NZARC Blog

One of our experts and the organisation we trust to complete our audit is Christmas Gouwland. We think that Darren Wright and his team provide great advice and service for a great price. We have even recommended his team to some of our contacts and are pleasantly surprised by the positive feedback received. 

They are making sure they keep up to speed with the upcoming once-in-a lifetime changes in the financial reporting framework. These changes are going to be formalised later this year, and will need to be implemented by most non-profit entities in New Zealand. The historical Financial Reporting Standards in New Zealand will cease to exist, as well as the ‘Special Purpose’ framework.

The team at Christmas Gouwland are going to help us here at the NZARCT navigate through these significant changes. We will also ask them to provide vital information through this newsletter and on our website so you are also informed with the latest updates and changes critical to you and your charity or association. 

Christmas Gouwland is a boutique chartered accountant firm located in Downtown Auckland. Working with a large range of non-profit clients, they work with organizations such as yours to find solutions to your accounting and audit challenges. 

Christmas Gouwland works with some of the largest church groups in Auckland, including the Catholic Diocese of Auckland, many National Bodies (incorporated societies), including the Early Childhood Council, and well established sports clubs. 

We are also thrilled they have decided to partner with us as a key sponsor to help the aims of the NZARCT as a whole.

The Christmas Gouwland audit team comprises only significantly experienced professionals. This means they help you get the right answer quickly. 

The traditional framework of ‘generally accepted accounting principles in New Zealand’ will soon cease to exist, to be replaced by International Public Sector Accounting Standards (“IPSAS”). IPSAS have been based from International Financial Reporting Standards (IFRS) that is the accounting framework for the for-profit sector, and are being tailored for public sector accounting. We expect that the number of variances between IFRS and IPSAS will continue to grow over time. IPSAS are issued by the International Federation of Accountants (a private federation), and are set to be introduced in Switzerland, and other jurisdictions globally.

Why the change?

New Zealand has attempted to provide a bridge for the public sector by including some concessions with the New Zealand equivalents to IFRS. However, the conclusion was reached that an entire new framework is required. IPSAS was selected as the most appropriate.

Who is impacted?

All registered charities in New Zealand (over 25,000 at latest count) will be required to prepare financial statements under IPSAS.

Incorporated Societies have not yet been caught, as there is law commission review of surrounding legislation. It is foreseeable that they will follow the structure set for charities.

Tiered reporting

Although the principles of measurement and recording will be the same for all entities, the new framework is introducing tiered reporting. It is expected, for example, that around 96% of charities will fall under simple format reporting.

Simple format reporting is proposed to be a fill-in-the-box sort of exercise, with various templates available for different types of entities. This will simplify the reporting process, however does not negate the requirement to follow IPSAS principles. This will be the most complex requirement for not-for-profits. For many very small entities (annual expenses less than $40,000), then cash-based accounting will likely be allowed.

Who is creating this change?

On 1 July a new governmental organisation, the External Reporting Board (XRB) was established. The XRB is an Independent Crown Entity with statutory functions on accounting and auditing. It has created two sub-boards to cover these key areas. The XRB initial Board’s philosophy is to maintain user-needs focus, and to match financial reporting requirements with needs.

When does this apply?

The first financial statements likely to be impacted are for the year ending 30 June 2015, and entities can early adopt in 2014. This is dependent on the process of the consultation process. However, balance sheets two years before the introduction date will need to be adjusted, so the first impact of these changes will be as early as 30 June 2012.