Charities often receive donations and services in kind on a regular basis. In kind donations and services means instead of the charity being donated money to buy goods and services, the goods and services themselves are donated at no direct financial cost to the charity.
The effectiveness of a charity’s Audit & Risk committee is important. One of the key objectives of an Audit & Risk committee is to ensure that internal controls are assisting in managing risks and ensuring funds are used efficiently and effectively.
In addition to the other mandatory reporting changes discussed in previous articles, which relate to charities with annual expenditure of less than $2m, another significant change is that charities are required to report related party transactions.
For accounting periods commencing on or after 1 April 2015 all registered charities must prepare financial statements which conform to new financial reporting standards. Many consider this to be the most significant change in financial reporting for the New Zealand charities sector ever.
In addition to the other mandatory reporting changes that have taken place for charities, one of the most notable changes from an accounting treatment perspective is in relation to revenue recognition, particularly grants and donations.
The accounting profession is on the start line of the most significant event in financial reporting this decade - the implementation date for the three new financial reporting standards affectionately known as the ‘Big 3’: Revenue NZ IFRS 15, Financial Instruments NZ IFRS 9 and Leases NZ IFRS 16.
This article will help Charities with annual expenditure under $2m to understand their obligations with regards to Simple Format Reporting and the preparation of their ‘Performance Report’. There are two options available known as cash and accrual.
NZ IFRS 15 Revenue from Contracts with Customers is the new accounting standard that will replace existing revenue standards and pronouncements in providing guidance on how to account for revenue. The new standard is effective for annual periods from 1 January 2018 and at a minimum one comparative (1 January 2017) period would need to be presented.