Financial reporting update. Northern Client Update, May 2017

Transcription

1 Financial reprting update Nrthern Client Update, May 2017

2 Agenda Imprving cmmunicatin in financial reprts Accunting standard changes update

3 Imprving cmmunicatin in financial reprts

4 Objectives f financial reprts PBE Cnceptual framewrk: Objectives f financial reprting Primary users T prvide infrmatin useful t users fr accuntability and decisin-making Service recipients and their representatives and resurce prviders and their representatives

5 Cncerns abut clarity f cmmunicatin Vlume f disclsure T much immaterial disclsure Cmplexity and understandability f disclsure Duplicatin f infrmatin in ntes and accunting plicies Nt enugh infrmatin n key areas f judgement, r estimatin Pr cmmunicatin f key infrmatin

6 Standard setters respnse IASB disclsure initiative prjects: IAS 1 amendments (aggregatin and sub-ttals, materiality, accunting plicies, rder f ntes) Materiality practice statement and clarified materiality definitin Principles f disclsure Standards level disclsure review NZ ASB Extensin f IAS 1 amendments t PBE IPSAS 1 (applies nw) Explanatry Guide: Materiality fr Public Benefit Entities

7 Definitins f materiality Infrmatin is material if its missin r misstatement culd influence the discharge f accuntability by the entity, r the decisins that users make n the basis f the entity s GPFRs prepared fr that reprting perid. Materiality depends n bth the nature and amunt f the item judged in the particular circumstances f each entity. (PBE cnceptual framewrk) Infrmatin is material if mitting, misstating r bscuring it culd reasnably be expected t influence decisins primary users f general purpse financial statements make n the basis f financial infrmatin abut a specific reprting entity. (IASB Definitin f materiality prject)

8 Evlving gd practice Accunting plicies Integratin with ntes Cnsidering understandability Which plicies are significant? Indexes, headings, graphics, clur Imprving and expanding imprtant disclsures Judgements, estimates, assumptins, sensitivities Reducing and remving immaterial disclsures Cnsidering rder f ntes Significant matters, exec summary r r key develpments nte

9 Gd examples in NZ public sectr Auckland Cuncil Meridian Energy Ltd Air New Zealand Christchurch City Hldings Ltd Financial Markets Authrity New Zealand Fire Service Cmmissin

10 Audit NZ respnse Acceptance f new appraches Mdel financial statements Expect Audit teams t engage n imprving financial reprting

11 Putting it int practice Treat as a prject Senir management supprt Big Bang r incremental change Cnsider user needs Engage with stakehlders Audit cmmittee Engage with auditrs early Agree changes n pr-frmas

12 Cncluding cmments Fcus n user needs and accuntability Shift frm cmpliance t cmmunicatin Transparency remains key Unfrtunately, cmplex transactins are likely t require cmplex disclsures Nt a fcus n reducing infrmatin, but n prviding better quality and mre relevant infrmatin

13 Accunting standards changes update

14 Standards update What s new fr 30 June 2017? Sme future changes f interest

15 New r amended PBE standards fr 30 June 2017 N new PBE standards cme int effect fr 30 June 2017 A number f standards have been amended e.g: Amended PBE IPSAS 1 (als NZ IAS 1) PBE IPSAS 17 (als NZ IAS 16) Effective date Descriptin f change 1 Jan 2016 Disclsure initiative as discussed earlier. 1 Jan 2016 Clarifies the treatment f accumulated depreciatin when an item f PPE is revalued. PBE IPSAS 20 1 Jan 2016 Clarifies that an entity prviding KMP services t the reprting entity (management entity) is a related party f the reprting entity. Requires disclsure f the cmpensatin t the management entity fr the prvisin f key management persnnel services. PBE IPSAS 23 1 Jan 2016 Permits an entity nt t recgnise dnated gds that meet the definitin f inventries if it is nt practicable t measure reliably the fair value f thse gds at the date f acquisitin.

16 Amended PBE standards fr 30 June 2018 Amended PBE IPSAS 17 (als NZ IAS 16, but effective 1 Jan 2016) Effective date Descriptin f change 1 Jan 2017 Changes the scpe f PBE IPSAS 17 t include bilgical assets that meet the definitin f bearer plants (e.g. fruit trees). PBE IPSAS 32 1 Jan 2017 Clarifies that service cncessin assets shuld be gruped with similar assets as a class f assets fr the purpse f subsequent measurement, cnsistently with PBE IPSAS 17, and that dissimilar service cncessin assets cannt be accunted fr as a class f assets.

17 Impairment f revalued prperty Revalued PPE scped int PBE impairment accunting standards (PBE IPSAS 21 and PBE IPSAS 26) PPE that is impaired can be impairment tested withut revaluing entire asset class Effective frm 31 December 2019 balance dates nwards Early adptin is permitted

18 Future changes that culd be significant - PBE IFRS 9 Financial Instruments Fr-prfits must apply a new financial instruments (FI) standard, NZ IFRS 9, frm 31 December 2018 year ends Ptential fr significant mixed grup issues when fr-prfits and PBEs apply different FI standards PBE IFRS 9 is a new FI standard fr PBEs, based n NZ IFRS 9 Mandatry effective date f 30 June 2021, this prvides PBEs with flexibility t early adpt t minimise mixed grup issues New: Classificatin requirements fr financial assets Impairment mdel Hedge accunting requirements

19 Future changes that culd be significant - PBE IFRS 9 Financial Instruments Sme key implicatins: Share investments nt held fr trading can be designated at fair value thrugh ther cmprehensive revenue and expense (FVTOCRE). If designated at FVTOCRE, all fair value mvements g thrugh reserves, including impairment, and n realisatin f gains r lsses n dispsal. Lans and receivables can nly be measured at amrtised cst if held with bjective t cllect cntractual cash flws that are slely payments f principal and interest. Unclear whether cncessinary lans with cntingent repayment features qualify fr amrtised cst accunting. If nt, measured at fair value with mvements in surplus/deficit. Market-based discunt rates required at balance date. Expected lsses included in estimating fair value. Financial perfrmance vlatility.

20 Future changes that culd be significant - PBE IFRS 9 Financial Instruments Impairment f lans and receivables is nw based n an expected lss mdel ; previusly unimpaired assets culd nw require impairment prvisins Mre cmplex Hw significant culd adjustments be? Systems and prcesses t estimate these? Financial Statements f Gvernment early adptin?

21 Future changes that culd be significant Leases Fr-prfits must apply a new lease standard, NZ IFRS 16, frm 31 December 2019 year ends NZ IFRS 16 requires lessees t recgnise mst leases n the balance sheet Lessr accunting largely unchanged frm NZ IAS 17 Leases N NZ IFRS 16 PBE equivalent under develpment in NZ, but.. IPSASB is develping an expsure draft n leases: Lking likely t bring lessees leases n balance sheet Prject is als cnsidering cncessinary leases Fr example, peppercrn r nminal rental payments

22 Future changes that culd be significant Revenue and nn-exchange expenses Fr-prfits must apply a new revenue standard, NZ IFRS 15, frm 31 December 2018 year ends. 5 step revenue recgnitin mdel: Identify cntract(s) with custmer Identify perfrmance bligatin(s) Determine the transactin price Allcate transactin price t perfrmance bligatins Recgnise revenue when (r as) the entity satisfies perfrmance bligatins N IFRS 15 PBE equivalent under develpment in NZ, but IPSASB is develping a cnsultatin paper n: Revenue accunting by PBEs Accunting fr nn-exchange expenses, fr example, grants

23 Questins