Download Application Review Certificate for a Growth Grant

Application Review Certificate for a Growth Grant
Review of Research and Development Intensity (“RDI”) Ratio
Guidelines - RDI
The R&D Expenditure and Operating Revenue, as set out in the respective Statement of Financial
Performance, is to be used to calculate a Research & Development Intensity (“RDI”) ratio, and to be eligible
for a Growth Grant (“GG”), an applicant must have had:
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at least $300,000 in eligible R&D expenditure sourced from non-government funds in each of the two
most recent years; and
eligible R&D expenditure of at least 1.5% of revenues in each of the two most recent years; and
Under the terms of the R&D Grant, R&D Expenditure and Operating Revenue, as set out in the Statement of
Financial Performance and included in the calculation of the RDI ratio, is required to be consistent with
relevant New Zealand Equivalent International Accounting Standards (“NZ IAS”), notably:
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R&D Expenditure is required to be consistent with NZ IAS 38 and NZ FRS 13; and
Operating Revenue is required to be consistent with NZ IAS 18.
For the purpose of calculating the RDI, Operating Revenue is defined as all categories of Revenue as per NZ
IAS 18 paragraph 35(b), excluding the sale of plant property and equipment, interest and dividends.
Link to copy of NZ IAS 18: www.google.co.nz/?gws_rd=cr#fp=1613f5024054304d&q=nz+ias+38
Requirement for a Review Certificate
Unaudited Financial Statements provided in support of an R&D Grant application are required to be
accompanied by the following Application Review Certificate.
This Review Certificate also is required where a business applies NZ IFRS Differential Reporting and has not
disclosed its R&D Expenditure as per IAS 38.
Successful GG recipients may also be required to have completed an annual Review Certificate.
The Review Certificate should be completed by an appropriately qualified Public Practicing Chartered
Accountant, who is independent of the Applicant.
Link to NZ Chartered Accountants: www.nzica.com
If the business is part of a larger group, the RDI calculation is to be undertaken at the holding business level or
at the point which the business has strategic and financial autonomy. The business must have at least one
director who is resident in New Zealand and at least one of the following must be true: the business is
incorporated in New Zealand; the business has a centre of management in New Zealand; or the business has
a head office in New Zealand.
Definition of Eligible Research and Development Expenditures for R&D
Growth Grant
Eligible R&D expenditure is defined as those meeting the New Zealand Equivalent to International Account
Standard 38 (NZ IAS 38) definition of research and development and expensed under the standard.
The NZ IAS 38 definitions of R&D are:

Research is original and planned investigation undertaken with the prospect of gaining new scientific
or technical knowledge and understanding.
Application Review Certificate - September 2013

Development is the application of research findings or other knowledge to a plan or design for the
production of new or substantially improved materials, devices, products, processes, systems or
services before the start of commercial production or use.
Clarifying Principle
If necessary, when seeking to distinguish R&D from non R&D, the further advice provided by the New Zealand
Financial Reporting Standard 13 (NZ FRS 13) should be applied:

R&D is distinguished from non-R&D by the presence or absence of an appreciable element of
innovation. If the activity departs from routine and breaks new ground it is normally R&D; if it follows
an established pattern it is normally not R&D.
General Exclusions
The following types of expenditure are not eligible for the Growth Grants initiative:

Any expenditure that is capitalised as an intangible asset under NZ IAS 38

R&D undertaken outside of New Zealand

R&D funded through an enforceable levy

Enforceable levies for R&D

Any R&D funded by a grant or other payment provided by a business that is not part of the same
consolidated group of companies as the applicant. However, expensed funding for R&D contracted
out by the applicant to another business is eligible.
Specific exclusions
To provide further clarification on the definition, some specific activities are excluded. This list is not
exhaustive. Activities not specifically excluded are only eligible provided they meet all other features of the
definition. Specific activities excluded are:

Engineering follow-through in an early phase of commercial production.

Activities related to the construction, relocation, rearrangement or start-up of facilities or equipment
other than facilities or equipment whose sole use is for the businesses’ R&D.

Routine, on-going efforts to refine, enrich, or otherwise improve on the qualities of an existing product
or process, or to make cosmetic or stylistic changes to it.

Routine design of tools, jigs, moulds and dies, or seasonal or other periodic design changes to
existing products. However, expensed design activities involved in developing a new product or
process are eligible.

Activities involved in ensuring that existing products or processes comply with statutory requirements
or standards, and quality control, routine testing or trouble-shooting during commercial production.
However, testing in search of significant product or process improvements is eligible.

Adapting an existing product or process to a particular customer’s need or site.

Supporting, de-bugging or modifying computer software.

Market research or surveys, market testing, market development or sales promotion, management
studies, efficiency surveys or the routine collection of information.

Any costs involved in protecting, licensing, selling or defending intellectual property or of acquiring or
using external intangible assets (e.g. patent licences).

