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New Zealand exposure drafts propose IPSAS adoption for certain public sector entities

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28 Jun 2012

The New Zealand External Reporting Board (XRB) and the New Zealand Accounting Standards Board (NZASB) have issued for comment a set of over 40 Exposure Drafts that propose to operationalise the new Accounting Standards Framework as it applies to Tier 1 and Tier 2 'Public Sector Public Benefit Entities' (PS PBEs, essentially public sector entities without a profit motive). The new framework is based on International Public Sector Accounting Standards (IPSAS).

Following proposals for for-profit entities, the suite of exposure drafts represents the second stage of the overall new Accounting Standards Framework for New Zealand which is being gradually implemented for various categories of entities in New Zealand with the approval of the New Zealand Minister for Commerce.

This stage applies to public sector 'public benefit entities' (PBEs), which are defined as "reporting entities whose primary objective is to provide goods or services for community or social benefit and where any equity has been provided with a view to supporting that primary objective rather than for a financial return to equity holders."

The proposals are based on IPSAS issued by the International Public Sector Accounting Standards Board (IPSASB), but with some modifications made.  These modifications include such items as:

  • Reflecting New Zealand regulatory requirements
  • Requiring a statement of compliance with the New Zealand PBE standards, rather than with IPSAS (the latter being unlikely due to the amendments made)
  • Some measurement differences, e.g. certain inventories are required to be measured at cost, adjusted when applicable for any loss of service potential (rather than at the lower of cost and current replacement cost); certain heritage assets are required to be recognised as property, plant and equipment or intangible assets; removing the 'temporary control' exemption from consolidation (and similar changes to the scope for associates and joint ventures)
  • Integration of additional Standards and Interpretations, or guidance from other standards (mostly equivalent to IFRSs), on topics not covered in IPSAS, e.g. business combinations, income taxes, insurance contracts, interim financial reporting, interpretations on lease accounting, testing of goodwill and impairment
  • Specific proposals on how entities should transition to the new requirements
  • The inclusion of additional disclosures and guidance, and removal of some guidance not considered relevant in the New Zealand context.

The proposals have been developed primarily with public sector PBEs (as defined) in mind.  Another version of the PBE Standards (and associated 'Reduced Disclosure Requirements') that specifically addresses not-for-profit (NFP) PBE accounting issues will be issued as a separate ED in mid-2013 as part of 'Stage 3' of the proposals.

Submissions on the proposals are due by Friday 14 December 2012.  Click for more information (link to XRB website).

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