All registered charities must complete annual reporting to Charities Services. This includes filling out an Annual Return and attaching financial statements. Up until now, there have been no minimum standards on the content or the quality of those financial statements. New reporting standards came into effect on 1 April 2015 and registered charities will need to prepare financial statements in line with these new standards.

The reporting standards are set by the External Reporting Board (XRB), the independent Crown Entity responsible for developing and issuing accounting standards. With over 27,000 registered charities in New Zealand, of all different shapes and sizes, four different reporting tiers have been developed to allow smaller charities to prepare financial statements on a simplified basis. Larger charities will be required to use a set of accounting standards.

Charities Services expects that about 95% of registered charities will qualify to use the simplified standards. These charities have the option of using specially designed templates and guidance notes.

Refer to the Charities Services resource ‘Which tier will I use?’ for more information.

What are financial statements?

Financial statements provide information about a charity’s activities, transactions and balances. They include a statement of financial performance (profit or loss) which shows revenue and expenses, and a statement of financial position (balance sheet) which lists all the assets and liabilities.

People interested in a charity’s financial statements read them so they can make informed decisions. These people include the governance group, members, funders, and donors. It is important that financial statements fairly present the activities, transactions and balances and give the whole story of a charity.

The new reporting standards for tier 3 and 4 refer to the financial statements as a ‘performance report’. This is due to the fact that those standards require charities to provide non-financial information, such as its mission or purpose and what it does, in addition to financial information.

To read full article and view a 'how to' video please click here. 

This information was sourced directly from the Charities Services website here.