Interest expenses or lease payments of any kind, and any overheads that are not closely linked to
R&D activities. Eligible overheads include finance, personnel, training, travel, administration and
library activities associated with R&D, and reasonable R&D-related transportation, storage, cleaning,
repair, maintenance, and security activities.

Prospecting or exploring for minerals, petroleum, natural gas or geothermal energy.

Research in the social sciences, arts or humanities.
Entities that conduct or commission R&D activities mainly for other persons or businesses are likely to be
ineligible due to insufficient eligible expenditures.
Source: Ministerial Direction
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Application Review Certificate - September 2013
Application Review Certificate for a Growth Grant
Research and Development Expenditure
Business Name:
Click here to enter text.
Address:
Click here to enter text.
Callaghan Innovation grant application
reference (if known):
Click here to enter text.
Review of Operating Revenue and Research and Development Expenditure
We have reviewed the accompanying Operating Revenue and Eligible Research & Development Expenditure
Schedule (the Schedule) for the above named business and its subsidiaries for the past two years [insert financial
years and end date in Table 1].
Table 1: Financial Years
Financial Year one
(FY1)
Click here to enter
text.
Financial Year two
(FY2)
Click here to enter
text.
End date
Click here to enter
text.
This report has been prepared solely for your exclusive use and solely for the purpose of assisting you with your
grant application. However we understand that a copy of this report has been requested by Callaghan Innovation
solely for the purpose of supporting claims in respect of the application for a Growth Grant (“GG”). We agree that a
copy of this report may be provided to Callaghan Innovation in connection with this purpose but, we do not accept
any duty, liability or responsibility to Callaghan Innovation in relation to this report. This report is not to be used for
any other purpose, recited or referred to in any document, copied or made available (in whole or in part) to any other
person without our prior written consent. We accept or assume no duty, responsibility or liability to any party, other
than you, in connection with this report or this engagement including without limitation, liability for negligence.
Responsibilities
The above named business is responsible for the preparation of the Schedule.
Independent Accountant’s Responsibilities
We are responsible for reviewing the Schedule as presented by the business in order to report to you whether, in our
opinion and on the basis of the procedures performed by us, anything has come to our attention that would indicate
that the Operating Revenue and Eligible R & D Expenditure presented in the Schedule does not fairly present the
balances in accordance with the accounting policies as set out in the Schedule.
We understand that Operating Revenue under the terms of the GG, eligible and R&D Expenditure is recognised as
an expense in the Statement of Financial Performance as contemplated by the New Zealand Equivalent International
Accounting Standard 38 and NZ FRS 13, and to be eligible for GG, an applicant must be at least the defined RDI
threshold ratio of 1.5%.
Basis of Opinion
A review is limited primarily to enquiries of company personnel and analytical review procedures applied to the
financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we
do not express an audit opinion.
We have reviewed the Operating Revenue and Eligible R & D Expenditure presented in the Schedule in accordance
with the Review Engagement Standards issued in New Zealand. Other than the provision of services listed below, we
have no relationship with, or interests in the above named business or any of its subsidiaries.
Application Review Certificate - September 2013
Other services provided: Click here
to enter text.
Opinion
Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the
Eligible R & D Expenditure for the financial years in Table 1 does not present fairly the balances in accordance with
the accounting policies as set out in the Schedule.
In addition we also undertook a review of internal controls as related to R&D Expenditure, which specifically involved
the following procedures:
Please insert details and findings of procedures undertaken. The scope of this work should be designed to
provide reasonable comfort that the business operated effective internal controls related to Revenue recognition
and the recording of R&D Expenditure during the reported period. The scope of this work should be designed
with reference to an appropriate level of materiality.
Click here to enter text.
Our review was completed on [insert date] and our review opinion is expressed as at that date.
CHARTERED ACCOUNTANT
Organisation name:
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Contact name:
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Address:
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Contact telephone:
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Contact email:
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Date:
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Application Review Certificate Schedule:
Research and Development Intensity and Research and Development
Expenditure
$000
Operating revenue
Eligible research and development
expenditure
RDI%
FY1
[0,000]
[0,000]
FY2
[0,000]
[0,000]
Total
[0,000]
[0,000]
[0.0%]
[0.0%]
[0.0%]
$000
R&D Expenditure
Less Other R&D grants (as expensed
above)
Less General Exclusions
Less Special Exclusions
Eligible R&D Expenditure
FY1
[0,000]
[0,000]
FY2
[0,000]
[0,000]
Total
[0,000]
[0,000]
[0,000]
[0,000]
[0,000]
[0,000]
[0,000]
[0,000]
[0,000]
[0,000]
[0,000]
Accounting policies:
Click here to enter text.
Research and Development Expenditure
Click here to enter text.
[Please include relevant policy here or refer to the relevant page in any accompanying financial statements]
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