New Accounting Standards and Interpretations for Tier 1 Public Sector and Not-for- Profit Public Benefit Entities. 30 June 2015

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1 New Accounting Standards and Interpretations for Tier 1 Public Sector and Not-for- Profit Public Benefit Entities 30 June 2015

2 Introduction This document is applicable for Public Benefit Entities (PBEs) applying PBE Standards as well as PBEs applying New Zealand Equivalents to International Financial Reporting Standards applicable for PBEs (NZ IFRS PBE). This document contains disclosure information on changes in accounting policy on adoption of new and amended PBE Standards or NZ IFRS PBE. The document also contains disclosure information on changes in accounting policy on adoption of PBE Standards and NZ IFRS PBE issued but not yet effective. This publication lists all applicable PBE Standards and NZ IFRS PBE standards issued as of 30 June 2015 and are applicable for PBEs with 30 June 2015 year-ends. Important note for public benefit entities Under the new multi-standards approach to financial reporting in New Zealand, PBEs are moving to new PBE standards. This change is effective from 1 July 2014 for public sector PBEs and from 1 April 2015 for not-for-profit PBEs. Because of these differences in the mandatory application dates of the new PBE standards, the two parts of this document (Part A and Part B, as explained below) have been further divided into two sub-parts, one for public sector PBEs and another for not-for-profit PBEs. Also, as a consequence of the move to the new PBE standards, for PBEs that are currently reporting under NZ IFRS PBE standards, new and amended NZ IFRSs issued after March 2011 typically apply to profit-oriented entities only. This document has two parts: Part A Changes in accounting policy This table lists all the applicable accounting standards which would have been adopted for the first time for PBEs with a 30 June 2015 year-end. Paragraph 33 of PBE IPSAS 3 Accounting Policies, Changes in Accounting Estimates and Errors ( PBE IPSAS 3 ) for PBEs applying PBE Standards and paragraph 28 of NZ IAS 8 (PBE) Accounting Policies, Changes in Accounting Estimates and Errors ( NZ IAS 8 (PBE) ) for PBEs applying NZ IFRS PBE states that when an initial application of a standard has an effect on the current period, or any prior period, an entity shall disclose: a) The title of the Standard b) When applicable, that the change in accounting policy is made in accordance with the transitional provisions c) The nature of the change in accounting policy d) When applicable, a description of the transitional provisions e) When applicable, the transitional provisions that might have an effect on future periods f) For the current period and each prior period presented, to the extent practicable, the amount of the adjustment: i. For each financial statement line item affected ii. For PBEs applying NZ IFRS PBE, if NZ IAS 33 (PBE) Earnings per Share applies to the entity, for basic and diluted earnings per share g) The amount of the adjustment relating to periods before those present, to the extent practicable h) If retrospective application is impracticable for a particular prior period, or for the periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied. EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 1

3 Part B Accounting standards issued but not yet effective This table lists all applicable PBE Standards and NZ IFRS (PBE) standards issued but not yet effective for 30 June 2015 yearends and assumes that the entity has elected not to early adopt any of these Standards/Interpretations. Paragraph 35 of PBE IPSAS 3 for PBEs applying PBE Standards and paragraph 30 of NZ IAS 8 (PBE) for PBEs applying NZ IFRS PBE require disclosure of the possible impact of new and revised Accounting Standards that have been issued but are not yet effective. PBEs that qualify for and apply differential reporting concessions are granted disclosure concessions in PBE IPSAS 3 and NZ IAS 8 (PBE) and need not disclose information about standards issued but not yet effective. The table is complete as at 30 June 2015 and any further Standards/Interpretations issued after this date will also need to be disclosed up until the date of authorisation of the financial report. An entity does not need to refer to Standards/Interpretations that are not applicable to them provided the entity ensures that the Standard/Interpretation is, in fact, not relevant. If the effect of a particular Standard/Interpretation has not yet been determined, those details should be disclosed. The impact on Group financial statements should be added based on the entity s specific circumstances. This table will be updated and released for reporting periods ending 31 March, 30 June, 30 September and 31 December. EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 2

