Incorporated Societies reporting requirements

There has been plenty written on the new Financial Reporting framework and its effect on the reporting and audit requirements for Companies and ‘Public Benefit Entities’ – namely charities.

So where does this leave incorporated societies who are not registered charities?

An incorporated society should file annual financial statements that meet the society’s reporting obligations as set out in section 23 of the Incorporated Societies Act 1908, with the Registrar of Companies. If these are not lodged, there is a risk the Registrar may take this as an indication the society has ceased, and begin steps to remove the society from the Register.

Financial statements are due to be submitted to the Registrar by the end of the month following the AGM.

Whether these are audited, reviewed or simply compiled is dictated by the rules of the societies.

Guidance for the form of the financial statements is given on the Incorporated Society’s website, as an example it will follow:

“The annual financial statements should include:

  1. The society’s full name
  2. The financial year that the financial statement has been prepared for
  3. The society’s income and expenditure for that financial year
  4. The assets and liabilities, as at the close of the financial year
  5. All mortgages, charges, and securities of any description affecting any of the society’s property at the close of that year
  6. An audit or review report (where a society’s rules specify that an auditor or reviewer must be appointed)
  7. A certificate signed by an officer of the society confirming that the statement has been submitted to and approved by the members at a general meeting.”
So what about the new rules for incorporated societies?

There is some movement in this space. A review of the Incorporated Societies Act 1908 was undertaken by the Law Commission. Its main recommendation was the replacement of the 1908 Act with a new one. Subsequently, the Ministry of Business, Innovation and Employment (MBIE) issued an Exposure Draft of the Incorporated Societies Bill last year.

The key proposed changes for financial reporting requirements are that societies will be required to prepare financial statements in accordance with accounting standards issued by the External Reporting Board. In essence, Incorporated Societies will have the same obligations as Charities.

This would result in the adoption of a four tier system of financial reporting;

Incorporated Societies Tier TablesComments on the Exposure Draft are due with MBIE by 30 June 2016.

Our opinion is that the current Act needs replacement and convergence of financial reporting standards is long overdue.  We look forward to hearing your thoughts.

 

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