What is the New Zealand Accounting Standards Framework?

In New Zealand, certain entities are required by law to prepare financial statements in accordance with accounting standards issued by the XRB. The Statutory Financial Reporting Framework established by the Government determines which entities are subject to this requirement (sometimes called the “who” question).

The New Zealand Accounting Standards Framework (the ASF) sets out the XRB’s strategy for developing and issuing accounting standards that are appropriate for those entities that have a statutory requirement to prepare financial statements in accordance with accounting standards issued by the XRB (sometimes called the “what” question).

The development of the ASF began in early 2009 in conjunction with Government reforms that led to the enactment of the Financial Reporting Act 2013 and associated amendments to other legislation.

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The ASF was first issued in April 2012 after a comprehensive consultation process and updated for minor amendments in December 2015. The ASF became effective on a “rolling basis” across the three key sectors in New Zealand, as shown below:

Sector	When did the ASF become effective	Number of years the ASF has been effective
Public sector PBEs ^[1]	1 July 2014	4 – 5 years
For-profit entities ^[2]	1 April 2015	3 – 4 years
Not-for-profit PBEs ^[3]	1 April 2015	3 – 4 years

Key objectives of the New Zealand Accounting Standards Framework

The ASF has two key underlying 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

Key elements of the New Zealand Accounting Standards Framework

The ASF has three key elements.

Multi-standards approach	Different suites of accounting standards for two distinct sectors: for-profit entities and PBEs
Tiered approach	Different accounting requirements for each tier based on cost-benefit considerations: For-profit entities – 2 tiers PBEs – 4 tiers
Basis for developing each suite of accounting standards	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^[4]for Tiers 3 and 4.

Multi-standards approach

Different suites of accounting standards for two distinct sectors: for-profit entities and PBEs

Tiered approach

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

For-profit entities – 2 tiers
PBEs – 4 tiers

Basis for developing each suite of accounting standards

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^[4]for Tiers 3 and 4.

[1] Public Benefit Entities (PBEs) are reporting entities whose primary objective is to provide goods or services for community or social benefit rather than for a financial return to equity holders.

Public sector PBEs are PBEs that are public entities as defined in the Public Audit Act 2001, and all Offices of Parliament.

[2] For-profit entities for financial reporting purposes are reporting entities that are not PBEs.

[3] Not-for-profit (NFP) PBEs are PBEs that are not public sector PBEs (e.g. registered charities).

[4] This term refers to the Tier 3 and Tier 4 PBE Accounting Requirements.

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