Author Topic: New Zealand considers a new accounting standard framework  (Read 360 times)

atseacliff

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New Zealand considers a new accounting standard framework
« on: September 14, 2011, 10:12:45 GMT »
New Zealand considers a new accounting standard framework which has important proposals for public benefit entities.

The New Zealand External Reporting Board (XRB) has released three documents outlining proposals for a new Accounting Standards Framework for New Zealand.

The proposals include a multi-standard framework, where the standards to be applied would depend on the nature and classification of the entity. In summary terms, the new structure would operate as follows:
•   For-profit entities. 'NZ IFRS', converged with International Financial Reporting Standards (IFRSs), supplemented by additional New Zealand specific standards, and harmonised as appropriate with Australia, applied as follows:
•   'Full NZ IFRS' for 'Tier 1' entities, with some entities, which will continue to be required to make an explicit and unreserved statement of compliance with IFRSs. This would apply to entities with public accountability, with some entities being 'deemed' to be publicly accountable
•   'Reduced Disclosure Requirements' (RDR) for 'Tier 2' entities, consistent with the approach adopted in Australia and replacing the existing New Zealand differential reporting framework. This would require the same recognition and measurement requirements as full NZ IFRS (Tier 1) but would allow reduced disclosures (and so would not result in New Zealand adopting the IFRS for SMEs)
•   Public benefit entities (PBE). The establishment of a set of NZ PBE standards based on International Public Sector Accounting Standards (IPSAS) modified as appropriate for New Zealand circumstances and not-for-profit entities. The application of the standards would be based on a three tier structure, with the third tier (the smallest entities) using a simple reporting approach.

The XRB proposes that the new for-profit framework be in place in time for it to be early adopted from 1 July 2012, the PBE framework so far as it applies to public sector entities be effective for financial years beginning on or after 1 July 2013, and the PBE framework for not-for-profit entities be effective for financial years beginning on or after 1 July 2014 (with early adoption allowed).

The proposals for public benefit entities differ from that proposed by the antecedent Accounting Standards Review Board (ASRB) which suggested the adoption of IPSAS without modification. The consultation papers explain the change in approach as follows:

The Discussion Document proposed that "pure" IPSAS be adopted as part of the PBE Accounting Standards. A key reason for this was to reduce standard setting costs. A number of respondents raised concerns about some technical aspects of IPSAS as well as the lack of standards on certain topics. The IPSAS Working Group also identified a small number of key technical areas that would need to be considered including the potential unsuitability of the IPSAS government business enterprise definition; the IPSAS definition of control; and the optional requirement to report heritage assets.


Some respondents also expressed concerns about the IPSASB governance and funding arrangements...

Given these factors, the XRB Board considers that it is premature to be confident that the risks surrounding the adoption of "pure" IPSAS have been adequately mitigated... The XRB Board will continue to monitor the development of IPSAS. A move to "pure" IPSAS is an aspiration over the longer term.

The New Zealand Commerce Minister Simon Power has also announced complimentary proposals to simplify the financial reporting framework for small and medium-sized businesses and registered charities.

Closing date for submissions on the XRB proposals is 16 December 2011.

 

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