Financial reporting update. Client Updates, May 2018

Transcription

1 Financial reprting update Client Updates, May 2018

2 Agenda Accunting standard changes fr 2018 Future changes

3 Accunting Standard Changes fr 2018

4 Changes t standards applying fr March/June 2018 reprting Amended PBE IPSAS 32 (nt applicable t fr-prfits) NZ IAS 7 (nt applicable t PBEs) 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. 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 f financing liabilities. Cmparatives nt required fr first-year.

5 Changes t standards applying fr March/June 2018 reprting Example f recnciliatin under revised NZ IAS 7

6 Future changes pssible early adptin Amended Public Benefit Entities 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 Descriptin f change 1 Jan 2018 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. 1 Jan 2019 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.

7 Future changes pssible early adptin Amended Fr-prfits NZ IFRIC 22 NZ IAS 40 Effective date 1 January January 2018 Descriptin f change Clarifies the accunting treatment fr advance receipts and payments denminated in a freign currency Clarifies when an entity shuld transfer prperty, including prperty under cnstructin r develpment int, r ut f investment prperty: A change in use f a prperty ccurs when the prperty meets, r ceases t meet, the definitin f investment prperty and there is evidence f the change in use; A change in management s intentins fr the use f a prperty des nt, by itself, prvide evidence f a change in use; NZ IFRIC 23 1 January 2019 Clarifies hw t deal with uncertainty in incme tax treatments

8 Mdel financial statements Mdel financial statements N changed requirements affecting existing Mdel Financial Statements. 30 June 2017 versins remain applicable. Will issue a revised DHB mdel fr 30 June 2018 t reflect the presentatin and disclsure changes already applied t ther Mdel Financial Statements. Plan t issue a revised Tier 3 mdel fr 30 June 2018

9 Financial Reprting the Future

10 Financial Reprting The Future Big 3 NZ IFRS 9 Financial instruments/ PBE IFRS 9 NZ IFRS 15 Revenue frm Cntracts with Custmers NZ IFRS 16 Leases Fr Prfits Perids beginning n r after 1 January 2018 (31 March/30 June 2019) Perids beginning n r after 1 January 2018 (31 March/30 June 2019) Perids beginning n r after 1 January 2019 (31 March/30 June 2020) PBEs Perids beginning n r after 1 January 2021 (30 June 2022) Early adptin? FSG 2019 IPSAS prject n revenue and nn-exchange expenditure in prgress IPSAS Leases prject in prgress. ED issued Jan.

11 IFRS 9 Financial Instruments IFRS 9 is significantly different cmpared t IAS 39/IPSAS 29 New classificatin requirements fr financial assets New impairment mdel based n expected lsses New hedge accunting requirements NZ IFRS 9 and PBE IFRS 9 essentially the same Fr-prfits mandatry effective frm 1 Jan 2018 Fr PBEs, the mandatry effective date f 1 Jan 2021 prvides PBEs with flexibility t early adpt t minimise mixed grup issues

12 IFRS 9 Financial Instruments FSG early adptin Treasury advice as per Treasury Circular 2017/09: The Crwn has elected t early adpt PBE IFRS 9: will apply t the Financial Statements f the Gvernment (FSG) fr 2018/19 Assessing changes in disclsures and understanding hw this will impact the CFISnet Data Lad and ther Crwn reprting templates. Guidance fr entities with rutine trade receivables and term depsits:

13 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

14 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

15 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 (with recycling)

16 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

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

18 Hedge accunting Remains ptinal Mechanics basically unchanged Fair value hedge, Cash flw hedge, Net investment Ineffectiveness t P&L Frmal designatin and dcumentatin But mre risk management strategies shuld qualify fr hedge accunting % effectiveness threshld remved Pssible t hedge cmpnents f nn-financial items (e.g. hedge crude il cmpnent f jet fuel) Entities that hedge accunt need t can either: transitin t IFRS 9 hedge accunting r wait until transitin becmes mandatry (waiting n macr-hedging)

19 Transitin Need t decide whether t restate cmparatives Can nly restate if yu dn t use hindsight Fr transitin adjustments, carefully cnsider transitinal prvisins Additinal disclsure requirements will need t be cnsidered Entities may need t seek external accunting advice n cmplex issues Engage with yur auditr early n yur apprach t the transitin

20 NZ IFRS 15 Revenue 5 step mdel Cntract Separate perfrmance bligatins (PO) Transactin price $ Allcate $ t PO Recgnise revenue when (r as) PO is satisfied

21 NZ IFRS 15 - Revenue Applicatin f the 5 step mdel requires a detailed understanding f revenue cntracts May require significant wrk and judgement Sme entities are finding this challenging Engage with yur auditr early n yur apprach t the transitin

22 PBEs - Revenue and nn-exchange expenses In 2017 IPSASB issued a cnsultatin paper n: Revenue accunting by PBEs Accunting fr nn-exchange expenses, fr example, grants Submissins clsed n 22 Nvember 2017 and a number f PBEs in NZ prvided a submissin n the CP. IPSASB is cnsidering the CP respnses and next steps. A finalised standard is expected t be several years away.

23 NZ IFRS 16 Leases Fr-prfits must apply a new lease standard, NZ IFRS 16, frm 31 December 2019 year ends Lessees t recgnise mst leases n the balance sheet Lease liability and assciated right t use asset Bth initially measured at PV f lease payments Depreciate right f use asset Interest expense n lease liability using discunt rate determined at lease cmmencement Tw exemptins: lw value and shrt term leases Lessr accunting largely unchanged frm NZ IAS 17 Leases

24 IPSASB Leases Prject Status f IPSASB wrk: Expsure draft (ED 64) issued January Cmments clse June Pssible release f standard mid 2019 Timing issues between applicatin f NZ IFRS 16 and an IPSAS standard: Risk fr PBE mixed grup cnslidatins in having t reverse FP lessee accunting balances.

25 IPSASB Leases Prject Lessee accunting: same apprach as IFRS 16 Lessr accunting is different t IFRS 16 Bk a receivable and deferred revenue liability Spread deferred liability ver the lease term Recgnise underlying asset Includes guidance n cncessinary leases If yu have significant leases as lessr r cncessinary leases, we encurage entities t read the ED and submit t XRB/IPSASB Cmments t XRB by 31 May 2018 Cmments t IPSASB by 30 June 2018

26 Future - Accunting fr grups 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. IPSAS 40 Public Sectr Cmbinatins Fr Prfits NZ IFRS 10,11,12, IAS 27,28 already effective PBEs Perids beginning n r after 1 January 2019 (30 June 2020) (replaces PBE IPSAS 6,7,8) Requires brader and mre cmprehensive disclsures. NZASB still t apprve in NZ

27 Future Service perfrmance reprting PBE FRS 48 Service Perfrmance - Applies t reprting perids starting n r after 1 January 2021 (30 June 2022) Will replace the SSP requirements f PBE IPSAS 1 Fr-prfit service perfrmance reprting unchanged under FRS-44 Applies t Tier 1 and 2 public sectr PBEs required by law t present perfrmance infrmatin in accrdance with GAAP and all Tier 1 and 2 nt-fr-prfit PBEs. We expect the public sectr is well placed t cmply Additinal disclsures may be necessary: Cmparative infrmatin nw mandatry Disclsure f significant judgements in reprting perfrmance infrmatin

28 Questins?