Accounting Standards Framework

The New Zealand Accounting Standards Framework establishes which suite of reporting standards and reporting tiers apply to which entities.  This comprises a multi-sector, multi-tiered approach and sets out the full range of standards that apply, based on an entity's sector and tier. This tiered approach is intended to match the benefits with the cost of preparing financial statements, based on the size of the entity.

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Objectives of the framework

The Accounting Standards Framework and the XRB reporting standards set out what and how entities must report.

The Accounting Standards Framework has two key objectives:

  1. To meet user needs — by developing accounting standards that lead to high quality financial reporting that meets the different user needs in the for-profit and public benefit entity (PBE) sectors; and
  2. To balance the costs and benefits of reporting – by establishing appropriate accounting requirements based on the nature and size of the entity

The XRB conducted a targeted review of the Accounting Standards Framework in 2019. 

Key elements

The framework has three key elements.

Different suites of accounting standards for two distinct sectors: for-profit entities and public benefit entities (PBEs)

Different accounting requirements for each tier based on cost-benefit considerations:

  • For-profit entities – 2 tiers
  • PBEs – 4 tiers
  • For-profit entities — accounting standards are based on International Financial Reporting Standards (IFRS Standards).
  • PBEs — accounting standards are based primarily on International Public Sector Accounting Standards (IPSAS) for Tiers 1 and 2 and the XRB’s Simple Format Reporting Requirements for Tiers 3 and 4.

Click the arrows below to view the table summaries of the current accounting standards framework.

Tier Entity type Standards

Tier 1

Has public accountability or is a large for-profit public sector entity with total expenses > $30million


Tier 2

Has no public accountability and is not a large for-profit public sector entity with total expenses ≤$30million and elects to be in Tier 2

NZ IFRS Reduced Disclosure Regime (NZ IFRS RDR)

Tier Entity type Standards

Tier 1

Has public accountability or is a large PBE with total expenses > $30million

PBE Standards

Tier 2

Has no public accountability, is not large, has total expenses < $30million but > $2million, and that elects to be in Tier 2

PBE Standards Reduced Disclosure Regime (PBE Standards RDR)

Tier 3

Has no public accountability and has total expenses ≤ $2million, that elects to be in Tier 3

PBE Simple Format Reporting Standard - Accrual (SFR-A)

Tier 4

Has no public accountability and is allowed by law to use cash accounting, that elects to be in Tier 4.

PBE Simple Format Reporting Standard - Cash (SFR-C)

Overview of external financial reporting requirements

Along with its associated explanatory guides and additional material, the general standard XRB A1 provides a comprehensive overview of the external financial reporting requirements for both for-profit and public benefit entities (including not-for-profit entities). 

XRB A1 and its associated documents listed below can assist you to identify the relevant tier and associated financial reporting requirements for your entity.

Accounting standards issued by the XRB Board or the NZASB and are the primary indicators of generally accepted accounting practices (GAAP) in New Zealand.

They set out the recognition, measurement, presentation and disclosure requirements for transactions and events that are important in the preparation of financial reports—including those that may arise in specific industries.

In general, entities with statutory reporting requirements must prepare financial reports based on GAAP. 

XRB standards are widely accepted as appropriate to accounting practice and necessary in order that financial statements are meaningful, comparable and consistent across a wide variety of businesses and industries.

There are some exceptions to applying GAAP.

Certain enactments, such as the Charities Act 2005, permit an entity that does not meet the size threshold to be a “specified not-for-profit entity”.  This enables the entity to prepare its financial statements in accordance with a “non-GAAP standard” issued by the XRB or NZASB. Small charities with total operating payments of less than $125,000 are one such case.

Only the Tier 4 PBE Accounting Requirements comprise non-GAAP standards.  

Various pieces of legislation require entities to prepare general purpose financial reports (GPFR) that comply with XRB standards.

Here are some examples:

  • “FMC reporting entities” under the Financial Markets Conduct Act 2013—such as issuers of securities, stocks and shares and including licensed insurers, registered banks, credit unions and building societies.
  • Large New Zealand and overseas companies or subsidiaries of overseas companies under the Companies Act 1993.
  • Registered charities (also referred to as Not-for-profit entities) under the Charities Act 2005.
  • State sector bodies under the Public Finance Act 1989 or the Crown Entities Act 2004.
  • Local bodies and council controlled organisations (CCOs) under the Local Government Act 2002.

Most New Zealand-based for-profit small to medium-sized entities have no legal requirement to comply with XRB standards. The current framework no longer caters for small and medium-sized for-profit entities in its tier structure and the previous Tier 3 and Tier 4 for-profit standards have been withdrawn.

When the Government moved to reform the financial reporting framework, it decided that SMEs should continue to prepare financial reports for compliance purposes only, i.e. to a lesser and minimum special-purpose level.

This means SMEs will need to produce special purpose financial reports (SPFRs) for users such as a governance body, the Inland Revenue Department (IRD) or a lending institution, such as a bank.

Our Find your standard tool explains in more detail how to find the right sector and Tier for your entity and the standards it must apply. 

International conformance and harmonisation of auditing & assurance standards

This sets out the principles of convergence to international standards and harmonisation with Australian auditing and assurance standards. The framework will be used for the standard-setting process in New Zealand to enhance convergence with international practice, harmonisation with Australian audit and assurance standards, as well as reduce New Zealand standard-setting costs.

Convergence to international standards

Over the years, New Zealand has adopted the international auditing and assurance standards (the “clarified standards”) by way of New Zealand equivalents to those standards, expressed, for example, as ISA (NZ).

The New Zealand equivalents are in most cases substantively identical to the international standards they are based on. This approach is consistent with our strategy of adopting international standards.

Our assurance standards strategy is to continue to adopt international auditing and assurance standards to apply in New Zealand, unless there are very strong reasons why we should not.

Implementing this strategy will mean, over time, adopting New Zealand equivalents to international standards when a domestic standard currently exists.

We recognise that in adopting international standards we are committing to using that set of standards as a whole. For example, this means that not adopting one particular ISA (NZ) would mean assurance practitioners in New Zealand could not assert compliance with ISAs (NZ).

Trans-Tasman Harmonisation 

The XRB Trans-Tasman harmonisation principles allow assurance practitioners to operate in both jurisdictions within a single set of requirements and ensure a substantively common set of auditing and assurance standards that apply in both countries.

The NZAuASB and the AUASB have agreed on a common set of principles relating to the standards that each Board issues.

This co-operation contributes to the outcome framework for creating a Single Economic Market, announced by the New Zealand and Australian Prime Ministers in 2009.

The NZAuASB and AUASB are working together towards the establishment, over time, of a harmonised set of assurance standards based on international standards.

Part of this process is considering the most appropriate way to deal with country-specific requirements, including the possible use of domestic standards.

Policy document

Read the international convergence and harmonisation of standards policy, combined in a single document:

The document below is an overview of the additional requirements in the Australian Auditing Standards (ASAs), not added to the New Zealand Auditing standards. 

Note: this document will be subject to review in the near future and updated in accordance with any changes. 

Policy Statements

Modified audit reports

This policy sets out the processes the XRB Board and sub-Boards (the NZASB and NZAuASB) will follow when auditors (or otheer parties) submit modified audit reports under the Companies Act 1993 and the Financial Markets Conduct Act 2013. 

Developing Public Benefit Entity (PBE) Standards

This policy sets out decision making proceesse the XRB will follow when developing PBE Standards.