Eye on Reporting - February 2012

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Happy New Year and welcome to first edition of Eye on Reporting for 2012.

We are pleased to announce the release of our 2011/2012 Castle (International) Limited Supplement. The supplement has been designed to be used with our 2010 illustrative annual reports, Castle (International) Limited and Castle (International) Differential Reporting Limited, to assist you in preparing your annual reports for 31 December 2011 or 30 June 2012 year-ends. 

In addition, we bring you our quarterly publication of New Accounting Standards and Interpretations for entities with a 31 December 2011 balance date.

We are also pleased to announce that EY's 2012 update of International GAAP® 2012 is now available. Written by EY's Global International Financial Reporting Group, International GAAP® 2012 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 you with one of the premier references on current financial reporting practices. It is an essential tool in determining how to apply IFRS.

This month edition we also bring to your attention:

  • EY's new magazine, titled Reporting, a thought-provoking magazine covering issues affecting corporate reporting and governance.
  • Recent EY publications which take a closer look at the new revenue recognition proposals and how the proposals might have an impact on your organisation.
  • EY's key publications which highlight the latest developments to IFRS 9, including the decision to move the mandatory effective date from 1 January 2013 to 1 January 2015.

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, whose details you will find at the bottom of this newsletter.

Hot Topics 

  • Castle (International) Limited Supplement (pdf, 2.5mb)
    The 2011/2012 Castle (International) Limited Supplement (pdf, 2.5mb)  has been designed to be used with our 2010 illustrative annual reports, Castle (International) Limited and Castle (International) Differential Reporting Limited, to assist you in preparing your annual reports for 31 December 2011 or 30 June 2012 year-ends. This supplement provides an update to New Zealand accounting standards, along with illustrative examples and, where applicable, indicates the impact on our 2010 illustrative annual reports.

    We trust you will find this publication useful in preparing your next annual report.

  • New Accounting Standards and Interpretations (pdf, 343.7kb) 
     NZ IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires disclosure when an initial application of a standard has an effect on the current period, or any prior period, and disclosure of the possible impact of new and revised standards and interpretations that have been issued but are not yet effective.

    This includes pronouncements issued by the International Accounting Standards Board (IASB) and International Financial Reporting Standards Interpretations Committee (IFRSIC) for entities that are required to make a statement of compliance with IFRS. 

    The attached publication indicates standards and interpretations which would have become effective, and those on  issue which are not yet effective for 31 December 2011 year ends.

  • International GAAP® 2012
    The 2012 update of International GAAP® is now available.  Written by EY's International Financial Reporting Group, International GAAP® 2012 provides insights into how complex practical issues should be resolved in the real world of global financial reporting.

    International GAAP® 2012 has been fully revised and updated in order to:
  • Deal with new and amended authoritative pronouncements, including:
    • New standards on consolidation, joint arrangements and fair value measurement
    • Revisions to IFRS 9 Financial Instruments, IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures, among others
    • International Financial Reporting Interpretations Committee (Interpretations Committee) interpretations
  • Provide insight and guidance on the interpretation and practical application of IFRS from a global perspective, based on the experience of the book's authors in dealing with recent day-to-day practical issues
  • International Financial Reporting Interpretations Committee (Interpretations Committee) interpretations

    Contact your local EY representative for details on how to obtain a copy.

  • Revenue Recognition Project
    In our issue of Applying IFRS: Revenue from contracts with customers – the revised proposal (January 2012), we provide an analysis of the proposed revenue model, examples to illustrate how the proposed model would be applied under various scenarios and a comparison to existing standards.

    Our edition of IFRS Practical matters on the proposed standard for revenue recognition further highlights how the revised proposals for revenue contracts will have a significant impact on many organisational functions, including: financial; tax; IT systems; and business processes.

  • Latest Developments: Financial Instruments
     In December, the IASB issued amendments to the classification and measurement model of IFRS 9. The amendments move the mandatory effective date from 1 January 2013 to 1 January 2015 and provide relief from the restatement of comparatives. In our issue of Applying IFRS we summarise what you need to know about these amendments and includes an illustrative example of how the transition disclosures may look in practice. 

