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Update on proposed new financial reporting standards for not-for-profit entities
Updated November 2013
After 1 April 2015, registered charities will need to use new financial reporting standards to complete their annual financial statements. These new standards will provide greater consistency and transparency across the sector, bringing New Zealand’s registered charities in line with international standards. This information sheet outlines these changes and how they will affect charities.
After 1 April 2015, what will change for charities?
All registered charities will still need to file an annual return and financial statements. However, the financial statements will need to be completed in line with new standards set by the External Reporting Board (XRB). The XRB is an independent Crown Entity and is responsible for preparing and issuing accounting standards.
Will all charities have to use the same standards?
No. The standard (or standards) that a charity uses will depend on that charity’s annual operating expenditure. Four tiers of reporting requirements have been developed based on annual operating expenditure. This will allow smaller charities to prepare financial statements on a simplified basis, while larger charities will be required to use full accounting standards. 95 per cent of registered charities are in Tiers 3 and 4.
When will charities have to prepare financial statements that comply with the new standards?
While the standards come into effect on 1 April 2015, they will only apply to a charity’s first full financial year that starts on or after 1 April 2015. For example, a charity filing its annual return on 1 October 2016 will have to attach financial statements that comply with the new XRB standards.
How are the standards progressing?
Tier 3 & 4 standards are now available with explanatory guides and templates. They can be found at www.xrb.govt.nz
The draft Tier 1 & Tier 2 standards for large charities have been released for public comment; submissions close on 2 May 2014. Charities Services and the XRB are planning a series of roadshows around the country for early 2014 to consult with charities. For more information on how to get involved in the consultation on the Tier 1 & 2 standards go to www.xrb.govt.nz
What support will charities get to help them use the new standards?
For smaller charities (those with operating expenditure less than $2 million) the XRB has released templates that show how the Tier 3 and 4 standards can be applied in practice, with accompanying explanatory guides.
Charities Services will be supporting charities with education initiatives over the next two years. Watch the www.charities.govt.nz website for updates on when and where these initiatives will occur.