- Feedback to a public consultation Discussion Paper by the XRB confirms the New Zealand Accounting Standards Framework remains appropriate for reporting entities
- More support is needed for smaller charities struggling with their financial reporting obligations
- The XRB has concluded that no changes to the New Zealand Accounting Standards Framework are required at this time
In response to the recently completed targeted review of the New Zealand Accounting Standards Framework, the XRB received strong support for the current Framework, which the XRB says “confirmed that it is operating as originally intended – with no unintended consequences noted.” In July 2019, the XRB issued for public consultation its Discussion Paper, Targeted Review of the New Zealand Accounting Standards Framework.
The main purpose of the Discussion Paper was to obtain feedback whether the New Zealand Accounting Standards Framework is functioning as anticipated and is achieving its original objectives, and whether any refinements to the Framework are required. The Discussion Paper also sought feedback on certain specific matters relating to the Framework. Therefore, the XRB has concluded that no changes to the New Zealand Accounting Standards Framework are required at this time.
The Framework sets out the XRB’s strategy for developing and issuing accounting standards that are appropriate for entities that are required by law to prepare financial statements in accordance with accounting standards issued by the XRB. The current Framework was first introduced in 2012 and last updated in 2015
What feedback was sought?
The Discussion Paper sought feedback, among other things, on the following three specific matters:
- The importance of maintaining close alignment between PBE Standards and IPSAS
- The importance of harmonisation with Australia for Tier 2 for-profit disclosures, and
- Do the PBE tier size criteria need to be revisited?
According to the XRB, feedback suggests that the Framework appears to be operating as intended. Even so, some respondents noted that smaller charities are struggling with their financial reporting obligations and expressed support for the XRB’s post-implementation review of the Tier 3 and Tier 4 PBE Simple Format Reporting Standards. Respondents also suggested that more education and support for small charities will help increase the level of compliance with accounting standards. There were also specific suggestions in relation to the Tier 3 and Tier 4 standards and reporting by entities in Tier 3 and Tier 4. Some respondents commented that the Framework is complex.
The importance of maintaining close alignment between PBE Standards and IPSAS
The XRB said feedback suggests support for both the importance of alignment with IPSAS and also the importance of allowing the flexibility for consideration of New Zealand specific issues. Most respondents considered the prioritisation of local considerations to be more important than maintaining close alignment between PBE Standards and IPSAS and supported a more flexible approach to the development of PBE Standards.
However, there was some support for maintaining the current strategy of close alignment between PBE Standards and IPSAS. Some respondents who supported a more flexible approach also noted the importance of alignment with IPSAS in general and where appropriate.
In response to the mixed feedback received, the XRB decided to introduce some refinements to the wording of the PBE Policy Approach. The XRB reaffirmed the position in the current Framework, ie that it is “appropriate to develop PBE Standards based primarily on standards issued by the IPSASB.”
The importance of harmonisation with Australia for Tier 2 for-profit disclosures
While most respondents were of the view that continued harmonisation with Australia for Tier 2 for-profit disclosures is important, responses were mixed. The XRB decided that in this regard, the responses did not require immediate change to the Framework, noting that Australia is in the process of accounting framework reforms. The XRB mentioned, however, that trans-Tasman harmonisation for Tier 2 for-profit disclosures will be considered further under a separate project.
Do the PBE tier size criteria need to be revisited?
Most respondents did not identify specific unintended consequences or new developments that would require refinements to the PBE tier size thresholds, and the XRB concluded that no amendments to the Framework are required at this time. Three respondents thought the $2 million threshold between Tier 3 and Tier 2 should be increased. Three respondents did not recommend changing the current expenditure-based PBE tier size threshold, but recommended adding an asset-based threshold.
The XRB has also acknowledged the feedback identifying the increased focus on environmental, social and governance accountability reporting, both in the private and public sectors. These matters are being separately considered as part of XRB’s ongoing Extended External Reporting initiatives.
Access the XRB's feedback statement, Targeted Review of the New Zealand Accounting Standards Framework, issued August 2020.Feedback Statement