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available. been recognised in the Share Premium Reserve.
( j ) Sales ( I ) Changes in Accounting Policies
Group sales represent sales to outside parties by There have been no material changes in
the trading subsidiaries and do not include divi- accounting policies during the year. All policies
dends, interest or other investment income. The have been applied on a consistent basis with
amount of investment income is disclosed in previous years.




Brierley Investments Limited
Note 16 to these ¬nancial statements.
(m) Comparative Figures
(k) Bonus Shares in Lieu of Dividends Certain comparative ¬gures have been restated
The premium on bonus shares issued in lieu of to re¬‚ect changes in presentation.


12 SEGMENTED ASSETS AND SALES
Consolidated
1995 1994
Assets Sales Assets Sales
$000 $000 $000
$000
..................................................................................................................................................
By Activity Segment:
Energy and Oil Royalties 274,335 ” 287,990 ”
Engineering, Construction and
Property 559,591 9,504 572,387 180,987
Food and Beverages 203,419 153,480 326,878 376,658
Hotels 4,540,850 600,406 4,865,027 590,055
Investment 1,059,496 ” 1,233,406 ”
Manufacturing 309,582 326,114 373,711 157,055
Transport 752,496 136,953 559,466 152,309
Wholesale and Retail 215,929 849,788 11,688 14,315
Other 630,454 500,080 590,013 113,881
8,546,152 2,576,325 8,820,566 1,585,260
Cash and Marketable Securities 874,312 ” 327,824 ”
$9,420,464 $2,576,325 $9,148,390 $1,585,260
By Geographic Segment:
New Zealand 1,848,934 481,096 1,965,868 724,555
Australia 1,151,317 1,224,339 977,473 ”
Asia 294,514 ” 222,658 151,028
United States 612,556 270,484 698,535 119,622
United Kingdom 4,638,831 600,406 4,956,032 590,055
8,546,152 2,576,325 8,820,566 1,585,260
Cash and Marketable Securities 874,312 ” 327,824 ”
$9,420,464 $2,576,325 $9,148,390 $1,585,260

The increase in sales in the current year is principally due to the acquisition of Vox Holdings Pty Limited.
780 Case: Brierley Investments Limited




50 Part 4 Additional Cases




14 TAXATION
Consolidated
1995 1994
$000 $000
......................................................................................................................
Net Operating Surplus 381,356 378,162
Taxation at 33% 125,847 124,793
Brierley Investments Limited




Adjusted by the Tax Effect of:
Non-assessable Dividend Income (27,918) (3,660)
Other Non-assessable Revenues (17,001) (33,055)
Non-deductible Expenses 109,636 76,257
Deductible Items Carried Forward/(Brought Forward) (187,283) (160,162)
Income at Other Tax Rates (4,546) (1,765)
Under/(Over) Provisions in Prior Years (1,470) (9,870)
Other 4,618 4,691
$1,883 $(2,771)
Taxation Charged/(Credited)”New Zealand 3,802 6,981
Taxation Charged(Credited)”Other Countries (1,919) (9,752
$1,883 $(2,771)
Current Taxation 4,050 (2,443)
Deferred Taxation (2,167) (328)
$1,883 $ (2,771)
Deferred Taxation
Opening Balance (2,553) 1,501
Deferred Taxation in Pro¬t and Loss Account (2,167) (328)
Other Movements 1,248 (3,726)
$(3,472) $(2,553)

The Group currently has tax losses available to carry forward and offset against future
assessable income in several jurisdictions. The tax bene¬t of these losses is only recog-
nised to the extent of deferred tax liabilities.
Revenue authorities are currently conducting investigations into the Group which makes
the accurate quanti¬cation of the unrecognised tax bene¬t of the tax losses uncertain. The
Group considers that there are suf¬cient tax losses to offset both adjustments arising as a
result of these investigations and deferred tax liabilities.

Imputation Credits
Parent Company 4,560 4,560
Subsidiary Companies 47,778 15,863
Minority Interest Share in Subsidiary Companies (8,385) (12,233)
$43,953 $8,190
781
Case: Brierley Investments Limited




51
Part 4 Additional Cases




16 PROFIT ATTRIBUTABLE TO THE GROUP

Consolidated
Operating Net 1995 1994
Surplus Interest Total Total
By Activity Segment: $000 $000 $000 $000
...................................................................................................................................................

Trading Activities




Brierley Investments Limited
Energy and Oil Royalties 33,342 ” 33,342 120,597
Engineering, Construction and Property 7,867 (627) 7,240 9,363
Food and Beverages 24,853 (8,597) 16,256 20,171
Forestry ” ” ” 27,982
Hotels 192,281 (100,449) 91,832 41,534
Manufacturing 24,971 (7,982) 16,989 19,133
Transport 129,058 (4,230) 124,828 87,179
Wholesale and Retail (7,938) 1,315 (6,623) 768
Other 20,923 (15,042) 5,881 (8,552)
Trading Contribution 425,357 (135,612) 289,745 318,175
Taxation and Minority Interests (41,674) (35,080)
Net Trading Contribution 248,071 283,095

Investment Activities
Dividend Income 92,711 7,933
Surplus on Sale of Assets and
Investments 209,501 269,663
Other Income 13,825 5,252
Investment Contribution 316,037 282,848
Taxation and Minority Interests 1,005 (1,010)
Net Investment Contribution 317,042 281,838

