Administration and expenditure of the Chancellor's departments, 2008-09 - Treasury Contents

Supplementary written evidence submitted by Royal Mint

  I am writing in response to the letter I received from Mr Michael Fallon MP, Chairman of the Treasury Sub-Committee on 12 November 2009, requesting clarification on two points, following my appearance before the Treasury Sub-Committee. I set out below my response to the matters raised:


  The vast majority of the £8 million transfer (£7.806 million to be more precise) between Revaluation Reserve and the Profit and Loss Account related to a change in accounting policy, to record what is referred to internally as our "Base Stock" of metals on a FIFO basis, as opposed to a historical cost basis, as was previously the case.

  Prior to last year, the price movements in metal of our "Base Stock" were simply reflected by an increase or a decrease in the revaluation reserve. So, in accounting terms, an increase in the value was treated as:

    Dr Inventory

    Cr Revaluation Reserve

  and vice versa in the case of a decrease in value.

  The prior method was inconsistent with UKGAAP, which is the basis for Government Financial Reporting. To be clear, this adjustment did not impact the reported profitability of the Royal Mint. It was simply a transfer between two accounts within Government Funds, to reflect the fact that the prior treatment was no longer being adopted. There is no physical transfer of money either. This is simply a Financial Reporting Issue, and we do not anticipate any transfers of a similar nature next year.


  The Royal Mint and HMT have negotiated an arms length contract to supply UK coinage to HMT for a five year initial period followed by a three year termination period. The contract will therefore expire no earlier than 2018. The contract also provides for the production and sale of Commemorative coins, for which HMT are paid a Royalty.

  The contract also provides for general service and advice on coinage and coinage related matters such as design, counterfeiting and security.

  The value of the contract to the Royal Mint depends on the volume and mix of coins required by the UK economy over the life of the contract, and the value of metal prices over the period, as well as our ability to sell Commemorative Coins. In total this continues to be the most significant contract that the Royal Mint has, representing C.20% of the Circulating Coin business contribution and the vast majority of the Commemorative Coin business contribution.

20 November 2009

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