Monthly Archives: September 2013

Operating Payaments Defintion for New Accounting Standards

When the Financial Reporting Bill becomes law (by the end of the year),  clause 45 defines a “specified not-for-profit entity” as being, in respect of an accounting period if, in each of the 2 preceding accounting periods of the entity, the total operating payments of the entity are $125,000 or more.

The problem is that the current reporting standards do not define “operating payments”.

The XRB are proposing a new standard called XRB A2 which has just gone to the XRB Board for approval.  This is how they intend to define “operating payments” within the draft standard A2:

For the purpose of section 45 of the Financial Reporting Act 2013, total operating payments means the total amount of any payment (including grant payments), other than a capital payment, made by the entity during the accounting period.

For the purpose of the above paragraph, a capital payment is a payment during the accounting period for the purchase of a resource with an expected life greater than twelve months, to be owned or partly owned and used by the entity to support the entity’s activities or to provide services or products. Capital payments do not include payments for operating purposes or payments for resources to be passed to other entities.

In relation to the meaning of total operating payments, the XRB decided that this should be defined on a cash basis to minimise compliance costs.

Remember that if you are under $125,000 then you will use simple format reporting cash accounting.  If you are above $125,000 and less than $2,000,000 then you will use simple format reporting accrual accounting.

If we are able to establish a list of transactions that are Capital and Operating, we can provide better guidelines for Parishes and Synods and it would also mean that we can have a consistent base to work from.

  •  So, depreciation is out of the calculation…..
  • Is it ex GST or inclusive of GST?  I would say exclusive but the draft standard does not say so….
  • What about a payment that reduces a liability, like a loan payment, does that fit the definition?
  • Revaluations are not an operating payment so they are out.
  • Do what is the difference between a “grant” and “donation” for the purpose of the definition?
  • Payments from designated funds?

Thoughts please?

All Users

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Audit and review of Registered Charities Annual Accounts

The Government have announced that Charities with annual expenditure of $500,000 or more will be required to have their financial statements reviewed by a qualified accountant.

Charities with annual expenditure over $1 million will be required to have their financial statements audited.

The intention is that it will become the law  (in 2015) to have an audit or review and that it will need to be completed by a qualified accountant and meet the requirements set out by the Financial Reporting Bill and no doubt the ethical obligations of the Institute of Chartered Accountants.

There is a bit of water to go under the bridge yet as we have the term “operating payments” and “annual expenditure” being used in different pieces of proposed legislation.  This terminology will need to be addressed as it could make a difference between an audit or review or no review at all.

Financial Reporting

As the Financial reporting Bill is set for its third and final reading in September or October 2013, I am not going to make too many posts about this topic until the Bill is passed into law but I am pleased to tell you that the cut off for Tier 4, which is cash accounting to a set and prescribed format, has been increased from $40,000 to $125,000 which will mean more registered charities are able to use cash accounting.

Mileage Rates – 1 July 2013

Just a reminder for those who have not noticed that Information Leaflet No. 25 has changed the Connexional Travel description and rate.  Connexional Travel is now described as “Casual Travel”and is paid at $0.39 cents per km.  See page 13 of the Information Leaflet 25.