number of sources, including:

• Administrative data from Inland Revenue (IR 10)
• Central government data from the Treasury's Crown Financial Information System (CFIS)
• Superannuation data from the New Zealand Companies Office (Ministry of Economic Development)
• Local government data from Statistics New Zealand's Local Authority Statistics
• A sample survey of business financial data representing the rest of the population.

Statistics New Zealand would like to thank respondents for their contribution to this survey. We also acknowledge the cooperation of Inland Revenue, the Treasury and the New Zealand Companies Office for providing administrative data that enables us to lower the size of the postal sample and thereby reduce compliance costs on the business community.

Overview of results

Total income for all industries for the 2006 financial year increased by 6.5 percent to $492,152 million. All 16 industry groups recorded increases in income in 2006.
Surplus before income tax, which is total income less total expenditure (excluding salaries and wages to working proprietors) across all industries is $53,181 million. This is an increase of $4,208 million from the 2005 financial year.
Salaries and wages paid to employees across all industries increased by $4,659 million (7.4 percent) in the 2006 financial year. This compares to increases of 8.1% in 2005, and 8.5% in 2004.
Total expenditure for the 2006 financial year increased by 6.2 percent to $444,956 million.
The level of investment in fixed assets grew by 12.0 percent to $43,071 million in the 2006 financial year. This is similar to the 12.1 percent increase which was recorded in 2005.
The current ratio, which measures current assets to current liabilities, is 82.1 percent in the 2006 financial year. This is down on the 83.2 percent recorded in 2005.

Detailed industry data availability

Data collected in the AES is available at various levels of detail. The tables included in this release are at ANZSIC division level (16 industries), and a further disaggregation is contained in the supplementary tables, available on the Statistics New Zealand website (40 industries). A finer level is available on request, subject to confidentiality and quality constraints. Depending on the detail and type of analysis required, there are a number of available options. Statistics New Zealand will advise on the most appropriate data to suit a user's needs. The focus of the remainder of this commentary is on providing information to help users understand more about the AES and how it can be used.

Data on the construction industry provides an example of the range of information available.

The construction industry (Division E) in 2006 has continued its trend of increasing its sales of goods and services, and its surplus before income tax. In the 2006 financial year the construction industry has shown a 12.4% increase in sales of goods and services and a 10.7% in surplus before income tax. These increases seen in 2006 were not as significant as that seen in 2005, when the industry experienced a 20.5% increase in sales of goods and services, and a 29.4% increase in operating surplus, which were the largest increases seen in this industry in the last eight years.

Salaries and wages paid to employees in the construction industry increased by $587 million (15%) in the 2006 financial year to $4,492 million. This was the largest percentage movement of all 16 divisions in 2006.

The construction industry had the highest return on total assets ratio out of all divisions measured in the Annual Enterprise Survey, with a ratio of 26.9 percent. 

Changes introduced in the Annual Enterprise Survey 2006

There have been no significant changes to the Annual Enterprise Survey in 2006. However, there are a few events which have impacted tables in this release, which should be noted by users of this data.

Factors effecting time-series in the Annual Enterprise Survey 2006

Several large one-off restructuring transactions have been netted out in the mining industry (ANZSIC Division B) to preserve respondent confidentiality.

Certain financial position variables in the cultural and recreational services industry (ANZSIC Division P) have been affected by large one-off transactions which have resulted from a known industry restructure. The impact of these transactions is such that the values shown for those variables cannot be compared with their equivalents in other years.

The introduction of new accounting standards

New Zealand International Financial Reporting Standards (NZIFRS) are the New Zealand equivalent to International Financial Reporting Standards (IFRS). These standards replace the Financial Reporting Standards (FRS) and Statements of Standard Accounting Practice (SSAP). NZIFRS are modified to suit New Zealand entities and include public benefit entities.

New Zealand entities have the choice of when to adopt the new standards. They can adopt them from their financial year beginning in 2005 but must adopt them in their financial year beginning 2007 at the latest. AES 2006 is the first year in which we have seen an impact as a result of entities adopting new standards, this impact is expected to spread across the 2007 and 2008 surveys as remaining entities adopt the new standards.

Part of the requirements to adopting the standards is for entities to show the effect of transition to NZIFRS. The AES has been able to use this information to identify some of the impact on financial results. The degree and nature of the impact varies across entities and industries. Footnotes have been added to the tables within this publication where there is significant known impact. The standards that have had the most impact are:

• NZ IFRS 3: Business combinations
• NZ IAS 32: Financial instruments: disclosure and presentation
• NZ IAS 38: Intangible assets
• NZ IAS 39: Financial instruments: recognition and measurement
• Various fair value measurements.

