Consultation documents issued for comment
The New Zealand Accounting Standards Board (NZASB), a sub-board of the External Reporting Board (XRB), is inviting
organisations to have their say into how their going concern position is disclosed in financial reports in the wake of
growing economic uncertainty.
The NZASB has recently issued two consultation documents, known as exposure drafts, proposing more specific disclosure
requirements for businesses, public sector and not-for-profit organisations on their going concern basis for preparing
financial statements. Financial reports are prepared assuming that an organisation will continue to operate for at least
the next 12 months.
The NZASB Chair, Kimberley Crook, said, “the proposals build on existing requirements in accounting standards and are
designed to help entities to provide relevant and transparent information, which investors and other users of financial
statements are looking for during periods of increased economic uncertainty.”
The economic effects of COVID-19 are expected to have a significant impact on the going concern assessments of a large
number of organisations in New Zealand, both now, and for some time in the future. Many will need to apply significant
judgement and/or consider the impact of material uncertainties in assessing their organisation’s ability to continue as
a going concern.
The consultation documents propose more specific disclosure requirements where management has determined that the going
concern basis of financial statement preparation is appropriate, but is aware of events or conditions that may cast
significant doubt on the organisation’s ability to continue as a going concern. In these situations, readers of
financial statements need clear disclosure.
“Directors will need to consider whether the organisation they govern should apply the going concern assumption for
financial reporting purposes, and clearly disclose any significant judgements and material uncertainties they considered
in coming to this conclusion,” said Crook.
While the proposed effective date is annual periods ending on or after 30 September 2020, organisations currently
preparing their annual financial statements may find it helpful to use the more specific going concern disclosure
requirements.
The comment period for the two exposure drafts closes 24 July 2020. The drafts are available at:
The External Reporting Board (XRB) is the Crown Entity responsible for financial reporting strategy and standard setting
in New Zealand. Its focus is to establish accounting and assurance standards that engender confidence, assist in
international competitiveness and enhance accountability. The XRB has two technical boards, the New Zealand Accounting
Standards Board (NZASB) and the New Zealand Auditing and Assurance Standards Board (NZAuASB). For more information on
the XRB, NZASB or NZAuASB visit www.xrb.govt.nz