Eye on Reporting
Monthly Financial Reporting newsletter
Welcome to our first edition of Eye on Reporting for 2015.
The 2014/2015 edition of our Good Group New Zealand Limited illustrative financial statements for a for-profit entity reporting under NZ IFRS and our New Zealand Financial Reporting Guide have been released.
This month we also highlight:
- Our Applying IFRS publication on impairment of financial instruments under new IFRS 9
- The latest IFRS Developments publications on important aspects and practical implementation issues of IFRS 15, the new revenue standard, for entities from different industries
- Our IFRS Developments publications on the recent developments in the International Accounting Standards Board’s project on accounting for leases.
Kimberley Crook and Graeme Bennett
Financial Accounting Advisory Services
Eye on Reporting headlines:
- Hot topics
- Other IFRS news and other updates
- Industry in focus
- On the horizon
- Events and webcasts
New Zealand Illustrative Financial Statements
Good Group New Zealand Limited is an illustrative set of consolidated financial statements designed to assist for-profit entities preparing financial statements in accordance with Tier 1 for-profit accounting requirements ("full" NZ IFRS) and Tier 2 for-profit accounting requirements (NZ IFRS with reduced disclosures, i.e. NZ IFRS RDR), for 31 December 2014 and 30 June 2015 year-ends.
The publication highlights the disclosures (and related commentaries) for which NZ IFRS RDR concessions are available. It also sets out any additional NZ IFRS RDR disclosures requirements.
Please note: Good Group New Zealand Limited presents only the consolidated financial statements for the Group. Entities will need to consider legislative requirements around whether parent financial statements are also required.
For example, companies with 31 December 2014 year-end are still required to prepare separate parent financial statements, even when group financial statements have been prepared. From 31 March 2015 year ends and onwards, this legislative requirement has been removed. However, such companies should check for any other legal requirement to prepare separate parent financial statements, such as any other applicable legislative or contractual financial reporting requirements.
Our New Zealand Financial Reporting Guide 2014/15 summarises recent changes to the financial reporting framework. This includes an update for for-profit entities preparing financial statements in accordance with Tier 3 for-profit accounting standards (NZ IFRS Diff Rep) and for Public Benefit Entities (PBEs) preparing financial statements in accordance with NZ IFRS PBE standards. The Guide also provides illustrative disclosures required by the Companies Act 1993.
We are also pleased to announce the release of the Good Group (International) Limited - Alternative Format. The alternative format of the illustrative annual consolidated financial statements of Good Group (International) Limited and its subsidiaries for the period ended 31 December 2014 presents an alternative way to organise the financial statements and notes compared with Good Group (International) Limited. The statements have been prepared in accordance with IFRS issued as at 31 August 2014 and effective for annual periods beginning on 1 January 2014.
Please note that this publication is based on ‘pure’ IFRS, and does not cover New Zealand additional disclosure requirements. See above for our New Zealand publications.
Please note our first edition of the Good City Council illustrative financial statements will be released in March 2015. This publication has been designed to illustrate disclosure requirements for both Tier 1 public benefit entities (PBEs) reporting in accordance with new PBE Standards, based on International Public Sector Accounting Standards (IPSAS), and Tier 2 PBEs reporting in accordance with PBE Standards with Reduced Disclosure Requirements (PBE RDR).
New accounting standards and interpretations
NZ IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires disclosure when an initial application of a standard has an effect on the current period, or any prior period, and disclosure of the possible impact of new and revised standards and interpretations that have been issued but are not yet effective.
The attached publications indicate standards and interpretations which have become effective, and those on issue which are not yet effective, for 31 December 2014 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.
New Accounting Standards and Interpretations for For-profit Entities
New Accounting Standards and Interpretations for Public Benefit Entities
Businesses are facing an ever-complex global business environment, making reporting more complex. Key factors include:
- An increase in the volume and pace of regulatory change
- The demand for increased type and depth of information from stakeholders
- The increased frequency of reporting required
- The need to move reporting from a compliance focus, to a broader long term view of business performance.
The EY Global Financial Accounting Advisory Services (FAAS) group surveyed 500 CFOs or heads of reporting of large organizations (with greater than US$1b in revenue) to gain an understanding of the challenges facing them in the area of corporate reporting. The respondents were split evenly across Europe, Middle East, India and Africa (EMEIA), the Americas and Asia-Pacific and Japan, and covered 16 main industry sectors.
The report Connected reporting: responding to complexity and rising stakeholder demands summaries the results of the survey. The report will be of interest to the CFOs and finance function leaders as it highlights the issues that many of them face.
Other IFRS news and other updates
NZASB issued Disclosure Concessions for NZ IFRS 15
The New Zealand Accounting Standards Board (NZASB) has issued Disclosure Concessions for NZ IFRS 15. This Standard includes disclosure concessions for Tier 2 for-profit entities that apply NZ IFRS 15 Revenue from Contracts with Customers. The Standard is effective for annual periods beginning on or after 1 January 2017, with early application permitted when an entity adopts NZ IFRS 15 before 1 January 2017.
The Standard can be found on the XRB website.