    IFRS Developments - Issue 22 summarises the recently issued amendments to IAS 32 and IFRS 7 on offsetting of financial instruments.  These amendments are intended to reduce the level of diversity in current practice and to bridge the differences in the offsetting requirements under IFRS and US GAAP.

    The clarifying amendments to IAS 32 are effective for the annual periods beginning on or after 1 January 2014.  The new disclosures in IFRS 7 are required for annual periods beginning on or after 1 January 2013.  Both require retrospective application for comparative periods. 

    IFRS Developments – Issue 23 summarises the IASB's tentative decision reached at the board's 13 December 2011 meeting, to consider making limited improvements to IFRS 9 Financial Instruments. While limiting the scope of the review, the IASB seeks to address the interaction between this standard's classification and measurement model and the accounting for insurance contract liabilities. The IASB also seeks to address specific application issues in IFRS 9 and consider possible alignment between IFRS 9 and the US FASB's proposed classification and measurement model. 

    The IASB and US FASB made significant progress at their recent joint board meeting, having agreed on several tentative decisions in relation to the "three-bucket" expected loss approach to the impairment of financial assets.  In IFRS Developments – Issue 21 we summarise these decisions which include, the transfer principle from Bucket 1 into Bucket 2 or Bucket 3; the Bucket 1 impairment allowance; the differentiating factor between Bucket 2 and Bucket 3; the grouping of financial assets for impairment evaluation; and the application of the new impairment approach to retail loans, commercial loans and debt securities.

  • Introducing Reporting magazine
    Reporting is a new publication from EY that addresses the broad topics around reporting and governance and is designed to put financial reporting in a business context. It features articles on a mixture of business, regulatory and investor matters and it represents the views of reporters, regulators, investors and advisors.
    Reporting magazine is not about technical detail and standard changes – it complements the many publications our technical specialists produce.  It aims to examine how companies report and how stakeholders respond.

    Reporting is available electronically, included on the EY Insights app and as a stand-alone App via iTunes.

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IFRS news and updates 

  • Industry specific illustrative financial statements
    Our industry specific financial statements are available for the following industries - Oil & Gas, Real Estate, Construction and Insurance:
  • Good Petroleum (International) Limited
  • Good Real Estate Group (International) Limited
  • Good Construction Group (International) Limited
  • Good Insurance (International) Limited

    These 2011 editions contain an illustrative set of consolidated financial statements of a fictitious company, for the year ended 31 December 2011.  These financial statements are prepared in accordance with IFRSs in issue at 30 September 2011 and effective for year ended 31 December 2011.

    Note that these specific illustrative financial statements relate to 'pure' IFRS and therefore do not include additional New Zealand specific disclosures.

  • IASB Projects: A pocketbook guide
    The IASB continues to move forward with its standard-setting activities and the ability to stay one step ahead in a sea of change is critical.  Our December 2011 edition of the IASB Projects: A pocketbook guide summarises the key features of the various IASB projects, many of which are joint projects with the US Financial Accounting Standards Board (US FASB) as part of ongoing efforts to converge IFRS and US GAAP.  This guide also includes some of the potential financial and business implications of the proposed accounting changes, together with our views on the projects.

  • IASB exposure draft on Transition Guidance (Proposed amendments to IFRS 10) 
    The IASB has issued for public comment proposed amendments to IFRS 10 Consolidated Financial Statements.  The objective of the proposed amendments is to provide clarification on the transition guidance in IFRS 10 by confirming when an entity needs to apply IFRS 10 retrospectively.  Comments on the exposure draft are due by 21 March 2012.

  • Global Accounting Standards post 2011 – A way forward
    The IASB issued a request for views on the strategic direction and overall balance of its standard-setting agenda.  In the midst of the ongoing global financial crisis, Our IFRS Outlook article provides our views on the role the IASB can play in setting relevant and useful standards for global financial reporting.

