Young Jonathan: Financial Reporting Bill — Second ReadingText is incorporated into the Bound VolumeYoung Jonathan: Financial Reporting Bill — Second Reading[Sitting date: 02 July 2013. Volume:691;Page:11508. Text is incorporated into the Bound Volume.]JONATHAN YOUNG (National—New Plymouth):I am very pleased to stand and speak in support of the Financial Reporting Bill at its second reading. Thank you to the previous speaker David Parker for his comments regarding the select committee process which I believe worked in a way that was very conducive to seeing some very important changes take place in this bill.Tim Macindoe: A very efficient chairman.JONATHAN YOUNG: Thank you “Mr Whip”.One of the aspects that I want to touch on in terms of the select committee process was that we received a number of submissions—quite a considerable number—regarding the charities sector and the not-for-profit entities. Many of these entities—essentially charities—run on the smell of an oily rag so to speak and it is important as the previous speaker so rightly said that they are accountable to their donors. But at the same time we do not want to encumber them with such expensive accounting requirements so that probably too great a proportion of their receipts are spent on that administrative burden. So finding the balance was important.The committee on receiving many submissions came to the place in terms of the difference between a cash set of accounts and an accrual set of accounts where we lifted the threshold that was stated in the original bill for a cash basis set of accounts from $40000 up to $125000. Essentially a charity or a church or whatever that is able to employ a full-time worker or minister would generally have an income of around about $100000-plus perhaps a bit more and may not have the administrative support when they have that level of income required to do an accrual set of accounts. The difference essentially between a cash set of accounts and an accrual set of accounts is that accrued revenue is revenue that is incurred or recognised before the cash is received and accrued expenses are expenses that are recognised or incurred before cash is paid out.So it is actually quite complex to create a set of accounts. It often needs a professional and often also an auditor to check on the work that has been done in that regard as opposed to just a cash-in cash-out system which is far simpler. There are many software packages in the vicinity of $100 to $200 that handle cash book accounting very very proficiently. We felt that once a charitable organisation was receiving an annual income of greater than $125000 it was a reasonably sized entity that was probably incurring a reasonable amount of accrued expenses or revenue whether that be from interest or perhaps an invoice for maintenance on a property it owns or whatever. We felt that members of organisations that have that vicinity of income probably do need to have a more thorough set of accounts. So we worked through that process. I think some submitters wanted that threshold to be higher but we felt that that was a reasonable balance to find.The intention of this bill as I come to a close now is to rationalise the financial reporting obligations by doing a number of things apart from what I have just mentioned. It aligns such obligations with the goal of financial reporting to provide information obviously to external users to members of societies to clubs and charitable organisations and also to shareholders and the like who need an entity’s financial statements but cannot demand them. It also serves to standardise the interface between the Financial Reporting Act and other Acts by setting out core definitions and provisions with broad application to reporting entities in a new Financial Reporting Act. More important it makes the language of financial reporting consistent in all thepertinent Acts. So it is harmonising such terminology so that it becomes understandable and becomes a useful document for people.I am very happy to stand in support of the Financial Reporting Bill. I thank the members of the Commerce Committee for their cooperation in getting this through in a timely way. I think this is going to be of benefit to organisations throughout our country. Thank you.