Eye on Reporting
April edition 2019
Welcome to the April edition of Eye on Reporting.
In recent years, standard setters have introduced significant changes to the way entities report. Companies are busy applying NZ IFRS 9 Financial Instruments and NZ IFRS 15 Revenue from Contracts with Customers, as well as looking to implement NZ IFRS 16 Leases and NZ IFRS 17 Insurance Contracts. As stakeholders need time to digest these big changes, we have seen a period of calm from the standard setters, with just minor amendments being issued.
In the public benefit entity (PBE) space, the issue of PBE IPSAS 41 Financial Instruments and Effective Date of PBE IFRS 9 provides entities with an additional year to prepare for the new financial instruments standard. But this only applies if you do not have a requirement to report your financial statements to the Crown via CFISnet, as we explain below.
This month we also highlight:
- Our New Zealand specific issue of Standards and interpretations in issue at 31 March 2019
- The update of our IFRS Core Tools Library to include:
- Good Group - Illustrative interim condensed consolidated financial statements 30 June 2019;
- International GAAP® Disclosure Checklist - IFRS in issue at 28 February 2019;
- IFRS Update of standards and interpretations in issue at 31 March 2019; and
- Updates to the Good Bank and Good Insurance Limited model financial statements
Graeme Bennett, David Pacey and Lara Truman
Financial Accounting Advisory Services
- What’s new from EY
- IFRS news and other NZ specific updates: for-profit entities
- IPSAS news and other NZ specific updates: public benefit entities
- On the horizon
What’s new from EY
This edition contains illustrative interim condensed consolidated financial statements of Good Group (International) Limited and subsidiaries for the interim period ending 30 June 2019.
This edition of the checklist is applicable for entities with a year end of 30 June 2019. It captures disclosure requirements for IFRS standards and interpretations in issue at 28 February 2019. Please note that the checklist is also available online through the organisation’s EY Online portal. The online checklist tool is available in two formats – a subscription-based version that includes links to IFRS and a free version that omits those links. For details, see www.ey.com/checklist.
The illustrative consolidated financial statements of Good Bank (International) Limited and subsidiaries for the year ended 31 December 2018 are prepared in accordance with IFRS in issue at 30 September 2018 and effective for annual periods beginning 1 January 2018.
This publication follows our previous publications, Good Bank - Illustrative disclosures for IFRS 9 impairment and transition and Good Bank (International) Limited - Illustrative disclosures under IFRS 7R (December 2018), which included selected illustrative disclosures related to transition and impairment under IFRS 9 Financial Instruments and the new hedge accounting disclosures for entities opting to continue to apply hedge accounting under IAS 39 Financial Instruments: Recognition and Measurement when adopting IFRS 9.
IFRS Update is an overview of upcoming changes in standards and interpretations issued by the IASB and the IFRS IC, as at 31 March 2019, that will be effective for the first time for reporting periods ended at that date or thereafter. It also summarises key features of selected IASB projects and recent IFRS IC agenda decisions.
Standards and interpretations in issue at 31 March 2019
The attached publications below list standards and interpretations that are effective in New Zealand for the annual period ended 31 March 2019. The publications also provide an overview of standards and interpretations that have been on issue but are not yet effective for 31 March 2019 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.
The implementation of IFRS 16 Leases saw an issue raised as to how an entity should account for a contract that contains the right to place, for example, an oil pipeline in a specified underground space (subsurface rights). In March 2019, the IFRS Interpretations Committee (IFRIC) issued a Tentative Agenda Decision (TAD) on subsurface rights, observing that the contract described in the submission contains a lease and is accounted for in accordance with IFRS 16.
The TAD is open for comment until 15 May 2019.
The TRG discussed one IASB staff paper related to investment components. The staff proposed an amendment to IFRS 17 to clarify that an investment component is present when a contract requires an entity to repay an amount to a policyholder in all circumstances. IASB staff responses to 37 further issues raised were summarised and reported to the TRG in a second paper. Whilst the IASB does not intend to disband the TRG at this time, no further meetings have been scheduled. The TRG submission process remains open for questions that stakeholders believe meet the TRG submission criteria. The comments from the TRG discussion presented in this publication do not reflect formal interpretations or authoritative guidance.
At its April Board meeting, the IASB considered, as a whole, the amendments to IFRS 17 that it had tentatively proposed at its meetings held between November 2018 and March 2019. The Board agreed that the proposed amendments meet the criteria for evaluating such changes set at its meeting of October 2018, and asked the staff to proceed with preparation of an Exposure Draft with proposed amendments to IFRS 17.
On 14 March 2019, the IASB considered further potential changes to IFRS 17 Insurance Contracts and tentatively decided to proceed with changes relating to four aspects: credit cards that provide insurance coverage; transition – risk mitigation option; transition requirements for loans that transfer significant insurance risk; and amendments to disclosures requirements resulting from the IASB’s tentative decisions to date. The Board decided not to change the existing requirements in IFRS 17 related to the level of aggregation.
