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Eye on Reporting - November 2012

November 2012

Welcome to the November edition of Eye on Reporting.

On 15 November 2012, the External Reporting Board (XRB) and New Zealand Accounting Standards Board (NZASB) issued amendments to XRB A1 Application of Accounting Standards and three suites of accounting standards, giving effect to the new for-profit Accounting Standards Framework from 1 December 2012. We take a closer look at what this means in this month’s Hot Topics section below.

The International Accounting Standards Board (IASB) has issued an amendment to IFRS 10 Consolidated Financial Statements to provide an exception from the consolidation requirement for entities that meet the definition of an investment entity. Investment entities would instead need to account for subsidiaries at fair value through profit or loss in accordance with IFRS 9 Financial Instruments. The amendment has not yet been incorporated into NZ IFRS and, as a consequence, is not yet available for early adoption in New Zealand.  We discuss this further in this month’s Hot Topics section below.

This month we are also delighted to announce the release of EY’s updated IFRS Core Tools package. Our suite of IFRS Core Tools, updated twice each year to align with 30 June and 31 December year ends, provides a number of building blocks that can help you keep up with the changing landscape of IFRS. These tools will enable you to address any issues early and act proactively to avoid problems affecting reporting deadlines and communication with your stakeholders.

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

+64 274 899 049

Lara Truman

Executive Director, Wellington

+64 274 899 896

Ravi Kumar

Senior Manager, Auckland

+64 212 214 717

Jude Doliente

Manager, Auckland

+64 212 417 481

David Bassett

Senior Accountant, Auckland

+64 274 899 883

 Kind regards
Kimberley Crook
Financial Accounting Advisory Services


Hot topics

  • For-Profit Accounting Standards Framework Exposure Drafts
    The New Zealand Accounting Standards Board (NZASB) and External Reporting Board (XRB) recently issued amendments to XRB A1 Application of Accounting Standards and three suites of Accounting Standards, operationalising the XRB’s first of three stages in establishing the new Accounting Standards Framework. Details of the new Accounting Standards Framework are discussed in our recent publication Taking shape: New Zealand’s financial reporting framework starts to come together .

    The amendments to XRB A1, which sets out the accounting standards framework, establish a four tier framework for for-profit entities:
    • Tier 1  -full NZ IFRS;
    • Tier 2 - NZ IFRS with reduced disclosure requirements (RDR);
    • Tier 3 - NZ IFRS differential reporting, which is the current differential reporting regime; and
    • Tier 4 - Old NZ GAAP. 
    Tiers 3 and 4 are temporary tiers, which will be withdrawn once the Government enacts proposed changes to the financial reporting framework to remove the requirement for most small and medium-sized companies to prepare statutory financial statements.

    In general, the NZASB issued the three suites of Accounting Standards for ‘house-keeping’ purposes, to divide the current suite of NZ IFRSs (which covers all entities reporting under NZ IFRS) into the following three separate suites of NZ IFRS:
    • NZ IFRS and NZ IFRS with RDR (for Tier 1 and Tier 2 for-profit entities);
    • NZ IFRS Diff Rep (for Tier 3 for-profit entities applying NZ IFRS with the existing differential reporting concessions); and
    • NZ IFRS PBE (for all public benefit entities applying NZ IFRS).
    The establishment of these three suites has little or no impact on:
    • Tier 1 for-profit entities applying full NZ IFRS;
    • Tier 3 for-profit entities applying the current differential reporting regime; and
    • public benefit entities reporting under NZ IFRS.
    However, for-profit entities that qualify for and wish to opt into Tier 2 are able to take advantage of the reduced disclosure concessions for Tier 2 for-profit entities (NZ IFRS RDR). 

    The new suites of accounting standards are effective from 1 December 2012, with NZ IFRS RDR available for early adoption from the 1 December 2012.

    Please refer to the XRB’s website for the amended XRB A1 and new suites of accounting standards www.xrb.govt.nz/Site/Accounting_Standards.


  • IFRS Developments Issue 44: Investment entities final amendment - exception to consolidation 
    In this supplement we discuss the amendment to IFRS 10 Consolidated Financial Statements to provide an exception from the consolidation requirement for entities that meet the definition of an investment entity. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss in accordance with IFRS 9 Financial Instruments.

