Eye on Reporting
June edition 2017
Welcome to the June edition of Eye on Reporting.
After a very long journey, the International Accounting Standards Board (IASB or the Board) issued IFRS 17 Insurance Contracts. IFRS 17 will be mandatorily effective for annual reporting periods beginning on or after 1 January 2021. Once effective, IFRS 17 replaces IFRS 4 Insurance Contracts that was issued in 2005. The overall objective of IFRS 17 is to provide a more useful and consistent accounting model for insurance contracts among entities issuing insurance contracts globally. Our latest Insurance Accounting Alert publication outlines the new Standard. Also our latest webcast IFRS 17: financial statements and investor story explores the impacts of IFRS 17 on presentation and disclosures in the financial statements of insurers, as well as implications for reporting metrics.
This month we also highlight:
- Our latest issue of IFRS Developments on survey results of disclosures made by 207 Fortune 500 entities in relation to the expected impact of IFRS 15
- Our quarterly publications on standards and interpretations that are effective in New Zealand for 30 June 2017 year-ends
- The IASB’s webcast on IFRS 9 Impairment: The expected life of revolving facilities
- The IASB’s Request for Information: Post-implementation Review — IFRS 13 Fair Value Measurement
- The New Zealand Accounting Standards Board’s (NZASB) new PBE Standards: PBE IPSAS 39 Employee Benefits and Approved Budget (Amendments to PBE IPSAS 1)
Kimberley Crook and Graeme Bennett
Financial Accounting Advisory Services
Eye on Reporting headlines:
- What’s new from EY
- IFRS news and other updates: for-profit entities
- IPSAS news and other updates: public benefit entities
- Events and webcasts
- On the horizon
What’s new from EY?
New insurance Standard was issued
On 18 May 2017, the IASB issued IFRS 17 Insurance Contracts. IFRS 17 addresses the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner, benefiting both investors and insurance companies. Insurance obligations will be accounted for using current values instead of historical cost. The information will be updated regularly, providing more useful information to users of financial statements.
IFRS 17 is published together with illustrative examples and an explanation of the Board’s basis for conclusions. Other materials accompanying the Standard are:
The IASB also recorded two educational webinars:
IFRS 17 is effective from 1 January 2021, with early application permitted.
Our latest Insurance Accounting Alert publication outlines the new standard.
With the adoption of IFRS 15 Revenue from Contracts with Customers becoming mandatory in 2018, some regulators expect entities to have started their projects to implement the new revenue standard. However, our survey of 207 Fortune 500 entities indicates that most entities have provided little, if any, information about the expected effect to date.
This issue of IFRS Developments summarises the results of EY Global survey and considers the need for entities to disclose quantitative information about the expected effect of adopting IFRS 15 in their 2017 interim financial statements.
Standards and interpretations in issue at 30 June 2017
The attached publications below list standards and interpretations that are effective in New Zealand for the annual period ended 30 June 2017. The publications also provide an overview of standards and interpretations that have been on issue but are not yet effective for 30 June 2017 year-ends.
It is important to note that there are two separate publications, one for for-profit entities and one for public benefit entities (PBEs). Differences in the accounting standards framework applying to for-profit entities and PBEs make it important to select the applicable publication.
IFRS news and other updates: for-profit entities
IASB’s webcast on IFRS 9
The IASB published a webcast in which the Board discusses key requirements of IFRS 9 that are relevant when an entity determines the expected life of revolving facilities, such as credit cards and overdrafts, by considering its normal credit risk management actions. The webcast forms part of the IFRS Foundation’s efforts to support implementation of new Standards.
The webcast can be accessed here.
IASB begins second phase of IFRS 13 review with call for information
The IASB published a Request for Information (RFI) for stakeholders to tell the Board about their experience with IFRS 13 Fair Value Measurement. The objective of a request is to assess whether an accounting standard works as intended and achieves its objectives. This assessment involves analysing how the requirements in the Standard affect investors, companies and auditors.
