Assurance Services

Eye on Reporting - December 2012

December 2012

Welcome to our last edition of Eye on Reporting for the 2012 calendar year.

On 28 November 2012, the Financial Reporting Bill passed its first reading in Parliament and has been referred to the Commerce Select Committee.  When it comes into force, the Bill will replace the Financial Reporting Act 1993 and have consequential amendments to other Acts.  Key proposals of the Bill are outlined in our recent publication Taking Shape: New Zealand’s financial reporting framework starts to come together. Submissions are due to the Select Committee by 18 January 2013.

This month the External Reporting Board (XRB) and New Zealand Accounting Standards Board issued for comment two packages of Exposure Drafts, relating to Tier 3 and Tier 4 public sector public benefit entities (PBEs) and Tier 3 and Tier 4 not-for-profit entities under the new Accounting Standards Framework, i.e. PBEs with total annual expenses less than $2m. Further details of the two packages can be found under the Current Exposure Drafts section on the XRB’s website. Submissions on the Tier 3 and Tier 4 public sector PBEs package and the Tier 3 and Tier 4 not-for-profit entities package are due by Thursday 28 March 2013 and Friday 28 June 2013 respectively.

In this month’s edition of Eye on Reporting we highlight;

• Our first edition of the IPSAS Outlook newsletter designed for public sector entities.
• Our recent publication Applying IFRS: Fair Value Measurement, which outlines the requirements of IFRS 13, its definitions, measurement framework and disclosure requirements. It also addresses some of the key questions that are being asked about how to apply IFRS 13, recognising that some aspects of the standard are still unclear and different views may exist.
• The fourth edition of our Reporting magazine, which addresses the reporting and governance challenges companies face as they explain their performance story. The magazine contains a mixture of business, regulatory and investor views that will be of interest to all financial reporting professionals.

In the new year, look out for our 2012/13 New Zealand Financial Reporting Supplement  to assist preparers with their December 2012 and June 2013 annual reports. The 2012/13 supplement is designed to be used in conjunction with our range of illustrative financial statements.  The supplement will assist entities in gaining an understanding of both their current and future financial reporting requirements, and will provide information on changes to accounting standards that are applicable for December 2012 and June 2013 year-ends.

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.

We hope you have a happy and relaxing holiday. Merry Christmas!

 Kind regards
Kimberley Crook
Financial Accounting Advisory Services

• Hot topics
• IFRS news and updates
• Industry in focus
• On the horizon
• Events and webcasts

Hot topics

• IPSAS Outlook: Issues for leaders of public finance management 
  Welcome to the first edition of IPSAS Outlook, our new quarterly newsletter, which brings you insights into recent developments and emerging issues at the International Public Sector Accounting Standards Board (IPSASB - the independent accounting standard-setter for public sector entities). We will bring you regular reports on IPSAS projects from around the world as we share some of the experiences of our Global IPSAS network.



• Applying IFRS: Fair Value Measurement
  The International Accounting Standards Board (IASB) has established a new set of requirements for measuring fair value under IFRS that aligns with US GAAP.  These apply from 1 January 2013. What do the changes involve?  How will you be affected?  This publication outlines the requirements of IFRS 13, its definitions, measurement framework and disclosure requirements.  It also addresses some of the key questions that are being asked about how to apply IFRS 13.
  Further issues and questions are likely to be raised in the future as entities adopt the new standard. We encourage readers to closely monitor developments with respect to fair value measurements.



• Reporting magazine 
  Continued uncertainty and lack of growth in global markets affects every business Ernst & Young works with around the world. While immediate competitiveness is crucial, we have identified that, in parallel, organizations and their stakeholders are looking for reassurance that performance is genuine and sustainable in the long term. Successful businesses are reacting to rapid changes in risks, opportunities and stakeholder sentiment, while keeping longer term trends and changes under review.
  This edition explores this dual approach by probing the concept of responsible capitalism in the 21st century; discusses progress in integrated reporting; outlines the implications of companies exiting the Eurozone; and discusses the need for global companies to balance risk.
   

