One of the XRB’s functions under section 24(1) of the Financial Reporting Act 1993 (as amended by the Financial Reporting Amendment Act 2011), is financial reporting strategy. This involves developing and implementing strategies for the issue of accounting and auditing & assurance standards in order to provide a framework for the XRB’s overall direction in the setting of standards. It includes developing and implementing a strategy for tiers of financial reporting in accordance with the requirement of the Act.
The financial reporting strategy function is a key responsibility of the XRB Board.
Part of the XRB Board’s financial reporting strategy function involves establishing and maintaining an Accounting Standards Framework. The current Accounting Standards Framework has been in place since 2007 and is outlined in Standard XRB A1 Application of Accounting Standards.
The XRB Board is currently in the process of establishing a new Accounting Standards Framework based on a multi-sector, reporting tiers approach. Information about the existing and new Accounting Standards Frameworks can be found on the Accounting Standards Framework page.
Once the new Framework is established the XRB Board’s focus will shift to an on-going consideration of the adequacy of the established framework, and identification of any areas for improvement.
The XRB’s financial reporting strategy function also involves establishing an Auditing and Assurance Standards Framework. The Framework comprises establishing which auditing and assurance standards should apply to which assurance engagement, and what the basis for those standards should be.
The current Framework is outlined in Standard XRB Au1 Application of Auditing and Assurance Standards. The XRB Board considers this Framework to be appropriate and does not envisage revising it for the time being.
Information about the Audit and Assurance Standards Framework, including the philosophies that underlie it, can be found on the Assurance Standards Framework page.
A consequence of the XRB Board’s “adopting international standards” strategy is that the NZASB and NZAuASB’s ability to determine the content of standards once international exposure drafts are issued is reduced. This means that it is important for the two Standard Setting Boards to engage with international standard setters during the project development phase.
A further important element of the XRB Board’s financial reporting strategy is therefore to refocus the XRB’s technical effort and input from the back-end to the front-end of the international standard setting process.
Accordingly the XRB Board and the two Standard Setting Boards will look for opportunities to engage with international standard setting bodies at an early opportunity in the process of developing an international standard. This engagement may be directly, or in conjunction with Australian counterparts, or via regional standard setting bodies, or other mechanisms.
A strategic priority for the XRB Board is to enhance the level of engagement with stakeholders. The Board has established a “Stakeholder Engagement Strategy” that will encourage greater communication and engagement at both the specific proposal and general level.
In relation to communication and consultation over specific proposals, the Board supports the approach adopted by both the NZASB and NZAuASB to make it easier for the constituency to provide comments and feedback on specific proposals. This will involve less formal submission processes and instead targeting groups likely to be most affected by particular proposals being consulted on.
The XRB Board is also conscious of the importance of engagement at the “big picture” level. It has agreed a number of ways to do this including individual networking, programmed meetings with a range of constituency groups (in all sectors and across all perspectives – users, preparers, assurance providers), and undertaking public engagements.
As part of its general engagement strategy the Board has the established an External Reporting Advisory Panel (XRAP). The purpose of the XRAP is to provide a forum through which the XRB Board, NZASB and NZAuASB can consult with individuals and representatives of organisations affected by its work. The XRAP will also act “as a champion” for stakeholders in providing advice to the three Board’s on their work programmes and project outputs.
Information about the XRAP can be found on the External Reporting Advisory Panel page.