Financial reporting update. Christchurch Update, June 2017

Transcription

1 Financial reprting update Christchurch Update, June 2017

2 Agenda What s new fr 2017 Disclsure initiative Minr accunting standard changes PBEs Fr-Prfits Majr changes n the hrizn

3 Disclsure Initiative

4 The disclsure prblem The IASB has identified three main cncerns abut disclsures in the financial statements, cllectively termed the disclsure prblem

5 Standard setters respnse IASB disclsure initiative prjects: IAS 1 amendments (aggregatin and sub-ttals, materiality, accunting plicies, rder f ntes) applied frm 1 Jan 2016 IAS 7 additinal disclsures In prgress: NZ ASB Materiality practice statement and clarified materiality definitin Principles f disclsure Standards level disclsure review Extensin f IAS 1 amendments t PBE IPSAS 1 (applies frm 1 Jan 2016) Explanatry Guide: Materiality fr Public Benefit Entities

6 Materiality Materiality Primary users PBE Cnceptual framewrk IASB definitin f materiality prject Infrmatin is material if its missin r misstatement culd influence the discharge f accuntability by the entity, r the decisins that users make Infrmatin is material if mitting, misstating r bscuring it culd reasnably be expected t influence decisins primary users make Service recipients and their representatives and resurce prviders and their representatives Existing and ptential investrs, lenders and ther creditrs

7 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

8 Gd examples in NZ public sectr Meridian Energy Ltd Air New Zealand Christchurch City Hldings Ltd Otakar Ltd Enable Services Ltd Prt Otag Ltd

9 Putting it int practice Preparers: Auditrs: Cnsider what s imprtant fr users and fr accuntability Shift frm cmpliance t cmmunicatin Big Bang r incremental change Engage with stakehlders Audit cmmittee auditrs Acceptance f new appraches Mdel financial statements

10 Accunting Standards changes fr 2017

11 Changes t Standards applying fr March/June 2017 reprting (1) Amended PBE IPSAS 1 (als NZ IAS 1) PBE IPSAS 17 (already applies t frprfits in NZ IAS 16) PBE IPSAS 17 (and NZ IAS 16) PBE IPSAS 20 (already applies t frprfits in NZ IAS 24) PBE IPSAS 23 (nt applicable t frprfits) Effective date 1 Jan Jan Jan Jan Jan 2016 Descriptin f change Disclsure initiative as discussed earlier. Clarifies the tw ptins fr treatment f accumulated depreciatin when an item f PPE is revalued. Depreciatin methds based n revenue are nt apprpriate. Clarifies that an entity prviding KMP services 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. Permits an entity nt t recgnise dnated gds that meet the definitin f inventries if it is nt practicable (cst exceeds benefits) t reliably measure the fair value f thse gds at the date f acquisitin.

12 Changes t Standards applying fr March/June 2017 reprting (2) Amended PBE IFRS 3 (already applies t fr-prfits in NZ IFRS 3) Effective date Descriptin f change 1 Jan 2016 Cntingent cnsideratin fr a business cmbinatin that is classified as an asset r liability t be measured at fair value at each reprting date with changes thrugh surplus/deficit. Changes applicable t Fr-Prfits nly: NZ IAS 27 (already available t PBEs in PBE IPSAS 6) 1 Jan 2016 In parent financial statements accunt fr investments in subsidiaries, jint ventures and assciates either at cst, in accrdance with NZ IFRS 9 Financial Instruments (IAS 39) r using the equity methd. Same apprach fr each categry f investments.

13 Changes t Standards applying frm Dec 2017 Amended PBE IPSAS 32 (nt applicable t fr-prfits) Effective date Descriptin f change 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 and disclsure, cnsistent with PBE IPSAS 17, and that dissimilar service cncessin assets cannt be accunted fr as a class f assets. Changes applicable t Fr-Prfits nly: NZ IAS 7 1 Jan 2017 Requires disclsures that enable users t evaluate changes in liabilities arising frm financing activities, including bth changes arising frm cash flws and nn-cash changes. Fr example pening t clsing recnciliatin.

14 Future changes pssible early adptin Amended PBE IPSAS 17 (als NZ IAS 16, but effective 1 Jan 2016) PBE IPSAS 21 and PBE IPSAS 26 (Revalued PPE already in scpe f NZ IAS 36) Effective date 1 Jan 2018 (early adptin permitted) 1 Jan 2019 (early adptin permitted) Descriptin f change Changes the scpe f PBE IPSAS 17 t include bilgical assets that meet the definitin f bearer plants (e.g. fruit trees, grape vines). Previusly were agricultural assets under PBE IPSAS 27. Amendment means can change t accunting using cst mdel. Revalued PPE scped int PBE impairment accunting standards. PPE that is impaired (fr example, earthquake damage) can be impairment tested withut revaluing entire asset class.

15 Financial Reprting the Future

16 Financial Reprting the Future NZ IFRS 9 Financial instruments PBE IFRS 9 NZ IFRS 15 Revenue frm Cntracts with Custmers NZ IFRS 16 Leases PBE IPSAS 34 Separate Financial Statements; PBE IPSAS 35 Cnslidated Financial Statements; PBE IPSAS 36 Investments in Assciates and Jint Ventures; PBE IPSAS 37 Jint Arrangements; PBE IPSAS 38 Disclsure f Interests in Other Entities. Fr Prfits Perids beginning n r after 1 January 2018 Perids beginning n r after 1 January 2018 Perids beginning n r after 1 January 2019 IFRS 10-12, IAS 27, 28 already effective PBEs Perids beginning n r after 1 January 2021 Early adptin? IPSAS prject n revenue and nn-exchange expenditure in prgress IPSAS Leases prject in prgress Perids beginning n r after 1 January 2019

17 NZ IFRS 9 Financial Instruments (PBE IFRS 9) New: Classificatin requirements fr financial assets Impairment mdel Hedge accunting requirements

18 Classificatin f financial assets NZ IAS 39/PBE IPSAS 29 Fair value thrugh P&L Held t maturity Lans and receivables Available-fr-sale IFRS 9 Amrtised cst Fair value thrugh OCI Fair value thrugh P&L

19 Equity instruments Instrument-byinstrument electin Is investment held fr trading? N FVOCI ptin elected? Yes N Measured at fair value thrugh P&L Yes N recycling t P&L n dispsal/n impairments in P&L Measured at fair value thrugh OCI

20 Debt instruments Designated at FVPL? Permitted if measuring at FVPL eliminates r significantly reduces an accunting mismatch. N What are the characteristics f the cash flws? On specified dates are there cash flws that are slely payments f principal and interest? Yes What is the business mdel? Yes N N FVPL Hld t cllect cntractual cash flws? Yes Hld t cllect cntractual cash flws and sell? Yes Classificatin? Amrtised cst FVOCI

21 Financial liabilities Fair value mvement attributable t wn credit risk change recgnised in OCI Liability held fr trading? (includes derivatives) N Designated at FVPL? N Measured at amrtised cst Yes Yes FVPL

22 Impairment mdel Instruments that are credit impaired at initial recgnitin always remain in stage 3

23 Revenue 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

24 Leases Fr-prfits must apply a new lease standard, NZ IFRS 16, frm 31 December 2019 year ends 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