Eye on Reporting
Monthly Financial Reporting newsletter
Welcome to the August edition of Eye on Reporting
The International Accounting Standards Board (IASB) has decided to defer the effective date of IFRS 15 Revenue from Contracts with Customers, by one year. As a result, IFRS 15 will be effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. Out latest edition of IFRS Developments tells you what you need to know about the IASB’s July 2015 discussions.
This month we also highlight:
- Our publication of Applying IFRS that summarises the Joint Transition Resource Group for Revenue Recognition (TRG) discussions at their July 2015 meeting
- The latest in our series of publications on the potential implications of the new revenue recognition standard for various industry sectors, this month for engineering and construction entities
- Our Insurance Accounting Alert that summarise IASB’s July 2015 discussions on ways to mitigate impact of applying IFRS 9 before IFRS 4 Phase II.
Kimberley Crook and Graeme Bennett
Financial Accounting Advisory Services
Eye on Reporting headlines:
IFRS news and other updates
The International Accounting Standards Board (IASB) has decided to defer the effective date of its new revenue standard, IFRS 15 Revenue from Contracts with Customers, by one year. As a result, IFRS 15 will be effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. This aligns with the US Financial Accounting Standards Board’s (FASB) decision to defer the effective date of its new revenue standard by one year. This edition of IFRS Developments summarises the discussions on revenue at the July 2015 IASB meeting.
At their fifth meeting, members of the Joint Transition Resource Group for Revenue Recognition (TRG) discussed a number of implementation issues stakeholders have raised about the new revenue standards and reached general agreement on many topics. TRG members had differing perspectives on certain issues related to the application of the constraint on estimates of variable consideration and whether certain contracts should be considered completed at transition. Our Applying IFRS summarises these discussions and includes a list of questions and answers on which TRG members reached general agreement.
The IASB has proposed amendments to its new revenue standard to address licences of intellectual property, identifying performance obligations, transition and principal versus agent. This edition of IFRS Developments summarises the proposed clarifications in the IASB’s exposure draft issued on 30 July 2015.
PBE Accounting Standards amended for disclosure initiative and annual improvements
The New Zealand Accounting Standards Board (NZASB) issued two PBE Accounting Standards: Disclosure Initiative (Amendments to PBE IPSAS 1) and 2015 Omnibus Amendments to PBE Standards.
Disclosure Initiative (Amendments to PBE IPSAS 1) encourages public benefit entities (PBEs) to apply professional judgement in determining the information to disclose in their financial statements. PBEs should take the opportunity to focus disclosures on what is most relevant and important to users and remove immaterial disclosures.
2015 Omnibus Amendments to PBE Standards amends the PBE Accounting Standards:
- to align them with some changes to NZ IFRSs as a consequence of the IASB's Annual Improvements to IFRSs; and
- to align them with some changes to IPSASs as a consequence of the IPSASB's Improvements to IPSASs 2014.
Both Standards apply to Tier 1 and Tier 2 public benefit entities (PBEs) and are effective for annual financial statements covering periods beginning on or after 1 January 2016. Not-for-profit PBEs can apply the Standards early, as long as they apply the full suite of PBE Standards at the same time. Public sector PBEs can apply the Standards early for annual financial statements covering periods beginning on or after 1 April 2015.
Public Benefit Entity Consultation on accounting for donated goods
The NZASB published an Exposure Draft (ED) NZASB 2015-3 Donated Goods (Amendments to PBE IPSAS 23) for public comment. The amendments would allow entities not to recognise donated goods at the date of acquisition where it is not practicable to measure reliably the fair value of the goods in-kind. Where goods in-kind are intended for sale and the entity makes a judgement that it is not practicable to measure reliably the fair value of the goods at the date of acquisition such that the costs of recognising the donated goods at the date of acquisition outweigh the benefits, an entity will be permitted to recognise the revenue in the period when the goods in-kind are sold.
The ED is relevant for Tier 1 and Tier 2 public benefit entities. Comments are due to the NZASB by 30 October 2015.
Further information is available from the XRB website.
Industry in focus
Engineering and Construction
This edition of Applying IFRS considers the potential implications of IFRS 15 Revenue from Contracts with Customers for engineering and construction entities. It supplements Applying IFRS: A closer look at the new revenue recognition standard (June 2014) and should be read in conjunction with that publication.
The IASB continued re-deliberations on ways to mitigate the impact of adopting IFRS 9 Financial Instruments, in advance of the new insurance contracts standard (IFRS 4 Phase II), via modifications to the existing IFRS 4 Insurance Contracts standard. The IASB focused on three possible additional changes to the existing IFRS 4 to mitigate additional accounting mismatches and volatility in profit or loss that could arise when applying IFRS 9 before IFRS 4 Phase II. Our Insurance Accounting Alert tells you what you need to know about the IASB’s July 2015 discussions.
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
30 September 2015
19 October 2015
2 October 2015
28 October 2015
9 October 2015
26 October 2015
9 October 2015
26 October 2015
30 October 2015
Events and webcasts
IFRS 9 for non-financial institutions (Replay)
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. Impacts of the new standard will be varied, and may include significant development of systems and processes. It is critical to plan an initial assessment of the likely impacts of IFRS 9 in order to manage successful transition and implementation.
During this webcast, our panel will discuss the key concerns of IFRS 9 and provide insights on:
- The background to the IFRS 9 project
- Key areas of impact for non-financial institutions
- The new classification model
- The new expected credit loss model, and how it applies to non-financial institutions
- New criteria for hedge accounting, with practical examples.
Please click here to watch.
IFRS 4 Insurance Contracts - Participating contracts and update on key issues (Replay)
The IASB has substantially completed the development of the model for non-participating contracts under IFRS 4. However, issues relating to its model for insurance contracts with participating features have yet to be resolved. The coming months will be key to resolving the remaining issues in order for a standard to be issued.
Join us for an update on progress and a discussion about the key outstanding questions. This webcast will specifically discuss:
- Timelines for completion and interaction with IFRS 9
- IASB model – main tentative decisions to date and key issues for remaining re-deliberations
- Participating contracts – what is the issue, what proposals are being considered, and how will questions be resolved?
- The road ahead.
Please click here to watch.
The IASB's proposed Conceptual Framework (Replay)
Join us for a discussion of the IASB’s proposed Conceptual Framework Exposure Draft. Our subject matter professionals explain the proposed principles and concepts and discuss the consequential amendments, effective date and transition requirements.
- Proposed definitions of financial statement elements (assets, liabilities, income and expenses)
- Various measurement bases
- Presentation and disclosure issues and the principles and objectives proposed.
Click here to watch.
The new revenue recognition standard: a closer look - A webcast series for IFRS preparers: session 1, 2 and 3 (Replay)
Register for three sessions of our webcast - 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.
The second webcast will cover the requirements of Step 3 and Step 4, as well as the guidance on capitalisation of costs to obtain and fulfil contract. Please click here to watch.
The third webcast will cover the requirements of Step 5, as well as the application guidance on licenses of intellectual property. Our panel will also discuss presentation and disclosure requirements, highlighting areas that may require significant amounts of data and/or judgments by management. 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|
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.