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:
TRANSFER BETWEEN
THE REVALUATION
RESERVE AND
THE PROFIT
AND LOSS
ACCOUNT
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:
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.
FUTURE CONTRACTS
WITH HM TREASURY
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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