About reporting Tiers and reporting sectors
There are 3 sectors the XRB issue accounting standards for:
- Not-for-profit
- Public Sector
- For-profit
While there are separate reporting requirements for public sector and for-profit entities, most incorporated societies will be considered as not-for profit entities and will be required to use the not-for-profit reporting standards.
If your society is either a for-profit or public sector entity you will need to apply the reporting standards for those sectors. Note that making a profit/surplus does not necessarily mean that you are a for-profit entity, you must consider the wider purpose of your society in determining whether you are a for-profit or not-for-profit entity.
If you are unsure which type of entity your society is, please refer to Appendix A in XRB A1 for further detail.
Not-for-profit entities are Public-Benefit-Entities (“PBEs")
PBEs are “entities where the primary objective is to provide goods or services for community or social benefit and where any equity has been provided with a view to supporting that primary objective rather than for a financial return to equity holders.”
Some PBEs may be public sector entities instead of not-for-profit entities and will need to apply the public sector accounting standards as opposed to the not-for-profit accounting standards.
These entities are defined in paragraph 5 of Public Audit Act 2001 and includes all Offices of Parliament. Examples include all public service departments, crown entities, educational bodies (such as schools and universities), state enterprises, airport companies, licensing trusts, local authorities and councils, council-controlled organisations, port companies, community trusts.
There are four different tiers of reporting requirements for not-for-profit entities. We expect most incorporated societies will be not-for-profit entities.
| Tier | Society type | Standards | Link to PBE not-for-profit Standards |
| 1 | Large PBE with total expenses > $33 million, or if you have public accountability as defined in XRB A1 | Not-for-profit PBE Standards | Tier 1 & 2 not-for-profit PBE Standards |
| 2 | Large PBE with total expenses < $33 million and > $5 million | Not-for-profit PBE Standards Reduced Disclosure Regime (PBE Standards RDR) | Tier 1 & 2 not-for-profit PBE Standards |
| 3 | PBE with total expenses $5 million or less but total operating payments > $140,000 | Tier 3 (NFP) Standard | Tier 3 not-for-profit PBE Standards |
| 4 | PBE with total operating payments less than $140,000 | Tier 4 (NFP) Standard | Tier 4 not-for-profit PBE Standards |
*Applicable for financial years ending 31 March 2024 and later. Any financial year ends that ended prior to 31 March 2024 will be subject to the previous tier size thresholds (Tier 1 - total expenses over $30 million, Tier 2 - total expenses under $30 million and over $2 million, Tier 3 - total expenses under $2 million and operating payments over $140,000).
On the off chance that your society is a for-profit entity, you have two different tiers of reporting requirements depending on whether your society is publicly accountable (as defined in XRB A1).
| Tier | Society type | Standards | Link to For-Profit Standards |
| 1 | For-Profit entity with public accountability | For-Proft Standards (NZ IFRS) | Tier 1 & 2 for-profit standards |
| 2 | For-Profit entity that does not have any public accountability | For-Profit Standards Reduced Disclosure Regime (NZ IFRS Standards RDR) | Tier 1 & 2 for-profit standards |
Reporting Tier and audit threshold notes
If your society controls other entities or is the head of a group of entities, you may be required to consolidate (add the financial statements together to produce one set of financials for the group). If this is the case, to determine the Tier you will need to report against you will need to compare the Tier threshold with your consolidated position, rather than your stand-alone position.
For example, if you are a society that owns subsidiary companies you will need to add the financial information from these entities to your own to produce a group position. You would then compare the Tier threshold to the total expenses/total operating payments (as applicable) reported in your group position.
Alternatively, if you are a national society that operates in conjunction with and is closely aligned to separate regional societies (or incorporated branches of your society), you may need to consider whether you have control of the regional societies as outlined in the criteria contained in PBE IPSAS 35 (if you are a PBE) or NZ IFRS 10 (if you are for-profit). If the conditions of control are met, you will be required to compare the Tier thresholds to the total expenses/total operating payments (as applicable) reported in your group position.
If you are a not-for-profit society and your current financial year operating payments are more than $140,000 but your two preceding financial years' operating payments were less than $140,000 each, you are eligible to apply Tier 4 (instead of Tier 3) if you choose.
If you are a not-for-profit society and in your last two financial years you had operating payments of more than $140,000 but your current financial year operating payments are less than $140,000 you will be required to apply Tier 3 initially (instead of Tier 4).
You are able to voluntarily apply a Tier higher than the one you may be eligible for. This may be preferable if for instance you practice accrual accounting (if you prepare financial statements on an invoice basis not just from recording cash transactions) but are eligible for Tier 4 – you may prefer to apply Tier 3 rather than reverting to a cash basis of accounting for Tier 4.
The regulations for incorporated societies state that a society must be audited if:
- it is not a charity; and
- it has operating expenses of $3 million or more in each of the last two financial years (including expenses incurred by any other organisations that it controls).
You can find more information in section 16 of the regulations.