The Government agency "tagged" Dunedin City Holdings Ltd (DCHL) accounts with criticism over the valuation.
On June 30 this year, following a stadium review, DCHL acquired 100% of the shares in Dunedin Venues Ltd and Dunedin Venues Management Ltd for $111.6 million and $1.6 million respectively; effectively buying the stadium.
Scott Tobin, of Audit NZ, signed off the Independent Auditor’s Report on DCHL, saying "our work was limited over the carrying value of [the] stadium assets in the group financial statement".
He offered a "qualified opinion", meaning the financial results were tagged with a criticism.
A Dunedin city councillor, who did not want to be identified, contacted the ODT yesterday, saying the then-imminent tagging of the financial result was discussed in the non-public "grey papers" part of a meeting of the council’s Audit and Risk sub-committee but claimed it was not adequately explained and "flew over the heads" of most of those present.
Auditor Mr Tobin said the DCHL group recorded the stadium assets using the carrying value in Dunedin Venues’ financial statements, totaling $185 million, as that company was a "public benefit entity" using non-commercial valuation.
"However, in consolidating Dunedin Venues into the for-profit [DCHL] group financial statements for the first time at June 30, 2016, we [Audit NZ] believe the [DCHL] group is required to initially record the stadium assets at carrying values that are supported by a valuation on a commercial basis" Mr Tobin said in his report.
When contacted yesterday DCHL chairman Graham Crombie was philosophical about the tagging and having defied Audit NZ.
When asked if he was prepared to "take the tagging criticism on the chin", he said, "Yes, certainly" — even if that meant taking another tagging next year from Audit NZ.
"It’s a stupid accounting issue, with no effect other than on the audit opinion," he said.
The crux of the matter was stadium seller Dunedin Venues was a "public benefit" company while buyer DCHL was a "for-profit" entity, whose parent the council was a "public benefit" entity.
He confirmed it was possible the stadium’s value could again appear next year as a carry value, less some depreciation, but DCHL remained "in discussions" with Audit NZ about it.
In an earlier statement by Mr Crombie explaining the auditor’s tagging, a decision was made not to have a commercial valuation done.
"The [DCHL] group was required to initially record the stadium assets at carrying values that are supported by a valuation on a commercial basis," he said.
A commercial valuation of the stadium assets could be "materially lower" than the value recorded in the DCHL group’s statement.
"The stadium is a unique asset with no active [sales] market to make a reasonable assessment of fair value between a willing buyer and seller," Mr Crombie said.
While it was possible to identify "certain cash-flows" from stadium assets, they did not necessarily represent commercial cash-flows for the purpose of undertaking a discounted cash-flow calculation, to assess fair value, he said.
That meant establishing a commercial value involved "significant assumptions and estimates which are highly uncertain"; meaning DCHL couldn’t determine the commercial value of the stadium, Mr Crombie said.
Other than the stadium valuation, Mr Tobin noted DCHL financial statements "present fairly" its financial position, performance and cash flows and complied with New Zealand and international standards.
● Mr Crombie did not attend the Audit and Risk sub-committee meeting.
His absence was criticised by the unidentified city councillor.