    Please note that the NZASB has temporarily delayed the adoption of the investment entities amendment into NZ IFRS, given concerns about loss of consolidated information for investment entities and the Australian Accounting Standards Board’s (AASB) decision to delay adoption.  The AASB and NZASB are both planning to issue an exposure draft to seek feedback on proposed compensating note disclosures.  Those proposed disclosures are likely to comprise the three primary financial statements that would be produced under full consolidation.  The exposure draft would seek feedback as to how those disclosures might be reduced without losing relevant information.  The NZASB will consider this matter further at its December meeting.


  • IFRS Core Tools  
    Our suite of IFRS Core Tools consists of a number of practical building blocks that can help you to keep up with the changing landscape of IFRS:
    • IFRS Update: This publication is updated twice each year (as of 31 March and 30 September) and captures new standards and interpretations that apply to current reporting periods, as well as issued standards that are effective in future periods.
    • Good Group (International) Limited illustrative financial statements: Our set of illustrative interim and annual financial statements incorporates the applicable presentation and disclosure requirements, which are referenced throughout.
    • International GAAP® Disclosure Checklist: our International GAAP® Disclosure Checklist captures the current disclosure requirements, as well as disclosures that are permitted to be adopted early, to help you comply with IFRS in your interim and year-end IFRS financial statements.
       
    Note that these tools relate to ‘pure’ IFRS and therefore do not include additional New Zealand material.

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IFRS news and updates

  • Joint project watch 
    Joint Project Watch is designed to give you a snapshot of key developments in joint International Accounting Standards Board (IASB) / US Financial Accounting Standards Board (FASB) projects from an IFRS perspective, together with our observations on the potential implications for companies.


  • IFRS 9 classification and measurement – deliberations substantially complete 
    The IASB has announced a proposal to make limited amendments IFRS 9 and has thus substantially completed its deliberations. Issue 41 of IFRS Developments looks at the IASB’s decisions and the next steps.


  • Put options written on non-controlling interests - our views 
    The IFRS Interpretations Committee recently issued a draft interpretation giving guidance on how a parent entity should account for a put option written on the shares of a subsidiary that is held by non-controlling interest shareholders. In Issue 42 of IFRS Developments we outline our views about the proposals.


  • Executive compensation and the debate over accounting for equity-settled share-based payment awards 
    Recent adverse economic and financial market trends have renewed the debate on executive compensation, which is also the subject of intense media attention in the wake of the financial downturn. In this edition of IFRS Outlook we examine some of the accounting implications for equity-settled share-based payment awards.


  • IAASB suggests changes to improve the value of the auditor’s report 
    To find out more about the International Auditing and Assurance Standards Board’s (IAASB) suggested improvements to auditors’ reports and their possible implications for entities, in IFRS Outlook we also talk to Dan Montgomery, IAASB Deputy Chair and Chair of the IAASB Auditor Reporting Task Force.


  • IFRS Foundation publishes analysis of the SEC staff's final report on IFRS 
    The IFRS Foundation has published its staff analysis of the SEC’s final Staff Report on IFRS. The IFRS Foundation Report addresses IFRSs as global accounting standards; the IASB as a global standard setter; and the challenges for US transition.
     

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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
 Package 2: Public Sector PBE Accounting Standards
14 December 2012
 
 
 Exposure Draft ED 2012-4 Framework: PBE Standards - Mixed Groups
21 December 2012
 
 
IASB Request for Information Comprehensive Review of the IFRS for SMEs
CLOSED
30 November 2012 
 
  IPSASB Conceptual Framework Exposure Drafts
15 March 2013
 
30 April 2013 
IPSASB Consultation Paper - IPSASs and Government Finance Statistics Reporting Guidelines
28 February 2013
 
 31 March 2013

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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 via the webcast archive

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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

+64 274 899 049

Lara Truman

Executive Director, Wellington

+64 274 899 896

Ravi Kumar

Senior Manager, Auckland

+64 212 214 717

Jude Doliente

Manager, Auckland

+64 212 417 481

David Bassett

Senior Accountant, 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.

 

Contact us

Kimberley Crook
+64 9 300 7094

Graeme Bennett
+64 9 300 8191

Lara Truman
+64 274 899 896

David Pacey
+64 212 425 716

Asia Pacific Financial Accounting Advisory Services contacts.

Applying IFRS in New Zealand

The time for companies to ensure their financial reporting systems comply with NZ equivalents of International Reporting Standards is now. EY provides you with the tools and resources to help you with the task ahead.

EY  

 

Eye on Reporting

Eye on Reporting is our monthly update on financial reporting developments.

Please click here to read the current issue.