New Accounting Standards and Interpretations for Tier 1 For-profit Entities. 31 March 2016

Transcription

1 New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2016

2 Introduction This document is applicable for Tier 1 for-profit entities applying New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and contains disclosure information on changes in accounting policy on adoption of new and amended NZ IFRS and NZ IFRSs issued but not yet effective. This publication lists all applicable NZ IFRSs issued as of 31 March 2016 and are applicable for Tier 1 for-profit entities applying NZ IFRS with 31 March 2016 year-ends. 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 by Tier 1 for-profit entities with a 31 March 2016 year-end. Paragraph 28 of NZ IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors ( NZ IAS 8 ) 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 statement line item affected ii. If NZ IAS 33 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 Tier 1 For-profit Entities 31 December 2015 EY 2

3 This table lists all applicable NZ IFRSs issued but not yet effective for Tier 1 for-profit entities with 31 March 2016 year-ends and assumes that the entity has elected not to early adopt any of these Standards/Interpretations. Paragraph 30 of NZ IAS 8 requires disclosure of the possible impact of new and revised Accounting Standards that have been issued but are not yet effective. This includes pronouncements issued by the International Accounting Standards Board (IASB) and International Financial Reporting Standards Interpretations Committee (IFRS Interpretations Committee, previously known as IFRIC) for entities that are required to make a statement of compliance with IFRS. The disclosure requirement in NZ IAS 8 applies only to entities reporting under full NZ IFRS. Therefore, this table does NOT address standards issued but not effective for Tier 2 for-profit entities reporting under Tier 2 for-profit accounting standards and applying reduced disclosure requirements (RDR), as disclosure concessions are provided for these entities providing relief from disclosing information about standards issued but not yet effective. The table is complete as at 13 April 2016 and any further Standards/Interpretations issued after this date will also need to be disclosed up until the authorisation of the report. An entity does not need to refer to Standards/Interpretations that are not applicable to them provided the entity confirms 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 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 Tier 1 For-profit Entities 31 December 2015 EY 3

4 Part A Changes in accounting policy The following standards and interpretations would have been applied for the first time for Tier 1 for-profit entities with years ending 31 March 2016 (unless early adopted): Reference Title of Amendments to NZ IFRSs arising from the Annual Improvements Project ( ) The following standards are amended by this standard: NZ IFRS 2 Amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition' (which were previously part of the definition of 'vesting condition'). NZ IFRS 3 Clarifies that contingent consideration that is classified as an asset or a liability shall be measured at fair value at each reporting date. Consequentially amends NZ IAS 37 and NZ IAS 39 as a result of the amendment to NZ IFRS 3 NZ IFRS 8 Requires an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments. Clarifies that an entity shall only provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segment assets are reported regularly. NZ IAS 16 Clarifies that when an item of property, plant and equipment is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount. NZ IAS 24 Clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity. NZ IAS 38 Clarifies that when an intangible asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount. 1 July April 2015 EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 4

5 Part A Changes in accounting policy Reference Title of Amendments to NZ IFRSs arising from the Annual Improvements Project ( ) The following standards are amended by this standard: NZ IFRS 3 Clarifies that NZ IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the of the joint arrangement itself. NZ IFRS 13 Clarifies that the scope of the portfolio exception defined in paragraph 52 of NZ IFRS 13 includes all contracts accounted for within the scope of NZ IAS 39 or NZ IFRS 9, regardless of whether they meet the definition of assets or liabilities as defined in NZ IAS 32. NZ IAS 40 Clarifies that determining whether a specific transaction meets the definition of both a business combination as defined in NZ IFRS 3 Business Combinations and investment property as defined in NZ IAS 40 Investment Property requires the separate application of both standards independently of each other. 1 July April 2015 Statutory Funds (Amendments to Appendix C of NZ IFRS 4) Narrow scope amendments to IAS 19 Employee Benefits Fair Value Disclosures by Retirement Benefit Plans - Amendments to NZ IAS 26 The amendments require disclosure of information about solvency margins for life insurance funds, aligning Appendix C of NZ IFRS 4 with the requirements of the Reserve Bank s solvency standards for life insurers (and, to the extent possible, AASB 1038 Life Insurance Contracts). The amendments simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The amendments require additional New Zealand specific disclosures about applying the fair value hierarchy to retirement benefit plan investments measured at fair value in accordance with NZ IAS 26. The entities are required to disclose information that helps users of its assess both of the following: (a) for retirement benefit plan investments measured at fair value in the statement of net assets after initial recognition, the valuation techniques and inputs used to develop those measurements (b) for fair value measurements using significant unobservable inputs (Level 3), the effect of the measurements on the statement of changes of net assets available for benefits for the period. 1 July April July April January April 2015 EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 5