  • Hedge accounting moves closer to risk management practices 
    The IASB's new standard expected on hedge accounting will mark a significant shift from the way entities have conventionally applied hedge accounting under IFRS.  A review draft of the final standard is expected to be available on the IASB's website in early 2012 for a period of 90 days.  Our IFRS Outlook article summarises the reasons for the project and discuss the differences between the new hedge accounting model and current requirements under IAS 39 Financial Instruments: Recognition and Measurement.

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Industry in focus 


  • IFRS Developments for Insurers: An insurer's perspective on IFRS 10
    In this issue of IFRS Developments for Insurers, we outline the challenges that are likely to face insurers under IFRS 10 Consolidated Financial Statements and advise on preparing for these challenges.  The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled, and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. 

  • Insurance Accounting Alert: December 2011 
    The latest issue of Insurance Accounting Alert focuses on the 15-16 December IASB and US FASB joint meeting discussions in which the boards continued their re-deliberations of the tentative decisions in the IASB's exposure draft Insurance Contracts and in the US FASB's Discussion Paper Preliminary Views on Insurance Contracts.  A large part of the meeting was devoted to discussing the definition of portfolio grouping of cash flows for determining the residual/single margin, and the risk adjustment (discussed at the IASB only meeting). 

  • Business implications of IFRS 4, IFRS 9, Solvency II for insurers 
    Insurers face a huge challenge in synchronising the implementation of IFRS 4 Phase II with IFRS 9 in the coming years.  Managing the timelines and interdependencies between these frameworks, along with other new IFRS standards, Solvency II and other finance transformations and change programs that may be underway will place many companies in a conflicting position.  Systems and processes are being significantly updated to comply with an earlier regulatory deadline to implement Solvency II.  This heightens the need to assess overlapping requirements with other projects, and evaluate the risk and cost of making large investments (data warehouses, actuarial systems) against the risk and cost of deferring them with interim solutions.

    Facing the challenge focuses on business implementation and project management considerations by analysing the main areas that will be impacted by IFRS 4 Phase II and IFRS 9 and other major changes underway, such as Solvency II, to inform timing and approach. 

Real Estate

  • IFRS Developments for Real Estate: Revenue recognition proposals
    The IASB and US FASB recently re-exposed their joint revenue recognition proposals.  If adopted, these proposals may have a significant impact on how entities in the real estate and construction industries recognise revenue.

    In this edition of IFRS Developments for Real Estate, we consider the potential impact of the IASB's and US FASB's latest proposals on revenue recognition and the key implications for entities in the real estate and construction industries, including real estate investment trusts, funds and homebuilders.

  • IFRS for Real estate: Current issues and financial statements survey 
    Surveying IFRS for real estate provides an overview of the accounting policies and disclosures of 38 property companies from Europe, Australia, the Middle East, Asia and Canada.  This latest edition focuses on the issues that are likely to be significant in a still challenging real estate market, and looks ahead to the challenges of applying certain upcoming changes in IFRS.  Furthermore the survey extends beyond financial reporting into the area of sustainability reporting.


  • Applying IFRS in Banking Capital Markets
    This issue of Applying IFRS focuses on the application issues, practical challenges and the potential business impacts for banks and their structured entities in adopting IFRS 10 Consolidated Financial Statements.

    The recent financial crisis highlighted the need for better accounting to reflect the substance of relationships between entities. It also highlighted the need for consistency, transparency and comparability in the accounting for and disclosure of such relationships.  The IASB issued IFRS 10 and IFRS 12 Disclosure of Interests in Other Entities with the aim of increasing the consistency, transparency and comparability across these areas. 

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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
IPSASB Recommended Practice Guideline, Reporting on the Long-Term Sustainability of a Public Sector Entity's Finances
29 February 2012
IPSASB Consultation Paper Reporting Service Performance Information
29 February 2012
15 April 2012
Exposure Draft ED/2011/6 Revenue from Contracts with Customers
13 March 2012
ED/2011/7 Transition Guidance (Proposed amendments to IFRS 10)
24 February 2012
21 March 2012

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Events and Webcasts 

If you missed any of the recent global webcasts you can now watch them via the webcast archive.

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