The request is relevant to Tier 1 and Tier 2 for-profit entities as well as auditors, regulators and investors. The RIF can be found here. Comments are due to the NZASB by 23 August 2017 and to the IASB by 22 September 2017.
IPSAS news and other updates: public benefit entities
PBE IPSAS 39 Employee Benefits was issued
The NZASB issued PBE IPSAS 39 Employee Benefits that supersedes the current Standard - PBE IPSAS 25 Employee Benefits. PBE IPSAS 39 is based on IPSAS 39 Employee Benefits issued by the International Public Sector Accounting Standards Board (IPSASB).
PBE IPSAS 39:
- removes the option to defer the recognition of certain actuarial gains and losses arising from defined benefit plans
- eliminates some of the presentation options for actuarial gains and losses arising from defined benefit plans
- introduces the net interest approach, which is to be used when determining the defined benefit cost for defined benefit plans
- structures the disclosures for defined benefit plans according to explicit disclosure objectives for defined benefit plans
The Standard is effective from 1 January 2019, with early application permitted. The Standard is applicable to Tier 1 and Tier 2 PBEs — both not-for-profit and public sector entities. The Standard can be found here.
NZASB issued Approved Budget (Amendments to PBE IPSAS 1)
The NZASB issued an amending standard Approved Budget (Amendments to PBE IPSAS 1) that removes the reference to the term “approved budget” from PBE IPSAS 1 and now refers to the existing comparative requirements in PBE IPSAS 1. This amending standard also specifies where entities may present comparisons between prospective and historical financial statements.
The amending standard is effective for annual periods beginning on or after 1 January 2018, with early application permitted. The amendments are applicable to Tier 1 and Tier 2 PBEs — both not-for-profit and public sector entities. The amending standard can be found here.
NZASB revised its proposed standard on Service Performance Reporting
The NZASB revised its proposed standard on service performance reporting, following consideration of comments received on the Exposure Draft Service Performance Reporting.
The NZASB is now undertaking a limited scope consultation to check that its revised proposals would not have unintended consequences. The consultation is open for public comment until 28 July 2017. The proposals are relevant for Tier 1 and Tier 2 PBEs — both not-for-profit and public sector entities. More information about this Limited Scope Review Draft can be found here.
Events and webcasts
IFRS 17: Financial statements and the investor story
As discussed above, the IASB issued IFRS 17. The Standard represents the most significant change to accounting requirements ever undertaken by insurers requiring companies to entirely overhaul their financial statements and underlying actuarial models, financial reporting processes and systems.
This webcast discusses:
This webcast is available on demand here.
IFRS: Enhancing communication effectiveness (Replay, 24 May 2017)
In response to calls for enhanced disclosure effectiveness in financial statements and better communication in corporate reporting, the IASB is currently exploring ways to improve disclosures in financial statements. At the same time, many entities have made significant efforts over the last few years to improve the communication effectiveness of their financial reports.
In this webcast, we will discuss:
Register for the reply of this webcast here.
Archived recordings of all our previous webcasts are available here.
On the horizon
Below are recent proposals that are currently open for comment to the NZASB, IASB and/or 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
28 July 2017
18 August 2017
2 October 2017
17 June 2017
31 July 2017
23 August 2017
22 September 2017
18 August 2017
30 September 2017
For more information on any of the points raised in this newsletter, please contact a member of EY Financial Accounting Advisory Services Team:
|Kimberley Crook – Partner, Auckland||+64 274 899 535|
|Graeme Bennett – Partner, Auckland||+64 274 899 943|
|David Pacey – Executive Director, Auckland||+64 212 425 716|
|Lara Truman – Executive Director, Wellington||+64 274 899 896|
|Alex Knyazev – Senior Manager, Auckland||+64 218 53 152|
|Charis Halliday – Senior Manager, Wellington||+64 275 543 047|
|Yulia Bogatova – Manager, Auckland||+64 274 899 408|
|Gali Slyuzberg – Manager, Wellington||+64 274 899 565|
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.