New Zealand Issues Revised Standards for Not-For-Profit Entities

Monday, October 20, 2014 Print Email

As in New Zealand’s accounting framework, the nature (private business, charity or public listed) and size (level of income and expenses) of an entity determines which accounting standards would be applicable on the entity. In case of not-for-profit organizations, the applicability of accounting standards depend upon whether the organization is answerable to general-public and the size of its expenses.

There are four types/tiers of not-for-profit (NFP) organizations with respect to reporting requirements:

Tier1.NFP organizations, which are publicly answerable (as defined by IASB)or have expenses in excess of NZ$30m, fall in this category.

Tier2.NFP organizations which are neither publicly accountable nor they have expenses in excess of NZ$30m and are not eligible or do not chose to fall in the reporting category of Tier 3 or Tier 4. NFPs under this tier can choose to apply Tier1 reporting requirements.

Tier3. NFPs with no public accountability and expenses of no more than NZ$2m, which chose to comply with the reporting requirements of Tier 3.

Tier4. NFPs under this class are allowed by an Act to follow other than GAAP standards and do their reporting accordingly e.g. cash basis of accounting. This is allowed when entities have no public accountability (as defined) and do not meet the size criteria and chose to comply with the requirements of this category.

New Zealand Accounting Standard Board (NZASB) has announced modifications to its standards, issued by International Public Sector Accounting Standards Board (IPSASB), applicable to NFPs to include requirements for NFPs under first two tiers. These changes would enable NFPs to choose deviation from local standards requirements and local laws. But these amendments would not affect public listed companies.

The new changes contain some sample of detailed financial statements for NFP guidance, along with the accounting concepts for NFPs. These amendments are in line with the suggestions given in November 2013.

Source: ReadyRatios

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