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Financial Reporting by the Government as a Whole

Page updated 23 Nov 2009

Introduction to financial reporting by the Government of New Zealand, including an overview of reporting requirements on Government sub-entities, the accounting standards complied with, accounting policies and guidance employed in preparing financial reports and research and other papers on financial reporting by the Government as a whole.

Introduction

The Public Finance Act 1989 requires the Government to prepare monthly and annual consolidated financial statements for the Government reporting entity. These financial statements provide information for decision-making and are a critical component of the accountability process. The Government uses these statements to give a comprehensive account of its use of resources and its assets and liabilities.

The Fiscal Responsibility and Whole-of-Government Financial Statements chapters of the Guide to the Public Finance Act are a useful overview of the Government's reporting process and the types of entities that are included.

In undertaking the financial reporting and forecasting roles, the Treasury’s desired result is that the Minister of Finance and key stakeholders consider that reporting fully illuminates actual or prospective performance and impacts on the economy. Treasury’s role in financial reporting by the Government as a whole includes managing the financial reporting process for the Government reporting entity, (including the executive judicial and legislative branches of Government) that leads to publication of the Financial Statements of the Government; participating in the development of accounting standards that apply to the Government as a whole, public sector entities and reporting entities generally, choosing accounting policies and preparing guidance to support the desired result, and communicating and liaising with the stakeholders to ensure they can understand the Government’s fiscal strategy and monitor progress towards it.

Crown Reporting Requirements

The Treasury collects information from Government sub-entities, including State-owned enterprises (SOEs) and Crown entities (CEs), so that it can report the financial results on a line-by-line basis in its financial statements.

The reporting requirements of each organisation depends on the materiality of its accounts to the consolidated financial reports. In order to ensure consistency in the preparation of the Financial Statements of the Government, information must be provided that is consistent with the Crown accounting policies.

A practical framework has been developed to identify and eliminate (i.e. not double count) revenue and expense flows, asset and liability balances, and cash flows between and within the Crown reporting entities (e.g. department to department, SOE to department and vice versa, and department to CE and vice versa) during the consolidation of the Government financial statements.

For more information see An Overview of Crown Reporting Requirements.

Treasury has also recently developed a Protocol for Responding to Material Uncertainties in Interim Financial Statements to identify the options that Treasury will consider when there are material uncertainties in information being prepared for the monthly Financial Statements of the Government.

Specific requirements relating to the current reporting cycle can be found in Treasury Circulars.

NZ IFRS and NZ GAAP

NZ GAAP is established by the approval of financial reporting standards and authoritative guidance by the New Zealand Accounting Standards Review Board (ASRB), an independent Crown entity.

The ASRB is strongly committed to the international convergence and international harmonisation of financial reporting standards. This commitment manifests in the Board’s support and involvement with both the International Accounting Standards Board (“IASB”) and International Public Sector Accounting Standards Board (“IPSASB”) and the Board’s decision to adopt International Financial Reporting Standards (“IFRS”) in 2002.

Before the adoption of IFRS, the existing standards were sector-neutral in that they applied equally to entities in all sectors. The ASRB has decided that with adoption of IFRS there should continue to be one set of standards for application by all entities. However, IFRS are developed for application by profit-oriented entities and, therefore, in order for IFRS also to be applied by public benefit entities it is necessary in the case of some of the IFRSs to modify or introduce additional requirements on measurement and recognition applicable to public benefit entities.

In most cases, the intended overall effect of modifying or introducing additional requirements for public benefit entities is intended to reflect differences between the sectors, including differences in user information needs that warrant a different accounting treatment or additional guidance for public benefit entities. Occasionally, it may also be appropriate to modify an IFRS for public benefit entities and/or introduce additional requirements for other reasons.

In reaching a view on whether modifications should be made or guidance added, the ASRB is mindful of the approach adopted by the AASB and the IPSASB.  The ASRB is currently seeking comment on a proposal that New Zealand should work towards International Public Sector Accounting Standards (IPSAS) being used as the basis for reporting in the public sector.  To assist in responding to that proposal, the Treasury has sought a review of the government’s financial statements for compliance with IPSAS.  The results from that review are available at International Public Sector Accounting Standards - Information Release.

The Government reporting entity has adopted New Zealand equivalents to International Financial Reporting Standards (NZIFRS) from the financial year beginning 1 July 2007.

For further information on NZ IFRS see New Zealand International Financial Reporting Standards.

Accounting Policies and Guidance

Financial Forecasting and Reporting by the NZ Government complies with NZ IFRS. Because NZ IFRS is principles based, judgment is still required in preparing financial forecasts and reports.

To ensure consistency in accounting treatment and to provide support to entities submitting information for the purposes of the consolidated financial statements and forecasts Treasury has prepared a set of Crown accounting policies and other guidance material. These can be accessed from Accounting Policies and Guidance.

Research and Other Publications

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