6 Part A Changes in accounting policy Reference Title of 2014 Omnibus Amendments to NZ IFRS The following standards are amended by this standard: NZ IFRS 1 Clarifies the application of paragraph 4A of NZ IFRS 1. FRS-44 Requires an entity to disclose the statutory basis or other reporting framework, if any, under which the have been prepared. NZ IFRS 4 Amends the definition of life insurer. NZ IFRS 7 Replaces the term deposit takers with the term NBDTs Replaces the term institution with NBDT. 1 April April 2015 EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 6

7 The following standards and interpretations have been issued but are not yet effective for Tier 1 for-profit entities for the period ending 31 March NZ IFRS 5, NZ IFRS 7, NZ IAS 19, NZ IAS 34 Annual Improvements to NZ IFRSs Cycle The following standards are amended by this standard: NZ IFRS 5 Changes in methods of disposal: Assets (or disposal groups) are generally disposed of either through sale or distribution to owners. The amendment clarifies that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in NZ IFRS 5. The amendment must be applied prospectively. EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 7

8 NZ IFRS 5, NZ IFRS 7, NZ IAS 19, NZ IAS 34 (continued) Annual Improvements to NZ IFRSs Cycle (continued) NZ IFRS 7 Servicing contracts: The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in NZ IFRS 7.B30 and NZ IFRS 7.42C in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments. Applicability of the offsetting disclosures to condensed interim : The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim, unless such disclosures provide a significant update to the information reported in the most recent annual report. The amendment must be applied retrospectively. NZ IAS 19 Discount rate: regional market issue: The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. The amendment must be applied prospectively. NZ IAS 34 Disclosure of information elsewhere in the interim report : The amendment clarifies that the required interim disclosures must either be in the interim or incorporated by cross-reference EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 8 between the interim and wherever they are included within the interim report (e.g., in the management

9 NZ IFRS 1, NZ IFRS 5, NZ IFRS 9 (2014), NZ IAS 1, NZ IAS 8, NZ IAS 33, NZ IAS 34, FRS-43, FRS-44 Amendments to For-profit Accounting Standards as a Consequence of XRB A1 and Other Amendments The following standards are amended by this standard: NZ IFRS 1: Amendments more closely align the terminology with IFRS 1 First-time Adoption of International Financial Reporting Standards. Clarify the application of the Standard for an entity whose for its most recent previous reporting period contained an explicit and unreserved statement of compliance with IFRSs or NZ IFRS. Amend the definition of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) to include domestic Financial Reporting Standards. NZ IFRS 5: IASB editorial amendment to clarify that the income tax expense as required by paragraph 81(h) of NZ IAS 12 needs to be disclosed separately for - the revenue, expenses and pre-tax profit or loss of discontinued operations and - the gain or loss recognised on the measurement of fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation. NZ IFRS 9 (2014): IASB editorial amendments are made to NZ IFRS 9 (2014). NZ IAS 1: Amends the definition of NZ IFRS to be the same as the amended definition of NZ IFRS in NZ IFRS 1. EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 9

