Consultation Documents
Consultation Papers Issued
On 14 September 2011 the XRB issued two Consultation Papers outlining the proposed new accounting standards framework. These are:
- Accounting Standards Framework for General Purpose Financial Reporting by For-Profit Entities
- Accounting Standards Framework for General Purpose Financial Reporting by Public Benefit Entities.
The related Multi-Standards Position Paper is available here.
These two Consultation Papers outline the XRB's specific proposals for the accounting standards framework for for-profit and public benefit entities respectively. The documents outline the proposed tier structure for each sector, together with the proposed accounting standards that will apply to each tier in each sector.
The period for submissions has now closed and the XRB is currently considering the feedback from respondents. It is envisaged that the XRB Board will make final decisions about the accounting standards framework towards the end of March 2012. This will allow the Board to finalise the draft tier strategy which it is required to submit to the Minister of Commerce by 31 March 2012. Submissions on the Consultation Papers are available for viewing here.
Related Government Announcement
The release of the Accounting Standards Framework documents follows the Government's announcement on 14 September of changes to the financial reporting framework. That announcement can be found on the Minister of Commerce's website. The new legislative framework will involve a number of significant changes from the status quo including the removal of the statutory requirement on most small to medium companies to prepare financial reports that comply with generally accepted accounting practice; and a requirement for registered charities to prepare general purpose financial reports. Further information about the Government's planned new legislative framework can be found on the MED website.
Key Aspects of the XRB Proposals
The XRB's accounting standards framework documents take into account the Government's announcement. The XRB's proposals include:
- A two tier structure for for-profit entities and the removal of the current exemption that allows small and medium companies to use "old GAAP" (as these entities will for the most part no longer be required to comply with XRB standards);
- The application of full NZ IFRS for tier 1 for profit entities and the adoption of a Reduced Disclosure Requirements (RDR) version of NZ IFRS for for-profit tier 2 entities (which will be consistent with that applicable in Australia and which will replace the current New Zealand Differential Reporting Framework);
- A three tier structure for public benefit entities (which includes registered charities) with all entities with expenses less than $2 million being in Tier 3 - this includes many small public sector entities as well as the majority of registered charities;
- The establishment of a set of NZ PBE standards based on International Public Sector Accounting Standards modified as appropriate for New Zealand circumstances and also for application by not-for-profit entities;
- The use of a simple format reporting approach for tier 3 entities.
The XRB's Consultation Papers propose 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). These dates are dependent on the results of the consultation process, and when the legislative changes needed to give effect to the Government's announcement are enacted and come into force.
The detailed proposals for each sector and tier are contained in the relevant Consultation Paper.