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New Zealand

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Financial reporting framework in New Zealand

Standard setting

In New Zealand, accounting standards are issued by the New Zealand Accounting Standards Board (NZASB), a Committee of the External Reporting Board (XRB).  The XRB is an independent 'Crown Entity' established under New Zealand law, particularly the Financial Reporting Act 2013 (and its precursor, the Financial Reporting Act 1993).

Compliance with Accounting Standards developed by the New Zealand Accounting Standards Board (NZASB) and approved by the External Reporting Board (XRB) are mandated under the Financial Reporting Act 2013.  Accounting standards are 'disallowable instruments' under New Zealand legislative process.

Accounting standard framework

The New Zealand 'Accounting Standard Framework' establishes a differential reporting reporting framework that applies to three broad categories of entities:

  • For-profit entities
  • 'Public-benefit entities' (PBEs) that are public sector entities
  • 'Public-benefit entities' (PBEs) that are not-for-profit entities.

Entities in each category are further delineated into a number of 'tiers', depending on the nature and size of the entities, whether or not it has public accountability, and its governing legislation, regulations or other reporting mandate. A separate sub-set of accounting standards apply to each tier within each category.

Accounting standards for for-profit entities

Accounting standards for for-profit entities are based on International Financial Reporting Standards (IFRSs) and are referred to as 'New Zealand equivalents to International Financial Reporting Standards' (NZ-IFRSs). NZ-IFRSs are Standards and Interpretations developed by the New Zealand Accounting Standards Board (NZASB) and approved by the External Reporting Board (XRB), comprising New Zealand equivalents to:

  • International Financial Reporting Standards
  • International Accounting Standards
  • International Interpretations.

The XRB has a "adopting international standards" strategy, and accordingly, the NZASB would normally issue NZ-IFRSs in respect of each pronouncement made by the International Accounting Standards Board (IASB).

There are a number of differences between NZ-IFRSs and IFRSs:

  • wording has been amended to accommodate the New Zealand legislative environment, for example, references to the Financial Reporting Act 2013
  • additional or amended accounting recognition and measurement requirements for public benefit entities (non-business entities)
  • in some cases NZ-IFRSs permit only one of a number of options available in the corresponding IFRS
  • additional disclosures
  • different effective dates
  • different transitional requirements
  • additional 'domestic' standards dealing with areas not dealt with under IFRSs, such as in relation to summary and prospective financial statements.

Eligible entities were able to apply NZ-IFRSs for periods beginning on or after 1 January 2005.  Mandatory compliance with NZ-IFRSs was required for annual periods beginning on or after 1 January 2007.

Compliance with IFRSs

Under NZ IAS 1 Presentation of Financial Statements (equivalent to IAS 1 Presentation of Financial Statements), an entity whose financial statements comply with IFRSs are required to make an explicit and unreserved statement of such compliance in the notes.  This statement would only be able to be made by a for-profit entity that applies 'Tier 1' NZ IFRSs.

 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.