Return to top of page
 

IFRS news and updates

• IFRS Developments Issue 48: Exposure drafts issued on narrow amendments to IFRS 10, IFRS 11 and IAS 28
  The International Accounting Standards Board (IASB) issued two exposure drafts proposing narrow amendments to IFRS 10, IFRS 11 and IAS 28:
  • The proposed amendment to IFRS 11 clarifies how to account for an acquisition of an interest in a joint operation that is a business as defined in IFRS 3;
  • The proposed amendments to IAS 28 (2011) and IFRS 10 clarify how to account for the sale/contribution of assets by an investor to its associate or joint venture, which will depend on whether the asset being contributed is a business as defined in IFRS 3. 
  In this issue of IFRS Developments, we discuss the proposals in the exposure drafts.



•  IASB proposes limited changes to IFRS 9 classification and measurement requirements 
  The IASB has published for public comment proposals for limited changes to the classification and measurement requirements for financial instruments under IFRS 9: Financial Instruments. Issue 47 of IFRS Developments summarises these proposals.



• IASB publishes proposals for amendments to IAS 28
  The IASB has published for public comment an exposure draft of proposed amendments to IAS 28 Investments in Associates and Joint Ventures. The objective of the proposed amendments is to provide additional guidance to IAS 28 on the application of the equity method. Specifically, it aims to provide guidance on how investors should recognise their share of the changes in the net assets of an investee that are not recognised in profit or loss or other comprehensive income of the investee.



• Proposed annual improvements to IFRS: 2011-2013 cycle 
  The IASB has issued the proposed Annual Improvements to IFRS 2011 – 2013 Cycle exposure draft which contains proposed changes to four standards. The proposed amendments would affect IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 3 Business Combinations, IFRS 13 Fair Value Measurement and IAS 40 Investment Property and are intended to clarify the standards where diversity exists.
  Issue 45 of IFRS Developments summarises these changes.



• The Boards progress on revenue recognition re-deliberations 
  The IASB and the US Financial Accounting Standards Board (FASB) continue to re-deliberate their joint proposal on revenue recognition and carry on the debate on the treatment of revenue for licences of intellectual property. Issue 46 of IFRS Developments summarises what you need to know about these deliberations.



• Lease classification to remain – what are some possible implications?
  Since 2006, the IASB and the FASB (the Boards) have been discussing the accounting for leases. The Boards published a joint exposure draft (ED) in August 2010 and began re-deliberations in early 2011 to address feedback received on it. In the November edition of our IFRS Outlook newsletter learn more about the Boards’ recent decision to retain lease classification (although in a different form), which is expected to be included in the revised ED along with some of some potential implications.



• IFRS Foundation publishes proposals to create an Accounting Standards Advisory Forum
  The IFRS Foundation has published for public comment proposals to create a new advisory group to the IASB, consisting of national accounting standard-setters and regional bodies with an interest in financial reporting.
   

Return to top of page
   

Industry in focus

Insurance

• Insurance Accounting Alert - October and November 2012 
  During their September and October 2012 joint meeting, the IASB and FASB re-deliberated the decisions in the IASB’s Exposure Draft i(ED) and in the FASB’s Discussion Paper, Preliminary Views on Insurance Contracts (DP). Topics discussed included:
  • accounting for acquisition costs in the pre-coverage period,
  • how to account for insurance contracts at transition, and
  • the premium allocation approach (PAA) as a result of the decision to allow changes in the insurance contract liabilities attributable to interest rate changes to be recorded in Other Comprehensive Income (OCI).
     
  Read the October 2012 edition.
  Read the November 2012 edition.



• Developments in media, entertainment and technology: Licence arrangements 
  The IASB and the FASB tentatively decided at the November meeting to explore a new approach for the accounting of licences in response to concerns raised during the consultation process from constituents across multiple sectors such as Media & Entertainment and Technology. Read about the proposal in this issue of IFRS Developments.
   

Return to top of page
 

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).
 

Return to top of page
 

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 via the webcast archive. 

Return to top of page
 

Contacts

 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.

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.