Eye on Reporting
EY monthly financial reporting newsletter
Welcome to the August edition of Eye on Reporting.
For for-profit entities with June year-ends, the beginning of the first comparative period for the new revenue standard, IFRS 15 Revenue from Contracts with Customers, is now less than one year away. We have recently updated our revenue publication, Applying IFRS: Joint Transition Resource Group for Revenue Recognition – items of general agreement.
In addition to this, further insights as to the potential implications of the new leases standard, IFRS 16 Leases, continue to emerge. Our latest publications summarise the implications of IFRS 16 for consumer products and retail entities, and telecommunications entities.
Our quarterly New Accounting Standards and Interpretations publications have been updated to reflect accounting standards issued as at 30 June 2016. Entities finalising their 30 June 2016 financial reports can use these documents as a basis for preparing their disclosures on standards issued but not yet effective.
This month we also highlight:
- Our latest Applying IFRS publication on some accounting and reporting considerations of the UK’s vote to leave the EU that entities may need to consider in preparing their reports
- The International Accounting Standards Board’s (IASB) narrow-scope amendments to IFRS 2 Share-based Payment as well as our recent IFRS Developments issue that summarises the amendments to IFRS 2
- The IASB’s exposure draft on clarification of the definition of a business and accounting for previously held interests
- The Global Public Policy Committee’s (GPPC) paper, The implementation of IFRS 9 impairment requirements by banks, which promotes high-quality implementation of the accounting for expected credit losses under IFRS 9
- Our latest Insurance Accounting Alerts on IASB’s discussions held during the May and June 2016 meetings
- The New Zealand Accounting Standard Board’s (NZASB) exposure draft on financial instruments for public benefit entities.
Kimberley Crook and Graeme Bennett
Financial Accounting Advisory Services
Eye on Reporting headlines:
- What’s new from EY?
- IFRS news and other updates: for-profit entities
- IPSAS news and other updates: public benefit entities
- Events and webcasts
- On the horizon
What’s new from EY?
This publication summarises the issues on which Joint Transition Resource Group for Revenue Recognition (TRG) members generally agreed, at both joint TRG and US Financial Accounting Standards Board (FASB) TRG meetings on revenue recognition, through to April 2016. While the unofficial views of the members of the TRG are non-authoritative, they represent the latest thinking on each topic. This publication is an update of our Applying IFRS: Joint Transition Resource Group for Revenue Recognition items of general agreement issued in December 2015.
Consumer products and retail (CPR) entities will need to change certain lease accounting practices when implementing the new leases standard, IFRS 16 Leases, which significantly changes the accounting for leases by lessees and could have far-reaching implications for telecom entities’ finances and operations. These publications summarise the new standard and describe some sector-specific issues CPR and telecom entities may wish to consider.
Standards and interpretations in issue at 30 June 2016
There are no major new standards or amendments becoming effective for the June 2016 year-end reporting period. Nevertheless, there are some amendments to standards that are applicable for the first-time in June 2016. The attached EY New Zealand publications list standards and interpretations that are effective for the annual period ended 30 June 2016. The publications also provide an overview of standards and interpretations that have been on issue but are not yet effective for 30 June 2016 year-ends.
It is important to note that there are two separate publications, one for for-profit entities and one for public benefit entities (PBEs). Differences in the accounting standards framework applying to for-profit entities and PBEs make it important to select the applicable publication.
The June 2016 edition of IFRS Update is also available. This publication provides an overview of IFRS standards and interpretations effective for years ended 30 June 2016 and thereafter. IFRS Update also summarises the key features of selected International Accounting Standards Board (IASB)’s projects and the most recent agenda rejection notices published by the IFRS Interpretations Committee. Please note that the IFRS Update publication is based on ‘pure’ IFRS, and does not cover New Zealand additional disclosure requirements.
On 23 June 2016, the people of the UK voted to leave the EU (Brexit). This publication addresses financial accounting and reporting considerations that entities may need to consider in preparing their upcoming interim (or annual) financial statements and reports.
IFRS news and other updates: for-profit entities
IASB issued narrow-scope amendments to IFRS 2
The International Accounting Standards Board (IASB) issued amendments to IFRS 2 Share-based Payment to eliminate diversity in practice in the classification and measurement of particular share-based payment transactions. The amendments provide requirements on the accounting for:
- The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments
- Share-based payment transactions with a net settlement feature for withholding tax obligations and
- A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled
Our recent IFRS Development issue summarises the amendments to IFRS 2.
IASB issued an ED on clarification of the definition of a business and accounting for previously held interests
The IASB recently released an exposure draft, ED/2016/1 Definition of a Business and Accounting for Previously Held Interests (Proposed Amendments to IFRS 3 and IFRS 11), which proposes amendments to clarify:
- The definition of a business
- How an acquirer should account for previously held interests in a business if acquiring control, or joint control, of that business
The Exposure Draft can be found here.
The proposals in the Exposure Draft are relevant for Tier 1 and Tier 2 for-profit entities. The New Zealand Accounting Standard Board (NZASB) is seeking feedback on the proposals contained in the Exposure Draft. Once the IASB issues this amending standard, NZASB will issue an equivalent amending standard in New Zealand for those for-profit entities that apply NZ IFRS.