At its Board meeting on Thursday 7 February, the IASB considered six further potential changes to IFRS 17 Insurance Contracts, including an issue that was deferred from December 2018. The Board tentatively decided to proceed with two of these changes but, in line with the IASB staff recommendation, did not agree with the four other proposed changes.
This publication provides illustrative disclosures to meet the requirements of IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments related to groups of insurance contracts accounted for under the premium allocation approach described in IFRS 17. The disclosures are presented as a series of extracts from a set of full financial statements for Good Life Insurance (International) Limited for the year ended 31 December 2021.
This edition provides an overview of the status of the European Union (EU) endorsement process for IFRS standards and amendments issued by the IASB as at 31 December 2018 with an EU effective date on or after 1 January 2019.
At its meeting on 8 February 2019, the IASB decided to amend IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments to provide relief to allow hedge accounting to continue despite the expected transition from IBOR to RFRs. In this publication, we summarise the IASB’s decision, provide the background to the issue and our view of the changes.
Please note that some of the above publications are based on ‘pure’ IFRS, and do not cover New Zealand additional disclosure requirements.
IFRS news and other NZ specific updates: for-profit entities
IFRIC Update March 2019
In its March 2019 meeting, the IFRS Interpretations Committee (Committee) discussed, among others, the following topics, and reached agenda decisions on the fact patterns discussed:
- Physical Settlement of Contracts to Buy or Sell a Non-Financial Item (IFRS 9 Financial Instruments)—Agenda Paper 11
- Credit Enhancement in the Measurement of Expected Credit Losses (IFRS 9 Financial Instruments)—Agenda Paper 12
- Curing of a Credit-impaired Financial Asset (IFRS 9 Financial Instruments)—Agenda Paper 13
- Sale of Output by a Joint Operator (IFRS 11 Joint Arrangements)— Agenda Paper 8
- Liabilities in relation to a Joint Operator’s Interest in a Joint Operation (IFRS 11 Joint Arrangements)—Agenda Paper 9
- Over Time Transfer of Constructed Good (IAS 23 Borrowing Costs)—Agenda Paper 3
- Customer’s Right to Receive Access to the Supplier’s Software Hosted on the Cloud (IAS 38 Intangible Assets)—Agenda Paper 7
All fact patterns and discussions are available here.
IPSAS news and other NZ specific updates: public benefit entities
PBE IPSAS 41 PBE Financial Instruments approved for issue
PBE IPSAS 41 Financial Instruments and Effective Date of PBE IFRS 9 were approved for issue in March 2019. PBE IPSAS 41 supersedes PBE IFRS 9 Financial Instruments and most of PBE IPSAS 29 Financial Instruments: Recognition and Measurement. It is effective for annual periods beginning on or after 1 January 2022, with early adoption permitted.
Effective Date of PBE IFRS 9 delays the effective date of PBE IFRS 9 by one year, from 1 January 2021 to 1 January 2022. This is to prevent PBE IFRS 9 from becoming mandatory before the effective date of PBE IPSAS 41. It also requires that any entities intending to early adopt PBE IFRS 9 do so before 1 January 2020. From 1 January 2020 an entity will only be able to early adopt PBE IPSAS 41.
However please note, that per the Treasury Circular 2017/09 all entities reporting their financial statements in accordance with Crown accounting policies will still need to early-adopt PBE IFRS 9 in the 2018/2019 financial year.
Invitation to Comment (ITC) and Exposure Draft (ED) for Uncertainty over Income Tax Treatments (Amendments to PBE IAS 12) approved for issue
The Board approved for issue NZASB ED 2019-1 Uncertainty over Income Tax Treatments (Proposed amendments to PBE IAS 12) and the accompanying Invitation to Comment. The ED proposes to incorporate the requirements of NZ IFRIC 23 Uncertainty over Income Tax Treatments into PBE IAS 12 Income Taxes.
NZ IFRIC 23 addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of NZ IAS 12. PBE IAS 12 Income Taxes is based on NZ IAS 12. Those PBEs that pay income taxes could encounter the issues addressed by NZ IFRIC 23.
Comments on the ED are due to the NZASB by 28 June 2019.
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/XRB by
Comments due to IASB by
Comments due to IPSASB by
17 May 2019
31 May 2019
29 June 2019
For more information on any of the points raised in this newsletter, please contact a member of EY Financial Accounting Advisory Services Team:
|Graeme Bennett – Partner, Auckland|| |
+64 274 899 943
|David Pacey – Associate Partner, Auckland|| |
+64 212 425 716
|Lara Truman – Associate Partner, 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
|Isaac Poore – Manager, Auckland|| |
+64 272 547 651
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.