Y1 Milk Reconcilation Statement

This workpaper reconciles the income derived from milk during the year. It is particularly useful where the client’s balance date differs to the milk season.

Recommended supporting documents: Milk production supplier statements, dividend payments statements

Fonterra season reconciliation

This section enables the apportionment of the milk production revenue and deduction where sharemilking arrangements are in place.

Where there is no sharemilking arrangement in place, enter 100% in all four cells.

Share of milk for this taxpayer % - enter the percentage of the milk production revenue that relates to this client’s agreed percentage.
Demerit % - enter the percentage of the demerits this client will be liable for as per their sharemilking agreement.
Volume adjustment - enter the percentage of the volume adjustments this client will be liable for as per their sharemilking agreement.
Capacity adjustment % - enter the percentage of the capacity adjustment this client will be liable for as per their sharemilking agreement.

Suppliers Statements

Using the suppliers statements, enter the year to date details in the table on rows 15 to 25.

Season protein – from the May Supplier Statement, enter the year to date base protein supplied in kilograms in cell E15.
Milkfat – from the May Supplier Statement, enter the year to date base milkfat supplied in kilograms in cell E16.
Total farm income as per summary Y.E. 31 May – from the May Supplier Statement, enter the total farm $ value from the milk season to date summary in cell D17.
Plus June/July current year – where the milk season (June to May) and your client’s balance date differ, enter details of income received after May but before balance date in Cell D19.

This adjustment section can also be used to account for further payments which relate to the current season that are paid up until the end of October. Confirm with the client manager or partner if your firm policy is to make this adjustment.
Less June/July last year – where an adjustment was made in prior year to account for milk receipts after May, enter the value of the adjustment in cell D20. This will reverse the prior year adjustment that was included in cell D19 of the prior year workpaper.
Net total farm $ - the total receipts received as a result of milk production during the year before any deductions or adjustments are taken into account.
Demerits – from the supplier statement, enter the total amount of demerits incurred during the year in cell D22.

Enter the value as it appears on the statement, i.e. enter negative values as a negative number and positive values as a positive number.
Volume adjustment – from the supplier statement, enter the total amount of volume adjustments made during the year in cell D23.

Enter the value as it appears on the statement, i.e. enter negative values as a negative number and positive values as a positive number.
Capacity adjustment – from the supplier statement, enter the total amount of capacity adjustments made into cell D24.

Enter the value as it appears on the statement, i.e. enter negative values as a negative number and positive values as a positive number.
Total farm milk production including retros – represents the total income generated from milk production during the year.

Adjustment for sharemilking arrangements

The table in row 27 to 30 apportions the milk receipts and corresponding deductions and adjustments as per the percentages entered at the top of the workpaper.

Check that the share of the milk receipts and adjustments correspond with the sharemilking arrangement.
Where adjustments are not being made correctly, ensure the appropriate percentages have been included in rows 10 to 13.

Dividend related payment

This section allows for Dividend Related Payment Adjustments. This compensation mechanism is becoming less and less common, particularly where the sharemilker arrangement has been renegotiated post the change to Fonterra’s payment structure.

Farm owners – enter the value of the dividend related payment adjustment as a positive value – this will deduct the sharemilker’s share of the dividend from the farm owner’s share of the milk production income.
Sharemilkers – enter the value of the dividend related payment adjustment as a negative value – this will add the sharemilker’s share of the dividend to the sharemilker’s share of the milk production income.

Journals required

Where there is a variance between the workpaper balance and the general ledger balance, create a journal to record transactions that have not already been accounted for. See Create a journal automatically.

If required, create a manual journal.