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ANNUAL REPORT 2020 | 27 Significant accounting policies REPORTING ENTITY The Neurological Foundation of New Zealand (the 'Foundation') is a public benefit entity for the purposes of financial reporting in accordance with the Financial Reporting Act 2013. The Foundation is a charitable organisation incorporated under the Charitable Trusts Act 1957. The primary activity of the Foundation is funding research, education and information to reduce the level of suffering and premature death from diseases of the brain. The financial statements of the Foundation are for the year ended 31 March 2020. STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with Public Benefit Entity Not For Profit (PBE NFP) Reduced Disclosure Regime and other applicable Financial Reporting Standards, as appropriate for Tier 2 not-for-profit public benefit entities, for which all reduced disclosure regime exemptions have been adopted. The Foundation qualifies as a Tier 2 reporting entity as for the two most recent reporting periods it has had between $2m and $30m operating expenditure. BASIS OF MEASUREMENT The financial statements are prepared on the historical cost basis, with the exception of certain financial instruments as disclosed in the financial instruments accounting policy. PRESENTATION AND FUNCTIONAL CURRENCY The financial statements are presented in New Zealand dollars ($) which is also the Foundation's functional currency. All numbers presented have been rounded to the nearest dollar, unless otherwise stated. USE OF ESTIMATES AND JUDGEMENTS The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Where material, information on significant judgements, estimates and assumptions is provided in the relevant accounting policy or note disclosure. No such significant judgements, estimates and assumptions were made during the period. The estimates and underlying assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances. Estimates are subject to ongoing review and actual results may differ from these estimates. Revisions to accounting estimates are recognised in the year in which the estimate is revised and in any future years affected. COMPARATIVES The comparative financial period presented is 12 months. Comparatives have been reclassified from that reported in the 31 March 2019 financial statements where appropriate to ensure consistency with the presentation of the current year's position and performance. The net asset position and net surplus reported in comparatives is consistent with previously authorised financial statements. SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted are consistent with those of the previous financial year. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Statement of Financial Position. TRADE AND OTHER RECEIVABLES Trade and other receivables are stated at the estimated realisable value. Bad debts are written off in the year in which they are identified. TRADE AND OTHER PAYABLES Trade and other payables are stated at cost. FINANCIAL INSTRUMENTS Financial instruments comprise investments in shares, bonds, fixed interest securities and managed funds, trade and other receivables, cash and cash equivalents, term deposits, loans and borrowings, and trade and other payables. Financial assets and financial liabilities are recognised when the Foundation becomes a party to the contractual provisions of the financial