Eye on Reporting

Monthly Financial Reporting newsletter

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Welcome to the October edition of Eye on Reporting.

The final version of NZ IFRS 9 Financial Instruments has been issued. We discuss the changes for classification and measurement, as well as the new requirements for expected credit losses.

This month we also highlight:

  • Our Applying IFRS publication on the ways of making financial statements more effective in communicating financial information
  • The June 2014 edition of IASB Projects: A pocketbook guide
  • The New Zealand Accounting Standards Board (NZASB) has issued Agriculture: Bearer Plants (Amendments to NZ IAS 16 and NZ IAS 41) and Fair Value Disclosures by Retirement Benefit Plans (Amendments to NZ IAS 26)
  • Our IFRS Developments publication on the recent developments in the IASB project on accounting for leases.

Kind regards
Kimberley Crook and Graeme Bennett
Financial Accounting Advisory Services

Eye on Reporting headlines:


Hot topics

  • NZASB issued the final version of NZ IFRS 9 Financial Instruments

    On 4 September 2014, the New Zealand Accounting Standards Board (NZASB) issued the final version of NZ IFRS 9 Financial Instruments, bringing together the classification and measurement, impairment and hedge accounting phases of the IASB’s project.  The standard will replace NZ IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of NZ IFRS 9.

    This version of the standard applies to Tier 1 and Tier 2 for-profit reporting entities, and is effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted but only for reporting periods beginning after the Standard has been issued (i.e. reporting periods beginning on or after 4 September 2014).  The earlier versions of NZ IFRS 9 also remain available for early adoption, but only if the entity applies one of those earlier versions before 1 February 2015.

    The standard is available on the XRB website.

    Our publication of IFRS Developments: IASB issues IFRS 9 Financial Instruments – classification and measurement focuses on the changes for classification and measurement. For a summary of the new expected credit losses requirements, read our recent publication IFRS Developments: IASB issues IFRS 9 Financial Instruments – expected credit losses.

  • Applying IFRS: Improving disclosure effectiveness

    The terms ’disclosure overload’ and ’cutting the clutter’ are used to describe a problem in financial reporting that has become a priority issue for the International Accounting Standards Board (IASB), local standard setters, and regulatory bodies. Unnecessary information within financial statements undermines the usefulness of reports by obscuring important information.  Our publication explores ways of making financial statements more effective in communicating financial information under current IFRS.

  • IASB Projects A pocketbook guide

    The June 2014 edition of IASB Projects: A pocketbook guide summarises the key features of the IASB’s major IFRS and implementation projects. It also includes some potential implications of the proposals, along with our views on certain projects.

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Other IFRS news and other updates

  • NZASB issued Fair Value Disclosures by Retirement Benefit Plans (Amendments to NZ IAS 26)

    On 4 September 2014, the NZASB issued the amendments to NZ IAS 26 Accounting and Reporting by Retirement Benefit Plans. These amendments require disclosures about the application of the fair value hierarchy to retirement benefit plan investments measured at fair value in accordance with NZ IAS 26. The amendments apply to Tier 1 and Tier 2 for-profit entities, and are effective for annual periods beginning on or after 1 January 2015, with early application permitted.

    The amending standard is available on the XRB website.

  • NZASB issued Agriculture: Bearer Plants (Amendments to NZ IAS 16 and NZ IAS 41)

    The NZASB issued Agriculture: Bearer Plants (Amendments to NZ IAS 16 and NZ IAS 41), which changed the accounting requirements for biological assets that meet the definition of bearer plants (e.g., fruit trees). The amendments apply to Tier 1 and Tier 2 for-profit entities, and are effective for annual periods beginning on or after 1 January 2016. Early application is permitted.

    Our publication IFRS Development explains what you need to know about these changes.

  • IASB issued Equity Method in Separate Financial Statements (Amendments to IAS 27)

    In August 2014, the IASB published amendments to IAS 27 Separate Financial Statements which restore the option for entities, in their separate (parent) financial statements, to account for investments in subsidiaries, associates and joint ventures using the equity method, as described in IAS 28 Investments in Associates and Joint Ventures.

    The amendments are effective for annual periods beginning on or after 1 January 2016 and must be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is permitted.

    Please note that the NZASB has not yet issued the amendments to NZ IAS 27.

