For-profit Accounting Standards (NZ IFRS)

Financial Reporting: EY New Zealand

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For-profit entities


For-profit entities are reporting entities that are not public benefit entities (PBEs).

The definition of a PBE is as follows:
“PBEs are entities whose primary objective is to provide goods or services for community or social benefit, and where equity has been provided with a view to supporting that primary objective, rather than for a financial return to equity holders”
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NZ IFRS


New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) are based on International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
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In accordance with the IFRS 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.
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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 November 2012

  • an Issuer;
  • a registered bank or deposit taker, as defined by the Reserve Bank Act 1989; and
  • a registered superannuation scheme, as defined by the Superannuation Schemes Act 1989 unless exempted from the requirement to prepare GPFR.
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;
  • a listed issuer;
  • a registered bank;
  • a licensed insurer;
  • a credit union;
  • a building society; and
  • 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).

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

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A for-profit entity may elect to report in accordance with Tier 3 For-profit Accounting Standards when the entity does not have public accountability and either: 

  • at the end of the reporting period, all of its owners are members of the entity’s governing body (provided the parent or ultimate controlling entity does not have the coercive power to tax, rate or levy); or
  • the entity is not large.

Size

A for-profit entity is large if it exceeds any two of the following:

  • total income of $20.0 million;
  • Total assets of $10.0 million; and
  • 50 employees.
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A for-profit company may elect to report in accordance with Tier 4 For-profit Accounting Standards when it:



(a) was applying Old GAAP at 30 June 2011, or was established between 1 July 2011 and 31 March 2014; and
(b) does not have public accountability; and
(c) is not required by section 19 of the Financial Reporting Act 1993 to file its financial statements with the Registrar of Companies; and
(d) is not large as defined by section 19A of the Financial Reporting Act 1993.

28 A for-profit entity other than a company may elect to report in accordance with Tier 4 For-profit Accounting Standards if it:
(a) was applying Old GAAP at 30 June 2011, or was established between 1 July 2011 and 31 March 2014; and
(b) does not have public accountability; and
(c) is not large.

29 A for-profit entity is large if it exceeds any two of the following:
(a) total revenue of $20 million;
(b) total assets of $10 million; and
(c) 50 employees.
 
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Welcome to EY’s For-profit Accounting Standards page.


This page contains content and resources that are relevant to for-profit entities with requirements to prepare financial statements in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP).

Please view our other sites for content and resources relating to Public Benefit Entities (PBEs) or visit EY New Zealand's Financial Reporting homepage.

For-profit Accounting Standard Framework overview

For-profit entities with requirements to prepare financial statements that comply with NZ GAAP are required to prepare financial statements in accordance with For-profit Accounting Standards as issued by the External Reporting Board (XRB).

The For-profit Accounting Standards Framework has a multi-tiered structure, whereby entities will fall into Tier 1 by default, but can opt-in to a lower tier if they meet the criteria of that tier.

The For-profit Entity Accounting Standard Framework is summarised in the below table.

          Entities Applicable Accounting Standards Additional Comments
        Tier 1 NZ IFRS N/A
        Tier 2
        • Not “publicly accountable”
        • Non-large for-profit public sector entities
        NZ IFRS RDR Adoption now permitted
        Tier 3 NZ IFRS Diff Rep Tiers 3 will be withdrawn from the accounting standards framework from
        1 April 2015
        Tier 4 Old NZ GAAP Tiers 4 will be withdrawn from the accounting standards framework from
        1 April 2015

         

        The removal of differential reporting and “old New Zealand GAAP”

        Tier 3 and Tier 4 for-profit entities that continue to have requirements to prepare financial statements in accordance with NZ GAAP that currently prepared financial statements in accordance with “old New Zealand GAAP” or NZ IFRS differential reporting will need to move to Tier 1 or Tier 2 for periods beginning on or after 1 April 2015 (i.e. for 31 March 2016 year-ends and onwards).