Eye on Reporting - November 2013

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Welcome to the November edition of Eye on Reporting.

On 20 November 2012, the Financial Reporting Bill (“the Bill”) passed its final reading before Parliament. The Bill will introduce changes for various entities, with the key changes impacting on companies, partnerships and registered charities.

The provisions in the Bill remain largely consistent with the previous versions; however, changes were made to reduce the size threshold for “large” overseas companies that carry on business in New Zealand and New Zealand subsidiaries of overseas companies, which means that more of these entities will continue to have preparation, audit and filing requirements.

For companies and partnerships, these changes are expected to be effective for reporting periods beginning on or after 1 April 2014 i.e. from 31 March 2015 year ends and onwards. The legislative changes for registered charities are expected to be effective for periods beginning on or after 1 April 2015.

For more details on the Bills see our Hot Topics section below, and keep a watch out in next month’s Eye on Reporting for our publication summarising the new financial reporting framework.

We are also pleased to report that the International Accounting Standards Board has issued a new version of IFRS 9 Financial Instruments (2013) that includes; (a) the new hedge accounting requirements; (b) a ‘fast-track’ to applying the requirements of IFRS 9 for the presentation of own credit risk-related fair value gains and losses; and (c) removes the 1 January 2015 mandatory effective date for IFRS 9.

The new version of IFRS 9 still needs to go through the New Zealand process to be incorporated into NZ IFRS before it can be applied by New Zealand entities.

We are holding a seminar on the new hedge accounting requirements in early 2014. This is separate from our seminars on the basics of hedge accounting to be held in December. If you haven't already, please register your interest. for the 2014 session.

This month we also highlight:

  • The issue of the suite of Simple Format Reporting Standards and Explanatory Guidance to be applied by Tier 3 and Tier 4 Public Benefit Entities (PBEs).
  • The issue for comment of a package of exposure drafts (EDs) that operationalise the new Accounting Standards Framework for Tier 1 and Tier 2 Not-for-Profit PBEs. The EDs include “not-for-profit enhancements” to the PBE Standards issued in May 2013, which were initially developed for the public sector PBEs.

If you would like any further information on any of these topics or the topics below, please get in touch with our Financial Accounting Advisory Services Team.

    To find out more about the services we offer in this area please contact EY's Financial Accounting Advisory Services Team

     

    Kimberley Crook

    Partner, Auckland

    +64 9 300 7094

    David Pacey

    Executive Director, Auckland

    +64 212 425 716

    Ravi Kumar

    Senior Manager, Auckland

    +64 212 214 717

    David Bassett

    Manager, Auckland

    +64 274 899 883

    Kind regards
    Kimberley Crook
    Financial Accounting Advisory Services


    Hot topics

    • Financial Reporting Bill
      This week the Financial Reporting Bill (“the Bill”) passed its third and final reading before Parliament. Before the Bill’s final reading, a supplementary order paper divided the Bill into two separate bills, being the Financial Reporting Bill and the Financial Reporting (Amendments to Other Enactments) Bill, both of which are now awaiting Royal Ascent before becoming law. The Financial Reporting (Amendments to Other Enactments) Bill contains the consequential amendments to other acts.

      Together, the Bills will introduce changes for various entities, with the key changes impacting on companies, partnerships and registered charities. For companies, the changes will result in the removal of the statutory requirement for many small and medium-sized companies to prepare general purpose financial reports. Conversely, for partnerships, the changes will introduce a statutory requirement for large partnerships to prepare general purpose financial reports, to align their reporting requirements with large companies.  The changes will also introduce a statutory requirement for registered charities to prepare general purpose financial reports.

      Since the Bill’s previous reading, two key amendments were made to;
      • Reduce the size thresholds for “large” overseas companies that carry on business in New Zealand and New Zealand subsidiaries of overseas companies, to assets over $20m (instead of $60m) or  revenue over $10m (instead of  $30m).  This means that more of these entities will continue to have preparation, audit and filing requirements.
      • Increase the penalties for failure to comply with financial reporting obligations for FMC reporting entities. 
        Provisions in the Bill relating to companies and partnerships are expected to be effective for reporting periods beginning on or after 1 April 2014 i.e. from 31 March 2015 year ends and onwards. The legislative changes for registered charities are expected to be effective for periods beginning on or after 1 April 2015.
         
      The Financial Reporting Act 1993 will remain effective for reporting entities until the applicable provisions in the Bill become effective.

      In next month’s Eye on Reporting, we will include an updated version of our publication summarising the new financial reporting framework.

    • IFRS Developments Issue 68: The IASB issues IFRS 9 (2013)
      On 19 November 2013, the International Accounting Standards Board (IASB) issued a new version of IFRS 9 Financial Instruments (2013).

      The new standard:
      • brings into effect the new hedge accounting requirements that will allow entities to better reflect their risk management activities in the financial statements;
      • allows entities to elect to apply the accounting for gains and losses from own credit risk without applying the other requirements of IFRS 9 at the same time; and
      • removes the 1 January 2015 mandatory effective date of IFRS 9, to provide sufficient time for preparers of financial statements to make the transition to the new requirements.
         