  • IFRS Developments: Joint Transition Resource Group for Revenue Recognition debates implementation issues

    The inaugural meeting of the Joint Transition Resource Group for Revenue Recognition discussed implementation issues relating to IFRS 15 Revenue from Contracts with Customers, including: gross versus net revenue presentation; royalties on licensed intellectual property; and impairment of capitalised contract costs.  The discussion was intended to help the IASB and the US Financial Accounting Standards Board (FASB) understand the implementation issues arising from IFRS 15, rather than reach conclusions on the specific issues.

    Our publication IFRS Development summaries the implementation issues discussed.

  • IFRS Developments: Boards address sale and leaseback transactions, lessor disclosures

    At their July 2014 joint meeting, the IASB and the FASB continued re-deliberating ways to clarify and simplify their 2013 joint proposal on leases, reaching converged decisions on most lessor disclosures and some aspects of the accounting for sale and leaseback transactions. The Boards reached different decisions on seller-lessee gain recognition and the accounting for Type A leasebacks in sale and leaseback transactions. The FASB also deferred decisions on some topics so its staff could do more research. Our IFRS Developments publication tells you what you need to know about these developments.

  • Applying IFRS: Venezuela - translation exchange rates

    This publication looks at the foreign currency accounting considerations that are applicable to entities with operations in Venezuela.

  • NZASB issued amendments to Simple Format Reporting Standards for Tier 3 public benefit entities

    The NZASB issued two standards amending the Tier 3 Simple Format Reporting Standards: PBE SFR-A (PS) Public Benefit Entity Simple Format Reporting - Accrual (Public Sector) and PBE SFR-A (NFP) Public Benefit Entity Simple Format Reporting - Accrual (Not-For-Profit). The amendments clarify the accounting requirements for Tier 3 public benefit entities that have interests in other entities.

    Interests in Other Entities (Amendments to PBE SFR-A (PS)) is effective for annual periods beginning on or after 1 July 2014. Earlier application is not permitted. Interests in Other Entities (Amendments to PBE SFR-A (NFP)) is effective for annual periods beginning on or after 1 April 2015. Earlier application is permitted.

    The standards are available on the XRB website here for public sector entities and here for not-for-profit entities.

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Industry in focus

  • Public sector

    IPSAS Outlook - July 2014
    The latest issue of IPSAS Outlook discusses the adoption of IPSAS by New Zealand. We also share our views on ED 54 Reporting Service Performance Information.

  • Insurance

    Insurance Accounting Alert: August 2014
    The IASB continued its re-deliberations on the 2013 insurance contracts’ exposure draft. At the July 2014 meeting, the IASB held decision-making discussions on the following topics:

    • The discount rate to use for the contractual service margin (CSM) interest accretion and calculation of the present value of cash flows to unlock the CSM
    • Whether requirements beyond IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors would be needed for a change in accounting for the presentation of the changes in interest rates.
    Our latest Insurance Accounting Alert publication summaries topics discussed.

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On the horizon

Below are recent proposals that are currently open for comment to the NZASB, IASB and/or International Public Sector Accounting Standards Board (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

For-profit Discussion Paper DP/2014/1 Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging

Closed

17 October 2014

17 October 2014

For-Profit Entity Consultation about IASB ED/2014/2 Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28)

Closed

15 September 2014

 

Public Benefit Entity Consultation on IPSASB ED 55 Improvements to IPSASs 2014

19 September 2014

 

19 September 2014

ED NZASB 2014-5 Disclosure Concessions for Tier 2 For-profit Entities: NZ IFRS 15 Revenue from Contracts with Customers

14 November 2014

 

 

ED NZASB 2014-6 Omnibus Amendments to For-Profit Accounting Standards

28 November 2014

 

 

ED/2014/3 Recognition of Deferred Tax Assets for Unrealised Losses (Proposed amendments to IAS 12)

21 November 2014

18 December 2014

 

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Events and webcasts

  • IFRS 9: impairment for banks and similar entities

    In July, 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 Financial Instruments: Recognition and Measurement. The new impairment requirements will have a major impact on many entities, especially banks. Such entities should recognise that the new model will require significant development of systems and processes. It is critical to start planning an initial assessment of the likely impact of the new IFRS 9 expected credit loss model to manage a successful transition and implementation.

    In this webcast, our panel will discuss the new IFRS 9 impairment requirements and what this means for banks and similar entities with significant credit risk exposures. This includes:

    • Key principles of the expected credit loss model for loans and bonds
    • Key changes from the exposure draft
    • Significant interpretation issues and practical implementation issues
    • The impact and implications for banks and similar entities

    Please click here to register.

    Archived recordings of all our previous webcasts are available here.

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  • Contacts
    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
David Bassett  – Manager, Auckland +64 274 899 883


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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.