The fact that New Zealand has adopted the IFRS (International Financial Reporting Standards) means that PBE (Public Benefit Entities) will need to comply with the IPSAS (International Public Sector Accounting Standards). The fundamental reasons for adopting the framework are to harmonise with Australia, focus more on the nature of users and to compete globally and internationally.

According to XRB (External Reporting Board) the Financial Reporting Bill was introduced on 31 July 2012 and is expected to be enacted in mid-late 2013. Council as a local governing authority will meet the definition of a PBE (Public Benefit Entity) as their primary objective is to provide social benefit to the community and they are non-profit driven. As the 'ED (Exposure Drafts) PBE Standards' was implemented in June this means that Council will need to comply with XRB A1 ((FP (For-Profit) Entities + PS (Public Sector) PBEs Update)). The new definitions in XRB A1 Part C define the Tiers as 'Tier 1 default PBE Standards' and 'Tier 2 PBE Standards RDR (Reduce Disclosure Regime).' Council would be subject to Tier 1 the default PBE Standards as their expenses are greater than $30 million and they meet the definition of 'Public Accountability' as they are entrusted with public resources and they have a fiduciary capacity in public assets. As the new approach of IPSAS would be a mixture of IFRS, IAS (International Accounting Standards) and FRS (Financial Reporting Standards); this is not likely to impact Local Government as Council is not subject to Tier 2 PBE Standards RDR, which has a 50% plus reduction of disclosures; therefore there are trivial ramifications in Council transitioning from NZIFRS to PBE Standards.

The principle guidance’s for PBE in NZIFRS are: NZIAS 24 Related Party Disclosures, NZIAS 16 Plant Property and Equipment and NZIAS 14 Segment Reporting. In NZIAS 24 'related party disclosures do not apply to arms-length transactions between entities subject to common control or significant influence by the crown,' which means buyers and sellers that is independent and act in their own interest will not be disclosed as a related party. To relate Council trade with independent contractors will not be considered as a related party as disclosed in the financial statements; whereas intragroup related party transactions are eliminated and consolidated in the financial statements. In NZIAS 16 'the treatment of assets acquired at nil or nominal cost,' means Council will look historically as the public want to know what has been accomplished and how it has benefited the community. In order for Council to comply with NZIAS 16 they will record their costs using the cost model under section 30 'assets are recognised at cost less any accumulated depreciation and impaired losses;' therefore items are measured at cost value to meet break even to ensure minimum funding, donations and memberships are met; resulting in an equilibrium point. Alternatively items can be recorded at acquisition date to meet the definition of nil or nominal cost, for example Council’s infrastructure are based on the value of vested investment where builders build roads as part of their development and the Council will retain ownership and be responsible for maintenance; discussed with Leslie Boardman, Senior Financial Accountant. In NZIAS 14 Council would not need to comply with segment reporting as a parent company would be required to include subsidiaries.

To conclude the new accounting framework does not have a significant effect on Council’s financial reporting as at present.