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New Zealand issues new standards based on IPSAS for public sector entities

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23 May 2013

The New Zealand External Reporting Board (XRB) and the New Zealand Accounting Standards Board (NZASB) have issued a package of new pronouncements that will apply to New Zealand public sector 'public benefit entities' (PBEs, essentially not for profit entities) from 1 July 2014. The new standards are largely based on International Public Sector Accounting Standards (IPSAS) published by the International Public Sector Accounting Standards Board (IPSASB).

The overall package of pronouncements issued consists of:

  • Standard XRB A1 Accounting Standards Framework (For-profit Entities plus Public Sector Public Benefit Entities Update) that will apply to all reporting entities and sets the requirements for which entities apply which set of pronouncements under New Zealand's new Accounting Standards Framework issued by the XRB Board in April 2012
  • A suite of 39 standards comprising both:
    • PBE Standards, applied by 'tier 1' PBE entities, which are those with 'public accountability' based on the IASB's definition or which are 'large' as defined. These entities are not eligible to adopt any of the disclosure concessions available for 'tier 2' entities
    • PBE Standards 'Reduced Disclosure Regime' (PBE Standards RDR), applied by 'tier 2' entities, which are those that do not meet the criteria to be a 'tier 1' entity, and which additionally are not eligible to apply the 'transitional' requirements for certain (mostly smaller) entities that qualify for classification as 'tier 3' and 'tier 4' entities. 'Tier 2' entities are exempt from particular disclosure requirements in the standards, such disclosures being identified throughout the standards with an asterisk (*)
  • The Public Benefit Entities (conceptual) Framework

The initial suite of PBE Standards are broadly similar to the proposals contained in a suite of exposure drafts issued in June 2012. However, there are some changes, including a significant decision to introduce the notion of Other Comprehensive Income (OCI). Although OCI is not included in IPSAS, the NZASB decided to include it based on the strong degree of support in submissions for its continuing use.

A further issue reflected in many submissions on the exposure drafts was a desire for minimal differences between the PBE Standards and New Zealand IFRS applied by for-profit entities. Constituent comment included 'big picture' and detailed standards concerns, and were primarily driven by concerns about the implications for 'mixed groups' (PBEs groups with for-profit subsidiaries). The Feedback Statement published with the new suite of standards notes:

With this in mind the NZASB and the XRB Board have established a joint working group to establish with greater clarity exactly when it is appropriate for the PBE Standards to depart from IPSAS – as this is the only practical way of minimising differences between the two suites of standards given that it is not possible to amend International Financial Reporting Standards and still be able to assert compliance with IFRS. One of the factors being considered by the working group is the impact unnecessary differences will have on preparers who are mixed groups. The deliberations of the working group are on-going and it is expected that the results will be reported later in 2013.

The financial years of the majority of New Zealand PBEs end on 30 June, and accordingly the new requirements will be applied by these entities for the first time in the 2014/15 financial year ending on 30 June 2015. As the standards require comparative information, this means that the new requirements will effectively be applied to relevant transactions and balances from 1 July 2013.

Click for more information (link to XRB website).

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