4 Part A Change in accounting policy for Public Sector PBEs The following standards and interpretations would have been applied for the first time for Public Sector PBEs with years ending 30 June Reference Title Summary PBE Standards for Tier 1 and Tier 2 Public Benefit Entities The package of PBE Standards issued in May 2013, applicable for Tier 1 and Tier 2 PBEs, consists of the following standards: Standard XRB A1 Accounting Standards Framework, which is the overarching standard that sets out the accounting standards framework; A suite of 39 PBE Standards; and The Public Benefit Entities (conceptual) Framework. The new PBE Standards are based on International Public Sector Accounting Standards, which are themselves based on IFRS. Therefore major changes to accounting policies are not expected. Nevertheless, there are some potentially significant differences and also a range of smaller differences between the PBE Standards and NZ IFRS. Examples of potential significant differences could include: PBE Standards with no equivalent NZ IFRS - PBE IPSAS 23 Revenue from Non-Exchange Transactions, which prescribes requirements for accounting for revenue from non-exchange transactions; - PBE IPSAS 32 Service Concession Arrangements: Grantor, which prescribes the accounting for service concession arrangements by the grantor Differences between equivalent standards - PBE IPSAS 20 Related Party Disclosures, exempts all transactions between related parties (except key management personnel remuneration) that occur on arm s length terms and conditions from disclosure by public sector PBEs, and provides a potentially wider definition of key management personnel compared to NZ IFRS 24 Related Party Disclosures. Please note that this is not a complete list of differences between PBE Standards and NZ IFRS. 1 July July 2014 EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 3

5 Reference Title Summary PBE IPSAS 1, PBE IAS 34, PBE FRS 42, PBE FRS 43 Amendments to Accounting Standards: Omnibus Amendments (Legislative Update) The following standards are amended by this standard: PBE IPSAS 1: Replaces the Financial Reporting Act 1993 with the Financial Reporting Act 2013 or legislation Deletes paragraphs 31.1 and 31.2 of PBE IPSAS 1, which referred to requirements in the Financial Reporting Act 1993 that no longer exist under the new Financial Reporting Act PBE IAS 34: Replaces issuers with FMC reporting entities. PBE FRS-42: Replaces a prospectus, investment statement with a product disclosure statement, a disclosure document Replaces securities with financial products Removes the reference to the borrowing group from paragraph 43 of PBE FRS-42. PBE FRS-43: Replaces a prospectus with a product disclosure statement or a disclosure document. 1 July July 2014 EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 3

6 Part A Change in accounting policy for Not-for-Profit PBEs The following standards and interpretations would have been applied for the first time for Not-for-Profit PBEs with years ending 30 June Reference Title Summary FRS-42 (PBE), FRS-44 (PBE) Amendments to Prospective Financial Statements (Amendments to FRS-42 (PBE)) The following standards are amended: FRS-42 (PBE): In addition to the annual reporting period, the entity can present prospective financial statements for the interim reporting period. FRS-44 (PBE): The entity is required to comply with only paragraphs 6, 7, 11.1 and 11.2 if FRS-44 (PBE) when preparing condensed interim financial reports 1 January July 2014 NZ IFRS 7 (PBE), NZ IAS 1 (PBE), FRS-42 (PBE), FRS-43 (PBE) Amendments to Accounting Standards: Omnibus Amendments (Legislative Update) Those amendments are effective for interim or annual periods beginning on or after 1 January Earlier application is permitted. The following standards are amended by this standard: NZ IFRS 7 (PBE): Amends the definition of deposit taker in Appendix E. NZ IAS 1 (PBE): Deletes NZ-specific paragraphs NZ 19.1 and NZ 19.2 of NZ IAS 1, which referred to requirements in the Financial Reporting Act 1993 that no longer exist under the new Financial Reporting Act FRS-42 (PBE): Replaces a prospectus, investment statement with a product disclosure statement, a disclosure document Replaces securities with financial products Replaces issuers with FMC reporting entities. FRS-43 (PBE): Replaces a prospectus with a product disclosure statement or a disclosure document Removes the reference to the Section 209(6)(c) of the Companies Act April July 2014 EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 3

