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Guidance on Recognising Liabilities and Expenses

Publication Details

  • Guidance on Recognising Liabilities and Expenses
  • Published: 6 Nov 2013
  • Status: Current
  • Author: The Treasury
  • Hard copy: Available in PDF format only. An HTML version is available on request from
  • Persistent URL for bibliographic use:

Guidance on Recognising Liabilities and Expenses

Page updated 6 Nov 2013

This guidance document sets out when to recognise a provision for a liability of uncertain amount or timing for financial reporting purposes, particularly when that is for an obligation which is not "exchanged".

This document summarises GAAP, provides application guidance with a focus on non-exchange transactions in particular, and provides examples illustrating when it is appropriate to recognise provisions and constructive obligations.

This guidance document should be read by those responsible for accounting policies and for the preparation of general purpose financial reports in the public sector in New Zealand.

The guidance outlined in this document applies to financial statements for periods beginning on or after 1 July 2013.

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About this guidance

Introduction and purpose

Generally accepted accounting practice

Crown Accounting Policies

Application guidance

Is there a possible obligation involving a (net) economic sacrifice?

Is the possible obligation ongoing and adjustable?

Does an obligation arise pursuant to an exchange contract?

Does an obligation arise pursuant to legislation or deed of settlement or agreement?

Does an obligation arise pursuant to a policy being pursued by the Government?

Summary of guidance

Illustrative examples

  • Maori Treaty claims
  • Settlement relativity clause
  • Weathertight Homes Financial Assistance Package (FAP)
  • Multi year research grants - dependent on expenses being incurred or milestone achievements.
  • Multi year research grants - deferred payment, purpose of spending restricted, but no performance or return obligations.
  • Offer to Red Zone property owners
rle-nov13.pdf (270 KB) pp. (2),1–20
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