Not-for-profit Update #3

  • Not-for-profit
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Aimed at registered charities and other
not-for-profits, our Not-for-profit Update provides you an overview of recent External Reporting Board activities — new or revised standards, other news and financial reporting matters you will find useful.


Thanks for subscribing to our Not-for-profit Update.  We hope you found previous issues useful and informative and that we address some topics of interest to you.

 

If you know of others who would benefit from reading this, please feel free to forward it to them or suggest they subscribe themselves so they can be sure to get future issues.


In this issue we cover...

  • Targeted Review of the NZ Accounting Standards Framework—what's it about?
  • Update on the Incorporated Societies Review
  • Two short explanatory videos to watch on our accounting standards
  • External webinar series for charities and not-for-profits that carry out some of their purposes overseas
  • How to use our reporting templates
  • Are you using the right names for our accounting standards?

Targeted Review of the NZ Accounting Standards Framework—what’s it about?

Targeted Review icon

The XRB Board has issued a Discussion Paper for the purpose of conducting a targeted review of the New Zealand Accounting Standards Framework. This Framework has now been effective for most reporting entities for five years, it is therefore timely and important that we “check in” on whether the Framework is functioning as originally intended and whether any refinements are needed.

As a registered charity or other not-for-profit entity, the outcomes of this targeted review could impact your future reporting requirements.

Why, you might ask?

The Framework set out the XRB’s strategy for developing accounting standards for all registered charities (from the smallest to the biggest) and other not-for-profit entities that have a statutory requirement to prepare financial statements in accordance with accounting standards issued by the XRB. The current Framework is based on a multi-standard, tiered approach.

The current Framework was first issued in 2012 and therefore it is too soon to conduct a first-principles review. However, the targeted review highlights specific matters for which we are seeking your feedback.

What we want to know from those who work with or in registered charities (and other not-for-profit entities) is:

  1. Your thoughts about our strategy for developing PBE Standards to ensure that they are “fit for purpose” for New Zealand?
  2. Whether the PBE tier-size criteria needs to be revisited[1], such as between Tiers 2 and 3?  
  3. Are you aware of any developments in the financial reporting environment or any unintended consequences that would require refinements to the Framework?

We are not looking at reviewing who should have a statutory requirement to report (that is set by law). Neither are we reviewing underlying individual accounting standards or the auditing and assurance requirements that apply to you.

We are aware that some Tier 3 and Tier 4 registered charities are experiencing challenges with the Simple Format Reporting Requirements we introduced back in 2015. To this end, we plan to conduct a separate standards-level review of the Tier 3 and Tier 4 PBE Simple Format Reporting Requirements shortly after the completion of this current targeted review.


[1] It is important to note that the XRB is unable to change the $125,000 threshold for Tier 4, as this is determined by the Government in legislation. 


Webinar spelled out with coloured blocks

Today, we’re also running a lunchtime webinar on the Targeted Review. We’ll explain the issues, how this affects you and how to have your say.

NOTE: We appreciate this is really short notice for most of you, but we did previously advertised this webinar in our other communications. If you cannot attend today's session—don't worry—you can still register for the webinar after the event and then access a recording at any later time to suit you.

Wednesday 21 August
12:00Noon—12:45PM

Register here

Need more information now? It’s all on our website.

Have a look


Have your say on the Targeted Review

Have your say icon

We want to hear from you by 15 November 2019.

It’s easy to send in your feedback. Either you can:

  • Make comments in response to the above questions using our secure online form.    You don’t have to answer all the questions, just those you want to.

Online feedback form 

OR 

  • If you want to make a detailed submission, you can do so in a separate document and upload it using our secure online form.

Upload your submission document


Update on the Incorporated Societies review

Incorporated Societies Review image

The Ministry of Business, Innovation and Employment (MBIE) has confirmed that Cabinet has approved the proposals for the new Incorporated Societies legislation.

Here we summarise some of the proposals relating to financial reporting.

Incorporated Societies not registered as Charities will be required to report using XRB standards when they satisfy one or more of the following criteria:

  • annual payments of $10,000 or more; and/or
  • assets of $30,000 or more; and/or
  • “Donee status” under the Income Tax Act 2007.

A mandatory audit will be required for Incorporated Societies not registered as Charities which satisfy one of the following criteria:

  • annual expenditure over $2 million; or
  • assets over $4 million.

Note that a registered charity which is also an Incorporated Society is already required to have a mandatory audit when annual expenditure is over $1 million and a mandatory review when annual expenditure is over $500,000.

The Incorporated Societies Bill is expected to be introduced to Parliament later this year. At this stage we do not have a timeframe for when the new legislation will take effect.

More details are on the MBIE website. 

Have a look


Two short explainer videos to watch on our accounting standards

Ever been stuck wondering why there are sometimes multiple versions of the same standard on the same page of our website? Or you weren’t even aware that there can be more than one version of the same standard we publish?  Whats does a standard's effective date mean?  When should you apply a standard for your entity?

All these questions and more are answered in our explainer video series. Go check them out now!


External lunchtime webinars for charities and not-for-profits

Webinar spelled out with coloured blocks

Do you carry out some of your activities overseas? If so, you might be interested in a free lunchtime webinar series.  

Find out more and register here


Reporting templates, explanatory guides, reporting standards...

What are they?  Where do I find them? 

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Over 90% of all registered charities report as either Tier 3 or Tier 4 entities. 

 

XRB’s Tier 3 and Tier 4 standards for NFPs set down the minimum requirements you must follow when preparing your performance report.

To help you understand and apply the standards correctly, Tier 3 and Tier 4  NFPs can use our financial reporting templates and related explanatory guidance. These are Microsoft Excel spreadsheets and cover most circumstances that are likely to apply to you. So, if you fill out the templates correctly, you will comply with the standard. 

Using these templates and their accompanying guidance notes is optional.  They have no legal status. 

For each of the Tier 3 and Tier 4 standards our website now provides you access to the standard document itself, the related explanatory guide and the correct reporting template—all on one page.


Are you using the right names for our accounting standards?

When you prepare your financial reports each year end, you need to let the reader know which accounting standards you have used.  For this reason, it is important to use the correct name of the standard(s).

We have observed some variations in practice so, here’s a quick reminder.

We suggest you take a close look at how you have referred to the accounting standards you are asserting compliance with, and use the correct terms shown above.

If you want to know more about reporting tiers, we set these out in our first issue of this NFP Update.

Have a look


This Not-for-profit Update is intended to provide you with a summary of the recent activities of the External Reporting Board (XRB). Links to websites are correct at the time of publication. You should not rely on this newsletter as a definitive publication of updates. The External Reporting Board does not guarantee, and accepts no legal liability whatsoever arising from or connected to the accuracy, reliability, currency, timeliness or completeness of this newsletter. The information contained in this newsletter does not constitute advice and should not be relied upon as such.