Introduction

The Board has today published an Interpretation for Public Benefit Entities of the Statement of Principles for Financial Reporting. The Interpretation explains how the principles in the Statement apply for public benefit entities.

The Interpretation will support the work of those bodies within the public benefit sector that are recognised by the ASB for the purpose of issuing Statements of Recommended Practice (SORPs). It will also be of interest to international work, including the conceptual framework project that is being taken forward by the International Public Sector Accounting Standards Board.

Background

In December 1999 the Board published its Statement of Principles for Financial Reporting (the Statement). This sets out the principles that the Board believes should underlie the preparation and presentation of general purpose financial statements, and is primarily intended to be relevant to the financial statements of profit-oriented entities.

The Board believes that a common set of principles should underlie the financial reporting of all entities and the Statement is, broadly speaking, also relevant to the financial statements of public benefit entities. However, some of the principles need to be re-expressed and others need a change of emphasis before they can be applied to these entities.

The project to interpret, the Statement for public benefit entities has been undertaken under the guidance of the Committee on Accounting for Public-benefit Entities (CAPE) which reports to the Accounting Standards Board.

Project history

In May 2003 the ASB published a Discussion Paper ‘Statement of Principles: Proposed Interpretation for Public Benefit Entities’, which aimed to address those aspects of the Statement that needed re-expression or a change of emphasis to make them more relevant to public benefit entities.

The Discussion Paper was generally well received and the Board then issued in August 2005 an Exposure Draft of a proposed Interpretation. This continued to reflect many of the proposals put forward in the Discussion Paper but was further developed in areas relating to:

• Liabilities for commitments to provide public benefits;
• Presentation of the residual interest and disclosure of restrictions over assets;
• Voluntary gifts
• Capital contributions (those establishing a financial interest in the residual interest);
• Capital grants (for financing the purchase or construction of an asset).

The Exposure Draft was also generally well received although respondents did raise concerns in respect of non-performance related commitments to provide public benefits and grants for financing capital projects. In considering these and other issues raised by respondents, some further changes were made. These are outlined in Appendix 4 of the Interpretation which explains its development.

Contact Project Director Alan O'Connor.

To find out how to obtain a hard copy of the ASB 'Interpretation for Public Benefit Entities of the Statement of Principles for Financial Reporting' see Publications.