NZASB issued 2014 Omnibus Amendments to NZ IFRSs
This Standard amends the For-profit Accounting Standards applied by Tier 1 and Tier 2 for-profit entities as follows.
- An amendment to NZ IFRS 1 First-time Adoption of New Zealand Equivalents to International Financial Reporting Standards to clarify the application of paragraph 4A.
- An amendment to FRS-44 New Zealand Additional Disclosures to require for-profit entities to disclose the statutory basis or other reporting framework, if any, under which the financial statements have been prepared.
- Amendments to align terminology with relevant legislation in:
- NZ IFRS 4 Insurance Contracts Appendix C Life Insurance Entities
- NZ IFRS 7 Financial Instruments: Disclosures Appendix E
- Amendments in respect of RDR concessions in:
- NZ IFRS 10 Consolidated Financial Statements
- NZ IAS 28 Investments in Associates and Joint Ventures
- Editorial corrections.
The Standard is effective for annual periods beginning on or after 1 April 2015. Early application is permitted.
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) completed their redeliberations of the definition of a lease, leaving in place the converged decisions they previously reached on how it would be applied. Our IFRS Developments tells you what you need to know about the Boards decision.
The IASB and the FASB continued redeliberating their 2013 proposal to put most leases on lessees’ balance sheets. They also reaffirmed the objective of lessee disclosures, but reached different decisions on the information that lessees would be required to disclose. Our IFRS Developments tells you what you need to know about the Boards’ decisions at their January 2015 joint meeting.
In December 2014, the IASB issued Investment Entities: Applying the Consolidation Exception, which amends IFRS 10, IFRS 12 and IAS 28 in respect of the exception to consolidation for investment entities. Our IFRS Developments highlights three issues that have arisen in practice in applying the investment entities exception.
In December 2014, the IASB issued amendments to IAS 1 and an exposure draft proposing amendments to IAS 7 as part of its Disclosure Initiative. This issue of IFRS Developments looks at the proposed amendments to IAS 7 for improved disclosures about an entity’s financing activities and its cash and cash equivalents balances.
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments bringing together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 and all previous versions of IFRS 9. This publication addresses the impairment requirements of IFRS 9.
Industry in focus
Mining and metals
The illustrative annual consolidated financial statements of Good Mining (International) Limited and subsidiaries for the period ended 31 December 2014 focus on the IFRS presentation and disclosure issues specific to the mining sector. These illustrative financial statements have been prepared in accordance with IFRS in issue at 31 August 2014 and are effective for annual periods beginning on 1 January 2014.
Please note that this publication are based on ‘pure’ IFRS, and does not cover New Zealand additional disclosure requirements
- Media & Entertainment
The Joint Transition Resource Group for Revenue Recognition (TRG) discussed 11 implementation issues at its meeting on 26 January 2015, including non-cash consideration, which will affect media and entertainment (M&E) entities that currently apply industry-specific guidance on advertising barter arrangements. M&E entities also may be interested in the TRG’s discussion of significant financing components, material rights, consideration payable to a customer, and incremental costs to obtain a contract. At the meeting, the staffs of the Boards also provided an update on their research on whether more guidance is needed on licenses of intellectual property.
- Automotive Industry
In this publication, we outline key considerations and actions for automotive entities in determining when and how to apply IFRS 15 Revenue from Contracts with Customers, the new revenue standard that was jointly issued by the IASB and the FASB.
These two editions of Applying IFRS consider the potential implications of the new revenue recognition standard, IFRS 15 Revenue from Contracts with Customers, for technology entities and software and cloud services entities. These publications supplement our Applying IFRS: A closer look at the new revenue recognition standard (June 2014), and should be read in conjunction with it.
- Asset Management
This edition of Applying IFRS considers the potential implications of the new revenue recognition standard for asset management entities
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).
Comments due to NZASB by
Comments due to IASB by
Comments due to IPSASB by
28 February 2015
25 March 2015
20 March 2015
17 April 2015
Events and webcasts
- New revenue recognition standard for health care entities (Replay)
In this webcast, our panel will discuss the key implications of the new revenue model for health care entities when accounting for patient service revenue.
Please click here to watch.
- International Public Sector Accounting - IPSAS Update 2014 (Replay)
In this webcast, our panel provides a progress update on key projects currently on IPSASB’s agenda, and also the developments regarding its governance and oversight.
Please click here to watch.
- The new revenue recognition standard: a closer look - A webcast series for IFRS preparers: session 1 (Replay)
Register for session 1 of our upcoming three-part webcast series - The new revenue recognition standard: a closer look. The webcast series will include a detailed discussion and a variety of examples for each step of the new revenue recognition model by our panel of subject-matter professionals.
The first webcast in this series will cover the requirements of Step 1 and Step 2 of the new revenue recognition model, as well as the application guidance on warranties. Our panel will also discuss the transition requirements of the new standard.
Please click here to watch.
Archived recordings of all our previous webcasts are available here.
For more information on any of the points raised in this newsletter, please contact a member of EY’s 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|
|David Bassett – Senior Manager, Auckland||+64 274 899 883|
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.