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?