Further information for users

The AES provides a wealth of information that can assist in understanding the structure and performance of industries within the New Zealand economy. When using AES data, it is important to be aware that there are a number of design issues that may impact on results. These are discussed below.

1. Results in the AES can be affected by how companies structure themselves and therefore how they are captured and reported in the AES. Large corporates often set up separate entities to manage different divisions of their business. These divisions are classified based on their predominant activity. For example, their administration (head office) and their asset-owning activities may be classified to other business services (Division L) and financial asset investors (Division K), respectively. This may mean that a manufacturing unit will not have these support activities recorded in the manufacturing industry.

If a business is divided into different divisions, this may mean that the AES results will include inter-company flows between divisions. These flows are referred to as gross flows.
2. The time series of the AES can be affected by the restructuring of companies. For example, if the various divisions within a company were to be restructured or amalgamated, then the following would happen:

• The consolidation of these units would remove the gross flows and leave net flows.
• The industrial classification of the resulting unit would be determined by predominant activity and the activity in the other industries would disappear.
• Value-added would remain the same in both options.

The reverse may also occur, when restructuring results in net flows being represented in a gross form.

3. The all industries table is a summation of divisional tables and therefore includes gross flows.

4. AES results are presented for a nominal March year. However, the data is collected from businesses with balance dates between 1 October 2005 and 30 September 2006. Table 1.01 below lists, for each industry, the predominant balance date by total income.

Table 1.01

Predominant balance dates by industry

• Revaluations on sale should be accounted for and will impact on results if they are significant.
• Only net additions are recorded; total additions and disposals are not available.
• Net additions are calculated for total fixed assets and then apportioned by closing book values of each asset type.

6. Statistics New Zealand has a legal obligation to protect companies' privacy and industry-sensitive information. It is for this reason that all tables released have confidentiality rules applied to protect the information supplied by an individual company. Once all confidential financial items have been identified, further items are suppressed to complete the protection of the confidential value.

Use of Annual Enterprise Survey data

In addition to its use in the National Accounts, the AES is also a data source for a number of other existing and upcoming Statistics New Zealand outputs, including:

• Longitudinal Research of Business Dynamics project
• Non-profit Satellite Account
• Business Price Indexes

Since the last redesign of AES, there has been increased demand for non-standard output from users. Statistics New Zealand is providing more input into research surrounding these requests. Examples include:

• The Reserve Bank of New Zealand's use of financial position data in its Financial Stability Report
• The Centre for Advanced Engineering has established a set of national key performance indicators (KPIs) for the construction industry, one of which is a profitability indicator for which AES data is used
• Ad hoc requests from other government departments such as the Ministry of Economic Development
• Requests by turnover bands, which can add significant analytical value and are a popular request
• Requests from businesses for financial data to gauge their performance against industry averages
• Value-added per employee count, and turnover per employee count.

Note that any release of information is subject to confidentiality and may have caveats placed on the data.

Future enhancements

New industrial classification for 2007

This will be the last publication produced based on the Australia New Zealand Standard Industrial Classification (ANZSIC) 1996.The Annual Enterprise Survey 2007 publication, which will be released in October 2008, will be published using an updated version of the ANZSIC classification (ANZSIC 2006) that replaces the ANZSIC 1996. The AES 2007 featuring the new classification, will be published along with backcast values for AES 2006 and AES 2005.

The development of a new version of ANZSIC has been driven by changes in the structure, composition and organisation of industrial and business activities in Australia and New Zealand. Significant technological changes since ANZSIC 1996 was developed have affected the way industry and businesses operate. In addition, industries undertaking new activities have emerged, requiring a review of ANZSIC 1996 and the development of a more contemporary version of the classification to better reflect the new economy. Further information please to the description on our website linked below: 
http://www.stats.govt.nz/statistical-methods/classifications/anzsic-2006-manual.htm.  

Review of annual financial statistics

The AES was last redeveloped in 1999 largely to meet requirements for national accounting purposes. Statistics New Zealand is conducting a review of the survey against current and future user needs. Included in this review are methods for improving data quality and business processes and options for reducing respondent load through increased use of administrative data.

Previous consultations with users have identified a demand for the following:

• The ability to measure the performance of sub-populations of interest, for example, non-profit institutions
• Longitudinal micro-data analysis of financial data
• Data integration with other Statistics New Zealand datasets, such as Balance of Payments
• A sample design that supports the measurement of financial position data by industry.

For more information on this review contact Emma Doets: info@stats.govt.nz.

For technical information contact:
Ian Tinkler or Nick Cox
Christchurch 03 964 8700
Email: info@stats.govt.nz.