Eye on Reporting
Welcome to our latest edition of Eye on Reporting.
This month, we highlight the recent decision of the Accounting Standards Review Board to change the New Zealand financial reporting framework. Instead of having one set of accounting standards apply to all sectors based on International Financial Reporting Standards (IFRS), there will be two sets of accounting standards: one set of standards for profit-oriented entities and another set of standards for public benefit entities. This change will have a major impact on public benefit entities.
We are pleased to announce that EY’s 2011 update of International GAAP® is now available. Written by EY's Global International Financial Reporting Group, International GAAP® 2011 interprets IFRSs, sets them in a relevant business context and provides insights into how complex practical issues should be resolved in the real world of global financial reporting. It continues our commitment to provide businesses with one of the premier references on current financial reporting practices. It is an essential tool in determining how to apply IFRS.
A number of industry specific updates are also available reflecting the IASB's discussion of specific issues and surveys we have conducted on how IFRS is applied in practice.
Financial Accounting Advisory Services
Major accounting changes for public sector and not-for-profit entities
At its March 2011 meeting, the Accounting Standards Review Board (ASRB) decided that New Zealand should move away from one set of accounting standards for all sectors and instead adopt two sets of accounting standards: one for profit-oriented entities and one for public benefit entities (PBEs). While the details of the set of accounting standards for PBEs are yet to be finally decided, it is likely that the PBE standards will be based on International Public Sector Accounting Standards (IPSAS), rather than IFRS. See the attached document (pdf, 212.5kb) for further information.
International GAAP® revised for 2011
International GAAP® 2011 has been fully revised and updated in order to deal with new and amended authoritative pronouncements, including the following:
- New standard on Financial Instruments (IFRS 9)
- Recent revisions to IAS 24 (Related Party Disclosures), IAS 27 (Consolidated and Separate Financial Statements) and IFRS 3 (Business Combinations)
- Changes that have been made through the 2010 Annual Improvements Process
- International Financial Reporting Interpretations Committee (IFRIC) interpretations
- Revisions to many other standards
IFRS news and updates
Supplement to IFRS Outlook issue 96: Lease term and variable lease payments simplified (pdf, 482.4kb)
In response to criticism, the IASB and the FASB decided to make changes to their proposed model for lease accounting. Respondents found the model overly complex and potentially costly to implement. The boards tentatively agreed to revise the proposed definition of the lease term and the treatment of variable lease payments, but they still remain committed to requiring that all leases be recognised on the balance sheet.
Industry in focus
Good Bank: Illustrative financial statements (pdf, 875.4kb)
The 2010 edition of Good Bank (International) Limited contains an illustrative set of consolidated financial statements of a fictitious group of banking companies for the year ended 31 December 2010. Good Bank (International) Limited's activities include providing retail and corporate banking, investment banking and asset management services. This publication illustrates specific IFRS disclosures made by the banking industry. These illustrative financial statements have been prepared in accordance with IAS 39 Financial instruments: Recognition and Measurement and other International Financial Reporting Standards (IFRS) in issue as at 31 August 2010.
Mining and metals
Refining IFRS: Revenue from contracts with customers - impact on the mining sector (pdf, 590.8kb)
What might be the implications of the proposed revenue recognition model in the mining sector? Our publication builds on the broader revenue recognition topic covered previously in Revenue from Contracts with Customers: The road to convergence: what the revenue proposals mean in practice.
Refining IFRS UPDATE: Accounting for stripping costs - draft interpretation (pdf, 441.8kb)
In August 2010, the Interpretations Committee published for public comment a Draft Interpretation Stripping Costs in the Production Phase of a Surface Mine (draft interpretation).
At the January 2011 meeting the Interpretations Committee considered the responses from the comment letters submitted and continued to progress their discussion.
This edition of Refining IFRS provides a high-level overview of the discussions from this meeting and outlines the issues that will be taken back to the March 2011 meeting.
We also set out our understanding of the likely next steps and the anticipated timing of this draft interpretation being finalised.
