Impact of IFRS on sector neutrality and public sector in New Zealand
Until late 2002, financial reporting standards (FRS) in New Zealand were developed based on a sector neutral approach. This meant a single set of accounting standards were applied to all entities regardless of which sector they were operating in. This was achievable because when FRS was created, the financial reporting standards board (FRSB) took into account that entities in the public sector, not-for-profit sector and private sector would be applying these standards. This included having to think about a broad range of transactions, different reasons for carrying out transactions, the readers of financial statements for all sectors, and the information that those readers needed (Brady, 2009). Not only did FRS account for the range of entities that would be applying the standards but it was also written in a language that was appropriate and made sense for all entities in each sector (Brady, 2009). However, since the decision to…show more content… This meant that communication amongst those drafting the standards and those affected by the standards could easily exchange information (Devonport & van Zijl, 2010). Devonport & van Zijl (2010) outlined some advantages of having sector neutral accounting standards including, a strong accounting connection between the public and private sectors and the transition between the two sectors would be easier for professional accountants.
Although the adoption of IFRS has caused New Zealand to slowly move away from sector neutral accounting standards because it was proven to be too difficult in adapting IFRS to make them sector neutral; Bradbury & Baskerville (2007) conclude that considering public sector issues can result in a set of standards being more robust and hopes that this value is not lost even when sector neutral standards are