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New Zealand issues third package of exposure drafts towards enacting its new differential reporting regime

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03 Dec 2012

The New Zealand External Reporting Board (XRB) and the New Zealand Accounting Standards Board (NZASB) have published a third package of exposure drafts designed to implement the revised New Zealand Accounting Standards Framework. This package of proposals would result in the optional use of 'simple format reporting standards' for not-for-profit entities based on accrual accounting (linked to the proposed adoption of IPSAS), or cash accounting, depending on meeting particular criteria.

The following types of entities would be eligible to apply each tier:

  • Tier 3 - Non-publicly accountable (as defined) with expenses that are less NZ$2 million, and which elect to be in Tier 3
  • Tier 4 - Entities allowed by law to use cash accounting, and which elect to be in Tier 4.

Entities that do not elect to be in these tiers would apply the proposed 'Public Benefit Entity (PBE) Standards', which themselves would be based on International Public Sector Accounting Standards (IPSAS), with some modifications.

The exposure drafts outline the reporting requirements for each tier, introduce simplifications in recognition and measurement requirements, and are designed to be written  in simplified language that is not overly technical.  As an illustration: the accrual accounting exposure draft outlines common categories of transactions and proposes guidance on when such transactions would be recognised.

The package also contains exposure drafts of optional templates and associated guidance notes for simple format reporting by Tier 3 and Tier 4 not-for-profit entities.

The XRB and NZASB expect to issue two further packages of exposure drafts in the coming months: one dealing with the 'simple format reporting standards' for public sector public benefit entities, and a revised set of PBE Standards that will apply to both public sector and not-for-profit 'Tier 1' and 'Tier 2' public benefit entities. 'Tier 2' entities would benefit from a 'reduced disclosure regime' but otherwise apply the recognition and measurement requirements of PBE Standards.

Completion of the various public benefit entity phases of the overall framework project would result in only New Zealand for-profit entities with standards that are compliant with, or based on, IFRS.

The third package of exposure drafts is open for comment until 28 June 2013.  Click for more information (link to XRB website).

Update: Subsequent to the issue of these exposure drafts, the XRB published a report (link to XRB website) from its NFP Reporting Entity Working Group. The working group’s suggestions will be considered by the NZASB as part of its enhancement of Tier 1 and Tier 2 PBE Standards to make them more applicable to the NFP sector.

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