7 Part B Accounting standards issued but not yet effective for Public Sector PBEs The following standards and interpretations have been issued but are not yet effective for Public Sector PBEs for the period ending 30 June Reference Title Summary PBE standards for Tier 1 and Tier 2 Public Benefit Entities enhancements for not-for-profit entities In October 2014, a revised set of PBE Standards were issued, as replacements for the PBE Standards issued in May The revised standards include enhancements for not-for-profit entities. Early adoption of PBE Standards is permitted. 1 April July 2015 EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 4

8 Part B Accounting standards issued but not yet effective for Not-for-Profit PBEs The following standards and interpretations have been issued but are not yet effective for Not-for-Profit PBEs for the period ending 30 June Reference Title Summary PBE IPSAS 1, PBE IAS 34, PBE FRS 42, PBE FRS 43 PBE standards for Tier 1 and Tier 2 Public Benefit Entities enhancements for not-for-profit entities Amendments to Accounting Standards: Omnibus Amendments (Legislative Update) In October 2014, a revised set of PBE Standards were issued, as replacements for the PBE Standards issued in May The revised standards include enhancements for not-for-profit entities. Early adoption of PBE Standards is permitted. The following standards are amended by this standard: PBE IPSAS 1: Replaces the Financial Reporting Act 1993 with the Financial Reporting Act 2013 or legislation Deletes paragraphs 31.1 and 31.2 of PBE IPSAS 1, which referred to requirements in the Financial Reporting Act 1993 that no longer exist under the new Financial Reporting Act PBE IAS 34: Replaces issuers with FMC reporting entities. PBE FRS-42: Replaces a prospectus, investment statement with a product disclosure statement, a disclosure document Replaces securities with financial products Removes the reference to the borrowing group from paragraph 43 of PBE FRS-42. PBE FRS-43: Replaces a prospectus with a product disclosure statement or a disclosure document. 1 April July April July 2015 EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 4

9 Reference Title Summary NZ IFRS 9 (PBE) (2009) Financial Instruments NZ IFRS 9 (PBE) (2009) includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the IASB s project to replace IAS 39 Financial Instruments: Recognition and Measurement. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of NZ IAS 39 (PBE). The revised Standard introduces a number of changes to the accounting for financial assets, the most significant of which includes: two categories for financial assets being amortised cost or fair value; removal of the requirement to separate embedded derivatives in financial assets; strict requirements to determine which financial assets can be classified as amortised cost or fair value. Financial assets can only be classified as amortised cost if (a) the contractual cash flows from the instrument represent principal and interest and (b) the entity s purpose for holding the instrument is to collect the contractual cash flows; an option for investments in equity instruments which are not held for trading to recognise fair value changes through other comprehensive income with no impairment testing and no recycling through profit or loss on derecognition; reclassifications between amortised cost and fair value no longer permitted unless the entity s business model for holding the asset changes; and changes to the accounting and additional disclosures for equity instruments classified as fair value through other comprehensive income. 1 January 2018 The application date for the Group would have been 1 July 2018, however, the Group will be applying a new suite of PBE standards (see above) by 1 July EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 5

10 Reference Title Summary NZ IFRS 9 (PBE) (2010) Financial Instruments NZ IFRS 9 (PBE) (2010) supersedes NZ IFRS 9 (PBE) (2009). The requirements for classifying and measuring financial liabilities were added to NZ IFRS 9 (PBE) as issued in The existing NZ IAS 39 (PBE) Financial Instruments: Recognition and Measurement requirements for the classification of financial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for financial liabilities, the change in fair value is accounted for as follows: The change attributable to changes in credit risk are presented in other comprehensive income (OCI) The remaining change is presented in profit or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss. 1 January 2018 The application date for the Group would have been 1 July 2018, however, the Group will be applying a new suite of PBE standards (see above) by 1 July * Designates the beginning of the applicable annual reporting period unless otherwise stated EY New Accounting Standards and Interpretations for Public Benefit Entities 30 June 2015 EY 6

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