Eye on Reporting
December 2011 Welcome to our last edition of Eye on Reporting for the 2011 calendar year.
In this month’s addition we highlight our latest Applying IFRS publication which discusses the key potential impacts as a result of applying the revised IAS 19 Employee Benefits as issued by the International Accounting Standards Board (IASB) in June of this year. The revisions have significant changes to the current version of NZ IAS 19 for defined benefit pension plans. There are also a number of other changes, including modification to the timing of recognition for termination benefits, the classification of short-term employee benefits and disclosures of defined benefit plans.
In the new year, look out for our 2011/12 Castle (International) Limited Supplement to assist preparers with their December 2011 and June 2012 annual reports. The 2011/12 Castle supplement is designed to be used in conjunction with our 2010 editions of Castle (International) Limited and Castle (International) Differential Reporting Limited illustrative financial statements. The supplement will provide information on changes to accounting standards that are applicable for December 2011 and June 2012 year-ends. It also will contain illustrative disclosures for NZ IFRS 12 Disclosures of Interests in Other Entities, which applies when an entity has early adopted the new accounting standards on consolidations and joint arrangements.
We hope you have a happy and relaxing holiday. Merry Christmas!
Kind regards
Kimberley Crook
Financial Accounting Advisory Services
Hot topics
Applying IFRS: IAS 19 Employee Benefits (pdf, 813.5kb)
This edition (pdf, 813.5kb) of Applying IFRS describes some of the key considerations for implementing the revisions to IAS 19 Employee Benefits that are effective for annual periods beginning on or after 1 January 2013.
The revised standard will result in significant changes in accounting for defined benefit plans, mainly as a result of recognising actuarial gains and losses immediately through other comprehensive income and the introduction of the net interest income (expense) approach. There are also a number of other changes, such as modification to the timing of recognition for termination benefits, the classification of short-term employee benefits and additional disclosure requirements around the amount, timing and uncertainty of future cash flows of defined benefit plans. The impact of these revisions could range from significant to immaterial. This will depend on the type of employee benefits an entity provides, as well as the accounting options available under current IAS 19 that the entity has selected.
IFRS news and updates
IFRS Developments Issue 19: SEC staff issue two papers on IFRS
As part of its work plan to consider whether, and if so, when and how IFRS should be incorporated into the US financial reporting system, the SEC staff has released two papers: An Analysis of IFRS in Practice and A Comparison of US GAAP and IFRS.
These Staff Papers provide additional information for the Commission to review before it decides whether to incorporate IFRS into the US financial reporting system.
In this issue of IFRS Developments we provide a high level summary of the observations made by the SEC staff.
Industry in focus
Insurance
Insurance Accounting Alert: Boards discuss fixed-fee service contracts
On 20 October, the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) continued their deliberations on the tentative decisions in the IASB's exposure draft Insurance Contracts and the FASB's discussion paper, Preliminary Views on Insurance Contracts. At this meeting, the Boards discussed excluding certain fixed-fee contracts from the scope of the insurance contract standard, the eligibility criteria for the premium allocation approach (PAA); and certain topics on presentation and disclosure related to the statements of financial position and comprehensive income.
In this issue of Insurance Accounting Alert we summarise these discussions.
Insurance Accounting Alert: Limited improvements to IFRS 9On 15 November, the IASB continued its re-deliberations of the tentative decisions in the exposure draft Insurance Contracts (ED). This discussion focused on treatment of residual margins and was educational in nature. In a separate session, the IASB discussed whether to consider making limited improvements to IFRS 9.
On 16 November, the IASB met with the FASB to discuss disaggregation/unbundling and the presentation of explicit account balances included within insurance contracts.
In this issue of Insurance Accounting Alert we summarise these latest discussions.
Power and Utilities
Accounting for joint arrangements in the power and utilities sector
This Applying IFRS in Power & Utilities addresses some of the challenges and implications of applying IFRS 11 Joint Arrangements to the joint arrangements of power and utilities entities. For some joint arrangements, the accounting is about to significantly change – particularly for entities that apply proportionate consolidation accounting to jointly controlled entities that meet the definition of joint ventures under the new standard. In addition, not all arrangements currently described as 'joint ventures' or ‘joint arrangements’ will meet the new definition of a joint arrangement. As a result, careful assessment of the structure and legal form of the arrangement, the contractual terms agreed to by the parties to the arrangement and other facts and circumstances will be required.
Mining and Metals
Refining IFRS – Mining & Metals: Resource nationalism
As the mining and metals sector rebounded relatively quickly from the global financial crisis, it became an early target of national governments to help restore their treasuries. From the outset of 2011, we have seen more than 25 countries change their fiscal environment (such as taxes and/or royalties) for mining and metals companies. Resource nationalism places a large cost burden on mining and metals companies and increases the risk of achieving long term project profitability. It can influence an entity's decision whether to invest in a particular country.
While there are many different forms of recent resource nationalism, this edition of the Refining IFRS series focuses on the following types and the consequential financial reporting implications:
• Imposition of a new resource rent tax
• Amendments to royalty regimes or other tax rates/levies
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).
Events and webcasts
Financial reporting webcast series
Ernst & Young global webcast
IFRS 9 Financial Instruments
Date: Tuesday, 13 December 2011
Live Broadcast Time: 22:00-23:00 New Zealand
Replay date: Tuesday, 13 December 2011
Replay time: 15:00-16:00 New York,
Registration (live): To register, click here.
Registration (replay): To register, click here.
Do you have the latest information on recent updates to financial instruments standards, including the status of IFRS 9 development? Can you identify the implications for your company's financial accounting and reporting?
Staying current on significant developments around hedge accounting and recent IASB decisions on impairment of financial assets is critical to understanding the key elements of the IASB proposals, the likely implications for your business and how you should respond to the proposals.
This webcast is aimed at CFOs, finance directors, audit committee members and controllers, from both financial and non-financial institutions, that take a proactive approach to addressing the impact of new standards and pronouncements under IFRS. The webcast will also offer participants the opportunity to question our panel of Ernst & Young professionals and external speakers, as they discuss the ongoing development of IFRS 9, which will eventually replace IAS 39 Financial Instruments: Recognition and Measurement.
In this webcast, we will discuss:
- The three-bucket impairment approach
- Insights into the hedge accounting review draft
- Amendments to IAS 32 Financial Instruments: Presentation and IFRS 7 Financial Instruments: Disclosures on balance sheet offsetting.
For more information on any of the points raised in this newsletter, please contact a member of Ernst & Young’s Financial Accounting Advisory Services Team:
Kimberley Crook – Partner, Auckland: +64 9 300 7094
David Pacey – Executive Director, Auckland +64 274 899 049
Andrew Moorby – Executive Director, Christchurch: +64 274 899 949
Ravi Kumar – Senior Manager, Auckland +64 212 214 717
Jude Doliente – Manager, Auckland +64 212 417 481
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