By Geographic Segment: New United United
Zealand Australia Asia States Kingdom
Trading Contribution 172,253 34,962 13,665 (22,967) 91,832 289,745 318,175
Investment Contribution 246,094 34,933 15,088 1,838 18,084 316,037 282,848
Total Contribution 418,347 69,895 28,753 (21,129) 109,916 605,782 601,023
Taxation and Minority Interests (40,669) (36,090)
Funding Costs and Overheads (133,343) (134,856
Pro¬t Attributable to the Group $431,770 $430,077

Trading Activities reflects the results of the trading subsidiary and associate companies. Investment Activities reflects the results of the respective
holding companies in New Zealand, Australia and Hong Kong.
782 Case: Brierley Investments Limited




52 Part 4 Additional Cases




AUDITORS™ REPORT

KPMG Peat Marwick
Chartered Accountants


AUDIT REPORT TO THE SHAREHOLDERS OF BRIERLEY INVESTMENTS LIMITED
Brierley Investments Limited




We have audited the ¬nancial statements on pages we considered necessary in order to provide us with
61 to 82. The ¬nancial statements provide informa- suf¬cient evidence to give reasonable assurance that
tion about the past ¬nancial performance and ¬nan- the ¬nancial statements are free from material mis-
cial position of the Company and Group as at 30 statements, whether caused by fraud or error. In
June 1995. This information is stated in accordance forming our opinion we also evaluated the overall
with the accounting policies set out on pages 65 and adequacy of the presentation of information in the
66. ¬nancial statements.
Other than in our capacity as auditors we have no
Directors™ Responsibilities relationship with or interests in the Company or any
The Directors are responsible for the preparation of of its Subsidiaries.
¬nancial statements which give a true and fair view
of the ¬nancial position of the Company and Group Unquali¬ed Opinion
as at 30 June 1995 and of the results of the Com-
We have obtained all the information and explana-
pany and the Group™s operations and cash ¬‚ows for
tions we have required.
the year ended 30 June 1995.
In our opinion:
Auditors™ Responsibilities • proper accounting records have been kept by the
It is our responsibility to express an independent Company as far as appears from our examina-
opinion on the ¬nancial statements presented by the tion of those records; and
Directors and report our opinion to you.
• the ¬nancial statements on pages 61 to 82:
Basis of Opinion ” comply with generally accepted accounting
An audit includes examining, on a test basis, evi- practice
dence relevant to the amounts and disclosures in the ” give a true and fair view of the ¬nancial posi-
¬nancial statements. It also includes assessing: tion of the Company and Group as at 30 June
• the signi¬cant estimates and judgements made 1995 and the results of the Company and the
by the Directors in the preparation of the ¬nan- Group™s operations and cash ¬‚ows for the
cial statements; and year ended on that date.
• whether the accounting policies are appropriate
Our audit was completed on 6 September 1995
to the Company and Group™s circumstances,
and our unquali¬ed opinion is expressed as at that
consistently applied and adequately disclosed.
date.
We conducted our audit in accordance with gener-
ally accepted auditing standards in New Zealand.
KPMG Peat Marwick
We planned and performed our audit so as to
obtain all the information and explanations which Wellington, New Zealand
The City of New York




I
n July 1996 Moody™s Investors Service was reviewing the ratings for
the general obligation bonds of the City of New York. With a population of approximate-
ly 7.3 million, New York was the largest city in the United States and an international
business and cultural center. Its key industries included banking, securities, life insur-
ance, communications, publishing, printing, fashion design, apparel manufacture, retail-
ing, and construction. In addition, the City was the leading tourist destination in the
United States.
New York™s economy was closely linked to national economic events. Thus, in the
early 1990s, it experienced a decline in employment and real gross product. Growth
City of New picked up in the period 1992 to 1994, but slowed after 1995. The City™s general obliga-
York tion bonds were rated Baa1, the lowest rated investment grade bonds.
Moody™s review included an analysis of the challenges facing U.S. municipalities
generally, as well as an examination of the ¬nancial performance of New York. At the
completion of the review, Moody™s had to decide whether to upgrade, downgrade, or
maintain the City™s current rating.


FINANCIAL CHALLENGES FOR MUNICIPALITIES
Municipal governments typically provided a range of services to local communities, in-
cluding legislative, executive, and judicial functions. They also offered a range of other
services, such as primary and secondary education, public safety (police and ¬re), public
works (streets, sewers, and sanitation), public welfare, public transportation, airports,
utilities (water and power), colleges, hospitals, corrections facilities, community devel-
opment, and parks and recreation facilities. To fund these activities, municipal govern-
ments received support from state and federal governments, property and other forms of
taxes, charges for various services, and utility revenues.
Municipal governments grew dramatically after World War II, from 2.8 million em-
ployees in 1945 to 7.4 million in 1970 and 10 million in 1987. This level of employment
exceeded that for the combined state and federal civilian governments.
During the 1990s municipalities faced a number of ¬nancial challenges, including de-
teriorating infrastructure, stagnant revenues accompanied by increasing cost structures,
.........................................................................................................................
Professor Paul M. Healy prepared this case as the basis for class discussion rather than to illustrate either effective
or ineffective handling of an administrative situation. The case has bene¬ted from the comments of Jack Miller
and Elizabeth Krahmer. Copyright © 1998 by the President and Fellows of Harvard College. Harvard Business
School case 9-198-030.

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