      Our IFRS Development Issue 68 publication provides a summary for the new Standard.

      The new version of IFRS 9 still needs to go through the New Zealand process to be incorporated into NZ IFRS before it can be applied by New Zealand entities.

      We are holding a seminar on the new hedge accounting requirements in early 2014. This is separate from our seminars on the basic of hedge accounting to be held in December. If you haven't already, please register your interest. for the 2014 session.

    • Simple Format Reporting Standards Approved
      The New Zealand Accounting Standards Board (NZASB) and External Reporting Board (XRB) have approved for finalisation and issue the following four Simple Format Reporting Standards for Tier 3 and Tier 4 public benefit entities:
      • Public Benefit Entity Simple Format Reporting - Accrual (Public Sector);
      • Public Benefit Entity Simple Format Reporting - Cash (Public Sector);
      • Public Benefit Entity Simple Format Reporting - Accrual (Not-For-Profit); and
      • Public Benefit Entity Simple Format Reporting - Cash (Not-For-Profit).
         
      The Board also approved for finalisation and issue the four associated explanatory guides.

      The NZASB is unable to formally issue the Simple Format Reporting Standards until the Financial Reporting Bill is enacted. The XRB has therefore decided to make the Standards available as "unauthoritative guidance" so that entities which wish to voluntarily adopt them (and which are legally able to take such action) can do so.  Once the Bill is enacted the Standards will be formally issued. Separate communiques will be issued when each of these two steps occurs.

    • Enhancements to PBE Standards for NFPs - Exposure Drafts
      The NZASB and XRB have issued a package of EDs and an accompanying invitation to comment, for proposals that will operationalise the new accounting standards framework as it applies to Tier 1 and Tier 2 not-for-profit public benefit entities (PBEs).

      The EDs contain proposed enhancements to the suite of PBE Standards developed for public sector PBEs, which were issued in May 2013, to make them appropriate for application by Tier 1 and Tier 2 not-for-profit PBEs.

      The EDs comprises:
      • Not-for-profit enhancements to each of the 39 PBE Standards in the current suite of PBE Standards (the extent of the enhancements is explained in the Invitation to Comment);
      • An ED for enhancements to the PBE Framework; and
      • EDs for two new Explanatory Guides to support the application of ED PBE IPSAS 6 Consolidated and Separate Financial Statements in the not-for-profit sector.
         
      None of the proposed changes will impact the reporting requirements for public sector PBEs.

      It is expected that the enhanced PBE Standards will be effective for not-for-profit PBEs for periods beginning on or after 1 April 2015, with early adoption permitted.
      Comments on these Exposure Drafts are due to the NZASB by the 2 May 2014. The EDs can be found on the XRB website (www.xrb.govt.nz). 

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    Other IFRS news and other updates

    • IASB Projects: A pocketbook guide
      EY’s pocketbook guide summarises key features of the active projects of the IASB and includes potential implications of proposed standards, along with our views on certain projects. This edition summarises the active projects and tentative decisions made by the IASB up to 30 September 2013 and consist of two broad sections − major IFRS projects (excluding International Financial Reporting Standard on Small and Medium-sized Entities) and implementation projects.

    • Reporting Magazine: Issue 06 - October 2013
      Reporting is the magazine from EY that addresses the reporting and governance challenges companies face as they tell their performance story.
      In our latest edition, the theme of existing and future risks features prominently ranging from threats associated with the cyber security to the dangers of groupthink.

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    Industry in focus

    Real estate sector

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    On the horizon

    Below are recent Exposure Drafts which are currently open for comment to the New Zealand Accounting Standards Board (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
    XRB Exposure Draft: Amendments to External Reporting Board Standard A1 Accounting Standards Framework: Omnibus Amendments (Legislative Update)
    20 December 2013
     
     
    XRB Exposure Draft: External Reporting Board Standard A2 Meaning of Specified Statutory Size Thresholds
    20 December 2013
       
    NZASB Exposure Draft: Amendments to Accounting Standards: Omnibus Amendments (Legislative Update)
    20 December 2013
       
    NZASB Request for comments on Statutory Funds (Amendments to Appendix C of NZ IFRS 4)
    20 December 2013
       
    EDs for Enhancements for PBE Standards for NFP PBEs (Tier 1 and Tier 2) 4 May 2014    
    Discussion Paper DP/2013/1 A Review of the Conceptual Framework for Financial Reporting

    CLOSED

    14 January 2014  
    IPSASB Exposure Drafts 48-52 on Accounting for Interests in Other Entities

    17 January 2014

      15 February 2014
    IPSASB Exposure Draft 53 First-Time Adoption of Accrual Basis International Public Sector Accounting Standards 17 January 2014   28 February 2014

     

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    Events and Webcasts

    • Click here to access a summary of all upcoming webcasts. If you missed any of the recent global webcasts you can now watch them 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.

    To find out more about the services we offer in this area please contact EY's Financial Accounting Advisory Services Team

    Kimberley Crook

    Partner, Auckland

    +64 9 300 7094

    David Pacey

    Executive Director, Auckland

    +64 212 425 716

    Ravi Kumar

    Senior Manager, Auckland

    +64 212 214 717

    David Bassett

    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.