Revenue from contracts with customers - impact on the oil and gas sector (pdf, 338.7kb) and impact on the oilfield services sector (pdf, 277.6kb)
These issues of Exploring IFRS look at some of the more significant implications that the proposed revenue recognition model may have for the oil and gas and oilfield services sectors. They build on the broader revenue recognition publication issued several months ago, entitled - Revenue from Contracts with Customers: The road to convergence: what the revenue proposals mean in practice.
Consumer products financial statement survey (pdf, 865kb)
In this third edition of the Consumer products IFRS survey, we surveyed the same 20 leading European Consumer Product entities from 2008. The 2010 survey updates the observations and addresses additional issues that arose in 2009. IFRS has had a significant and wide-ranging impact on the financial operations of consumer products’ companies, affecting not only accounting and reporting but also processes such as tax planning and compliance, business systems and regulatory compliance.
The road to convergence: the revenue recognition proposal — retail and consumer products (pdf, 612.5kb)
Following our summary of the revenue recognition model proposed by the IASB in its exposure draft of June 2010 we have produced a retail and consumer products-specific supplement highlighting some of the more significant implications of the proposed revenue model.
In particular, we consider the following topics that are likely to be of interest to consumer products entities:
- Normal product sales
- Rights of return
- Product warranties
- Sales incentives and allowances
- Licences and rights of use
IFRS for real estate: current issues and financial statements survey 2011 (pdf, 1.3mb)
Our overview of the accounting policies and disclosures of thirty-eight property companies from Europe, Australia and the Middle East focuses on the issues that are likely to be significant in this challenging real estate market. We also look towards the upcoming accounting changes.
Insurance accounting alert: February 2011 (pdf, 776.9kb)
Recently, the IASB started the re-deliberations on its accounting proposals on insurance contracts. The FASB joined and reaffirmed its commitment to work with the IASB on a single, high quality, converged accounting standard for insurance contracts.
The re-deliberations allow the boards to reconsider their decisions on the accounting for insurance contracts with the benefit of the comments they received on the IASB’s exposure draft Insurance Contracts and the FASB’s discussion paper Preliminary Views on Insurance Contracts.
Our publication summarises the boards' discussions at their February 2011 meeting.
On the horizon
Below are recent Exposure Drafts issued by the New Zealand Financial Reporting Standards Board (FRSB) and other developments being considered in financial reporting. Please refer to the NZICA website for more details.
Comments due to FRSB by
Comments due to IASB or IPSASB by
IASB supplement Financial Instruments: Impairment to ED/2009/12 Financial Instruments: Amortised Cost and Impairment
18 March 2011
1 April 2011
ED 125 Concessionary Loans: Proposed Amendments to NZ IAS 39 Financial Instruments: Recognition and Measurement, NZ IFRS 7 Financial Instruments: Disclosures and NZ IFRS 9 Financial Instruments
31 March 2011
ED 124 Proposed amendments to FRS-43 Summary Financial Statements
31 March 2011
IASB ED/2011/1 Offsetting Financial Assets and Financial Liabilities
14 April 2011
28 April 2011
IPSASB CF-ED1: Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Role, Authority, and Scope; Objectives and Users; Qualitative Characteristics; and Reporting Entity;
IPSASB Consultation Paper: Elements and Recognition in Financial Statements; and
IPSASB Consultation Paper: Measurement of Assets and Liabilities in Financial Statements
15 May 2011
15 June, 2011
Events and webcasts
EY offers a number of webcasts covering key accounting issues. The following webcasts are scheduled:
Financial Reporting Update – On the horizon
Tuesday 5 April, 2011
4:00 pm New Zealand
This webcast will look at the most significant changes to accounting standards in many years. The session will focus on the status of IASB projects and the likely implications of these changes on business. Content will cover:
- Financial instruments
- Joint arrangements
- Revenue recognition
- Defined benefit plans
Financial instruments: New IFRS developments for 2011
The archive of the webcast Financial instruments: New IFRS developments for 2011, held on 22 February is now available. Our panellists discussed the revised impairment model, provided insights on the new proposals on hedge accounting and offsetting and some of the likely implications for businesses.
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 9 300 7094
Lara Truman – Executive Director, Wellington: +64 4 499 4888
Andrew Moorby – Executive Director, Christchurch: +64 3 353 8094
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.