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Stable Platform of Financial Standards Announced

Stable Platform of Financial Standards Announced

NZ aligns with UK, Europe and Australia

The Accounting Standards Review Board (ASRB) is pleased to announce the establishment of a “stable platform” of New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS).

“This is a major landmark that marks the starting point for New Zealand’s shift toward the adoption of truly global accounting standards,” said Warwick Hunt, Chairman of the ASRB.

These NZ IFRS will replace the existing NZ GAAP used in financial reporting, and are equivalent to international standards being applied in the European Union and Australia from 2005.

All reporting entities in New Zealand must comply with the NZ IFRS for reporting periods beginning on or after 1 January 2007, but many with international interests will choose to apply the new standards early for periods beginning on or after 1 January 2005.

Mr Hunt said the approval was the culmination of two years’ hard work by many in the accounting profession, including ICANZ and its standards board (the FRSB), and the ASRB. “This is only a starting point – the stable platform may not be stable for long. At a global level there’s a full agenda of projects being worked on now and many of these will have far-reaching implications here and overseas.”

Mr Hunt said New Zealand had a proud history in the area of standard-setting, and would be a willing and able participant in contributing to the debates and resolution of issues moving forward.

Also on hand to witness the establishment of the new set of standards were Minister of Commerce Margaret Wilson, Chairman of the International Accounting Standards Board (IASB) Sir David Tweedie and IASB Board member Warren McGregor.

Sir David said establishment of the standards was significant. “This is a milestone for New Zealand, and a step along the path to the development of truly global accounting standards,” he said.

Related Issues

Other issues linked to the establishment of the stable platform of standards, and on the ASRB’s programme include:

specified exemptions for differential reporting;

classification of many co-operative shares as liabilities, rather than equity;

the standard on accounting for agriculture; and

the treatment of “public benefit entities”.

Exemptions for Differential Reporting

Mr Hunt said now New Zealand’s full IFRS platform was in place, the next priority for the ASRB was to develop differential reporting standards for qualifying entities to apply if they chose early adoption in 2005. ICANZ’s standards board – the FRSB – approved an exposure draft which it plans to release before the end of the year.

Classification of Co-operative Shares

With respect to co-operative shares, Mr Hunt noted that the FRSB is currently working with the co-operative industry to arrive at a workable disclosure solution under the standard. The IASB has also agreed to examine whether their standard, on which the NZ version is modelled, needs to be amended for co-operative shares that are redeemable at fair value.

“We’re pleased the IASB has taken this issue onto its agenda and have confidence in the IASB’s due process,” said Mr Hunt. “The ASRB’s legal advice is that classifying co-operative shares as liabilities for financial reporting wouldn’t have an adverse effect in terms of the solvency test that these companies must satisfy before they make distributions to their members.”

Accounting for Agriculture

The proposed standard on accounting for agriculture generated many submissions questioning the cost/benefit justification in requiring all agricultural assets to be measured at fair value, with the change in value recognised in the income statement.

Exemptions for accounting for agriculture will be considered under the differential reporting exemptions.

Public Benefit Entities

In recognising the New Zealand IFRS will be applicable to all sectors of the economy, consideration has been given to the special reporting needs faced by public benefit entities. As a result, several stable platform standards include New Zealand specific requirements applicable solely to these entities. Responding to feedback, Mr Hunt said the ASRB had asked the FRSB to develop additional guidance material. “We hope the first of this material will be exposed for comment within the next few months,” he said.

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