Comments on the Exposure Draft are due to the NZASB by 30 September 2016 and to the IASB by 31 October 2016.
Our recent issue of IFRS Developments summarises the proposed amendments.
On 17 June 2016, the world's six largest accounting networks under the auspices of the Global Public Policy Committee (GPPC) issued a paper to promote high-quality implementation of the accounting for expected credit losses. IFRS 9 Financial Instruments is effective from 1 January 2018 and the new accounting requirements for expected credit losses represent a significant change to the financial reporting of banks.
Many stakeholders, including investors, regulators, analysts and auditors will be affected. Given the importance of banks in the global capital markets and the wider economy, the effective implementation of the new standard has the potential to benefit many. The GPPC’s paper is intended to help those charged with governance to identify the elements of a high-quality implementation. The paper can be assessed here.
The IASB has concluded redeliberations on the proposed amendments to IFRS 4 Insurance Contracts to allow entities issuing contracts within the scope of IFRS 4 to mitigate certain effects of applying IFRS 9 Financial Instruments together with IFRS 4 before IFRS 4 Phase II becomes effective. Our May 2016 edition of Insurance Accounting Alert tells you what you need to know about the IASB’s discussions.
During the June meeting, the IASB discussed several sweep issues that arose during the drafting process for the forthcoming insurance contracts standard. The main topic was the measurement of the contractual service margin (CSM) after inception. This publication tells you what you need to know about the IASB’s discussions.
IASB released a webinar on the Disclosure Initiative project
The IASB is planning to publish a Discussion Paper on Principles of Disclosure by the end of 2016. In June 2016, the IASB released the webinar which provides an overview of the Disclosure Initiative and details the content of the Principles of Disclosure Discussion Paper.
The webinar can be found here.
IPSAS news and other updates: public benefit entities
NZASB issued an ED on financial instruments
The NZASB issued an Exposure draft, ED NZASB 2016-7 PBE IFRS 9 Financial Instruments (the ED), which is based on IFRS 9 Financial Instruments. Compared with PBE IPSAS 29, IFRS 9 introduces a number of changes to the recognition and measurement of financial instruments, such as a single, forward-looking ‘expected loss’ impairment model.
The proposals in the ED are relevant for Tier 1 and Tier 2 public benefit entities (PBEs). The NZASB plans to have a PBE Standard based on IFRS 9 available for voluntary adoption by PBEs when NZ IFRS 9 becomes effective in the for-profit sector.
Having a PBE Standard based on IFRS 9 would:
- Assist mixed groups (being groups that include both PBEs and for-profit entities) by reducing the potentially significant compliance costs relating to consolidation adjustments that could otherwise occur, due to the significant differences between the requirements in NZ IFRS 9 and PBE IPSAS 29
- Allow public benefit entities (PBEs) the opportunity to adopt the new requirements in IFRS 9
Comments on the ED are due to NZASB by 30 September 2016.
The ED can be found here.
Events and webcasts
The IASB has finalised their discussions on IFRS 4 and the option for insurers to defer the implementation of IFRS 9 – with revised standards expected to be issued in the next few months.
Join us for an update of the latest developments and a view on the main expected impacts on insurers in the life and non-life industries. We will also suggest some preparation activities that insurers may wish to undertake during 2016.
During this session, we will discuss:
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments. The standard is effective for annual periods beginning on or after 1 January 2018, with early application permitted.
The new impairment requirements will have a major impact on many entities, especially banks. In our October 2014 webcast, IFRS 9: impairment for banks and similar entities, we discussed the key principles of the expected credit loss model and highlighted the impact and implications of the new expected credit loss requirements for banks and similar entities.
In this webcast, our panel will discuss developments in interpreting and implementing the IFRS 9 impairment requirements and what this means for banks and similar entities with significant credit risk exposures. This includes:
Note: Click here to access the October 2014 webcast in which we discussed the key principles of the IFRS 9 impairment model.
You may also access IFRS publications and similar resources by clicking here.
Archived recordings of all our previous webcasts are available here.
On the horizon
Below are recent proposals that are currently open for comment to the NZASB, IASB and/or IPSASB. Please refer to the current exposure draft section on the XRB website for more details (www.xrb.govt.nz).
|Standard/Exposure Draft|| |
Comments due to NZASB by
Comments due to IASB by
Comments due to IPSASB by
30 September 2016
30 September 2016
31 October 2016
For more information on any of the points raised in this newsletter, please contact a member of EY Financial Accounting Advisory Services Team:
|Kimberley Crook – Partner, Auckland||+64 274 899 535|
|Graeme Bennett – Partner, Auckland||+64 274 899 943|
|David Pacey – Executive Director, Auckland||+64 212 425 716|
|Lara Truman – Executive Director, Wellington||+64 274 899 896|
|Alex Knyazev – Senior Manager, Auckland||+64 218 53 152|
The information contained in this newsletter does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to action being taken on any of the information.