Eye on Reporting

EY’s monthly financial reporting newsletter

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Welcome to the June edition of Eye on Reporting.

The effective date of the new revenue standard, IFRS 15, is fast approaching. Yet many entities have yet to begin considering the impacts of this standard and are not ready for its implementation. We are pleased to announce that we have issued a short publication Rethinking revenue recognition, which outlines the key impacts of the new requirements and implementation challenges.

Internationally, the Financial Accounting Standards Board (FASB) Transition Resource Group for Revenue Recognition (FASB TRG) continued its discussions. The FASB TRG members expressed diverse views on the question related to the accounting for material rights, but generally agreed on the issues related to performance obligations satisfied over time and contract assets. Our latest IFRS Development publication outlines the topics discussed by the FASB TRG in April 2016.

We also bring you our latest publication on the new leases standard, which will significantly change the accounting for leases for many entities. For example, real estate entities will need to change some accounting practices and, potentially, some business practices as a result of IFRS 16 Leases. Our recent publication How will IFRS 16 impact real estate entities? looks at these changes for real estate entities.

This month we also highlight:

  • Our publication New for-profit standards regime is now in place whichlooks at key considerations a NZ IFRS Diff Rep for-profit reporter need to take into account on transition to NZ IFRS RDR
  • IASB completes redeliberations on amendments to IFRS 4 regarding the application of IFRS 9
  • Our webcasts on IFRS 4 and IFRS 9 update for life and non-life insurers
  • Our webcast on development in IFRS 9 impairment for banks

Kind regards
Kimberley Crook and Graeme Bennett
Financial Accounting Advisory Services

Eye on Reporting headlines:


What’s new from EY?

EY - Rethinking revenue recognition (June 2016)

Rethinking revenue recognition  (June 2016)

NZ IFRS 15 creates a single source of revenue requirements for all entities in all industries. The new revenue standard is a significant change from current NZ IFRS as it replaces all revenue standards and interpretations. However, many entities have yet to begin getting ready for the new standard. This publication outlines key impacts of the new requirements and implementation challenges.

EY - IFRS Developments Issue 120: IASB debriefs the April 2016 FASB TRG meeting on revenue

IFRS Developments Issue 120: IASB debriefs the April 2016 FASB TRG meeting on revenue

At its May 2016 meeting, the International Accounting Standards Board (IASB) received an oral update on the meeting of the Financial Accounting Standards Board (FASB) Transition Resource Group for Revenue Recognition (FASB TRG) held on 18 April 2016. At the April 2016 meeting, the FASB TRG discussed five implementation issues, three of which are relevant in both IFRS and US GAAP.

The FASB TRG members expressed diverse views on the question related to the accounting for material rights, but generally agreed on the issues related to performance obligations satisfied over time and contract assets. The other two US GAAP-only issues relate to scoping considerations for assets managers and financial institutions.

This publication outlines the topics discussed by the FASB TRG in April 2016 that are relevant in an IFRS context and, where possible, indicates if members of the IASB or its staff commented further.

EY - Real estate leases – Howwill IFRS 16 impact real estate entities?

Real estate leases – How will IFRS 16 impact real estate entities?

Real estate entities will need to change some accounting practices and, potentially, some business practices as a result of IFRS 16 Leases. IFRS 16 significantly changes the accounting for real estate lessees, requiring them to recognise most rental contracts on their balance sheets. This publication looks at the changes to accounting practices for real estate entities.
EY - New for-profit standards regime is now in place (June 2016)

New for-profit standards regime is now in place (June 2016)

In 2016, New Zealand completes its transition to a new financial reporting framework. For–profit entities that continue to have statutory reporting requirements to prepare general purpose financial statements and previously reported under Tier 3 requirements, NZ IFRS Diff Rep, will move to Tier 2 and report under NZ IFRS RDR. This publication looks at key considerations a NZ IFRS Diff Rep reporter need to take into account on transition to NZ IFRS RDR.

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IFRS news and other updates: for-profit entities

IASB completes redeliberations on amendments to IFRS 4 regarding the application of IFRS 9

During the May meeting, the IASB 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 IFRS 4 before the new insurance contracts standard (IFRS 4 Phase II) becomes effective.

The Board also made additional tentative decisions on the temporary exemption and the overlay approach. It then gave staff permission to prepare a ballot draft of the final amendments.

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IPSAS news and other updates: public benefit entities

PBE Conceptual Framework has been issued

The New Zealand Accounting Standards Board (NZASB) issued the Public Benefit Entities' Conceptual Framework (the PBE Conceptual Framework). The PBE Conceptual Framework, when applied, supersedes the Public Benefit Entities' Framework issued in September 2014.

The PBE Conceptual Framework sets out the concepts that underpin general purpose financial reporting for PBEs. It defines elements, such as assets and liabilities and contains guidance on matters such as recognition and measurement.

The PBE Conceptual Framework is effective for periods beginning on or after 1 January 2017. Earlier application is permitted, provided an entity has applied, or is applying, PBE Standards or Simple Format Reporting - Accrual for Tier 3 public benefit entities.

The PBE Conceptual Framework is available on the XRB website as follows:

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Events and webcasts

EY - IFRS 4 and IFRS 9 update for non-life insurers

IFRS 4 and IFRS 9 update for non-life insurers

IFRS 4 and IFRS 9 update for life insurers

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:

  • Timelines and latest developments
  • Main impacts on insurers
  • Implementation considerations and what to do now
EY - Developments in IFRS 9 impairment for banks - Replay

Developments in IFRS 9 impairment for banks - Replay

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:

  • Issues discussed by the IASB’s Transition Resource Group for Impairment of Financial Instruments (ITG)
  • The Basel Committee guidance on credit risk and accounting for expected credit losses
  • Significant interpretation issues and practical implementation issues in practice
  • Impact and implications for banks and similar entities

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.
EY - Webcast: Clarifications to IFRS 15 - Replay

Webcast: Clarifications to IFRS 15 - Replay

Our panel of EY subject-matter professionals will discuss the IASB’s recent amendments, Clarifications to IFRS 15, and will highlight practical challenges and a variety of examples.

Our panel will also highlight the latest thinking on selected questions discussed by members of the IASB/FASB Joint Transition Resource Group (TRG).

In this webcast, we will discuss:

  • An overview of the IASB’s clarifications to the requirements for:
    • Identifying the Performance Obligations in the Contract (Step 2) of the new revenue recognition model
    • Principal versus Agent Application Guidance
    • Licensing Application Guidance
    • Transitioning to IFRS 15
  • Key implications of the clarifications
  • Key implications of selected discussions by the TRG
Register for the webcast here.

Archived recordings of all our previous webcasts are available here.

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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

IPSAS ED 60 Public Sector Combinations

27 May 2016

 

30 June 2016

ED NZASB 2016-1 PBE IPSAS 34 Separate Financial Statements

ED NZASB 2016-2 PBE IPSAS 35 Consolidated Financial Statements

ED NZASB 2016-3 PBE IPSAS 36 Investments in Associates and Joint Ventures

ED NZASB 2016-4 PBE IPSAS 37 Joint Arrangements

ED NZASB 2016-5 PBE IPSAS 38 Disclosure of Interests in Other Entities

30 June 2016

 

 

ED NZASB 2016-6 Service Performance Reporting

29 July 2016

 

 

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Contacts

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

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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.

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