Accounting Standards Framework


In March 2012, the XRB Board issued a document outlining the then new Accounting Standards Framework.  

This became effective progressively during 2012 to 2016.

The framework is outlined in Proposals for the New Zealand Accounting Standards Framework Incorporating the Draft Tier Strategy.  This was approved by the Minister of Commerce in April 2012.

The Accounting Standards Framework was updated in December 2015 to reflect legislative changes since 2012 and new descriptions of the Tier requirements. 

Overview of Accounting Standards Framework

The Accounting Standards Framework involves a multi-standards, multi-tiered approach as summarised in the table.

 For-profit EntitiesPublic Benefit Entities (PBE)
TierEntity typeStandardsEntity typeStandards

Tier 1

Has public accountability or is a large for-profit public sector entity

NZ IFRS

Has public accountability or is large 

PBE Standards

Tier 2

Has no public accountability and is not a large for-profit public sector entity, that elects to be in Tier 2

NZ IFRS Reduced Disclosure Regime (NZ IFRS RDR)

Has no public accountability and is not large, that elects to be in Tier 2

PBE Standards Reduced Disclosure Regime (PBE Standards RDR)

Tier 3

 

 

Has no public accountability and has operating expenses ≤ $2million, that elects to be in Tier 3

PBE Simple Format Reporting Standard - Accrual (PSFR-A) 

Tier 4

 

 

Has no public accountability and is allowed by law to use cash accounting, that elects to be in Tier 4.

PBE Simple Format Reporting Standard - Cash (PSFR-C)


"Public accountability" and "large" are both defined terms.

In accordance with the IASB definition, an entity has public accountability if:

(a) its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
(b) it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. This is typically the case for banks, credit unions, insurance providers, securities brokers/dealers, mutual funds and investment banks.

Some entities may also hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organisations, co-operative enterprises requiring a nominal membership deposit and sellers that receive payment in advance of delivery of the goods or services such as utility companies), that does not make them publicly accountable.

Entities deemed to be publicly accountable

Under XRB A1, an entity is deemed to be publicly accountable in the New Zealand context if it is:

For periods beginning on or after 1 April 2014

  • an issuer of equity securities or debt securities under a regulated offer;
  • a manager of registered schemes, but only in respect of financial statements of a scheme or fund;
  • a listed issuer;
  • a registered bank;
  • a licensed insurer;
  • a credit union;
  • a building society;
  • an entity or class of entities that is considered to have a higher level of public accountability by a notice issued by the Financial Markets Authority (FMA); and
  • an issuer under the transitional provisions of the Financial Reporting Act 2013.

An entity is not deemed to be publicly accountable if it is not considered to have a higher level of public accountability than other FMC reporting entities by a notice issued by the FMA.

Our Find your standard tool explains in more detail how to find the right sector and Tier for your entity and the standards it must apply.