Date posted: 01/05/2018 5 min read

Updated NZ optional special purpose financial reporting framework

Improvements have been made in response to feedback received during the post-implementation review

In brief

  • Holding gains/losses in the value of biological assets can now be recognised either through profit or loss or directly in equity
  • The format of the tax reconciliation format is no longer prescribed so preparers can use their preferred method
  • Goodwill can now be written-off over ten years instead of being subject to an impairment test

An updated New Zealand optional Special Purpose Financial Reporting Framework for use by For-Profit Entities (“the Framework”) has been issued. This follows the completion of a post-implementation review of the original Framework that was issued four years ago in 2014.

The post-implementation review did not identify any fundamental issues with the Framework, and therefore the Framework remains substantially unchanged. However, a number of areas were highlighted where improvements could be made.

The areas where some minor refinements have been made are:

  • Accounting for biological assets
  • The tax reconciliation
  • Accounting for goodwill

In addition, the following have been clarified:

  • Which entities the Framework should be used for
  • How to account for interests in other entities
  • Use of the “step-up” provision

Plus all the defined terms have been moved to the glossary at the end to eliminate duplication. This has reduced the length of the Framework by approximately 10%.

The updated 2018 Framework can be found in the “Related downloads section” below.

What’s changed?

Biological assets

The 2014 Framework required all holding gains in the value of biological assets to be recognised in directly in equity. This is fine when the gain is not assessable for income tax purposes, like when Herd Scheme values are used. However when the gain/loss is assessable/deductible for income tax purposes, like when National Standard Cost (NSC) values are used, this created an additional item in the tax reconciliation.

One of the key features of the Framework is that adjustments needed to reconcile tax return income are reduced (see page 8). Therefore, under paragraph 12.19, holding gains/losses in the value of biological assets can now be recognised either through profit or loss or directly in equity, depending on whether they are assessable/deductible for income tax purposes or not respectively. As mentioned above, whether they are assessable/deductible for income tax purposes depends on the method used to determine the change in value.

Tax reconciliation

We have simplified the requirement for a tax reconciliation of net profit or loss to the tax expense in paragraph 21.14(c) to allow members to use their preferred reconciliation method.


You told us that the impairment test requirement for goodwill is too onerous given the size and complexity of the entities you are applying the Framework too. Therefore we have introduced an accounting policy choice in paragraph 23.22 whereby you can choose to write-off goodwill over 10 years instead. The amount of goodwill written off is required to be presented on the face of the Statement of profit or loss or disclosed in the notes to the financial statements under paragraph 5.3.


The Framework was designed for use by for-profit entities. We have added some guidance in paragraph 1.4(e) on where you can find a more appropriate Framework for not-for-profit entities should you need it.


The Framework was designed for use by single entities. Consolidated financial statements for controlled entities or aggregated financial statements for other “groups” of entities (ie a tax group, funding group or security group) are outside the scope of the Framework. But the Framework does cover the accounting treatment for other types of interests in other entities. Paragraph 2.5 now contains a table that outlines how to account for interests in other entities.

Stepping up

Paragraph 3.7 has been clarified that you may assert compliance with the Framework when you elect the use the “step up” option. It is also clarified that when you step up to NZ IFRS you do not have to apply the applicable standard in full, ie you may only apply the recognition and measurement requirements, not the disclosure requirements, and this does not impact the ability to assert compliance with the Framework.

What do I need to do to ensure compliance?

The updated 2018 Framework is available for use immediately. Its use is still optional, but it provides greater flexibility than the 2014 Framework so we recommend you incorporate the changes into your systems and processes as soon as practicable. If you comply with the 2014 Framework, then you will also comply with the 2018 Framework, because it just provides more options.

We have also updated the three sets of illustrative financial reports accordingly (services, products and agriculture) – these are available to download below. We recommend that you review the standard templates that you use to ensure they are aligned with the updated 2018 Framework if you intend to claim compliance it.

We are working with the major accounting software packages to ensure their templates are updated also.

Find out more

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