10 NZ IFRS 1, NZ IFRS 4, NZ IFRS 5, NZ IFRS 9 (2014), NZ IAS 1, NZ IAS 8, NZ IAS 33, NZ IAS 34, FRS-43, FRS-44 (continued) Amendments to For-profit Accounting Standards as a Consequence of XRB A1 and Other Amendments NZ IAS 8: Inserts a footnote to the definition of IFRSs NZ IAS 33: Align the scope paragraph with that of NZ IFRS 8 Operating Segments. NZ IAS 34: Clarifies the of compliance with NZ IFRS. FRS-43: Requires an entity to display which accounting requirements the have been prepared under. FRS-44: Clarifies the statement of compliance with NZ IAS 34 to be made by Tier 1 entities. NZ IFRS 10, NZ IFRS 12, NZ IAS 28 Investment Entities: Applying the Consolidation Exception The amendments clarify various aspects of the exemption from consolidation of subsidiaries under NZ IFRS 10 that meet the definition of an investment entity. NZ IFRS 11 Accounting for Acquisitions in Joint Operations (Amendments to NZ IFRS 11) The amendments require the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in NZ IFRS 3 Business Combinations, to apply all of the principles on business combinations accounting in NZ IFRS 3 and other NZ IFRSs except for those principles that conflict with the guidance in this NZ IFRS. In addition, the acquirer shall disclose the information required by NZ IFRS 3 and other NZ IFRSs for business combinations. NZ IFRS 14 Regulatory Deferral Accounts NZ IFRS 14 provides first-time adopters of NZ IFRS with relief from derecognising rate regulated assets and liabilities until a comprehensive project on accounting for such assets and liabilities is completed by the International Accounting Standards Board (IASB). EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 10

11 NZ IAS 1 Disclosure Initiative The amendments clarify existing NZ IAS 1 requirements that relate to materiality, order of the notes, subtotals, accounting policies and disaggregation. NZ IAS 16 and NZ IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to NZ IAS 16 and NZ IAS 38) NZ IAS 16 and NZ IAS 38 both establish the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset. The IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 11

12 NZ IAS 16 and NZ IAS 41 Agriculture: Bearer Plants Amendments to NZ IAS 16 and NZ IAS 41 The amendments to NZ IAS 16 and NZ IAS 41 Agriculture change the scope of NZ IAS 16 to include biological assets that meet the definition of bearer plants (e.g., fruit trees). Agricultural produce growing on bearer plants (e.g., fruit growing on a tree) will remain within the scope of NZ IAS 41. As a result of the amendments, bearer plants will be subject to all the recognition and measurement requirements in NZ IAS 16 including the choice between the cost model and revaluation model. In addition, government grants relating to bearer plants will be accounted for in accordance with NZ IAS 20, instead of NZ IAS 41. Entities may apply the amendments on a fully retrospective basis. Alternatively, an entity may choose to measure a bearer plant at its fair value at the beginning of the earliest period presented. Any difference between the fair value used as deemed cost at that date and the previous carrying amount will be recognised in retained earnings. Earlier application is permitted and must be disclosed. Consequential amendments derived from the amendments to NZ IAS 16 and NZ IAS 42 have been made to the scope of NZ IAS 17, NZ IAS 23, NZ IAS 36 and NZ IAS 40. NZ IAS 27 Equity Method in Separate Financial Statements (Amendments to NZ IAS 27) The amendments require an entity preparing separate to account for investments in subsidiaries, joint ventures and associates either at cost, in accordance with NZ IFRS 9 Financial Instruments, or using the equity method. EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 12

13 IAS 7 Disclosure Initiative Amendments to IAS 7 The amendments to IAS 7 Statement of Cash Flows are part of the IASB s Disclosure Initiative and require an entity to provide disclosures that enable users of to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The amendments are intended to provide information to help investors better understand changes in a company s debt. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. Early application is permitted. Please note the NZASB has not yet issued the amendments to NZ IAS 7, but the amendments are expected to be issued in the near future. 1 January April 2017 EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 13

14 IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses Amendments to IAS 12 The IASB issued the amendments to IAS 12 Income Taxes to clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value. The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explains in which circumstances taxable profit may include the recovery of some assets for more than their carrying amount. Transition Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact. Early application is permitted. If an entity applies the amendments for an earlier period, it must disclose that fact. Please note the NZASB has not yet issued the amendments to NZ IAS 12, but the amendments are expected to be issued in the near future. 1 January April 2017 EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 14

15 NZ IFRS 15 Revenue from Contracts with Customers NZ IFRS 15 establishes principles for reporting useful information to users of about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. 1 January April 2018 NZ IFRS 15 supersedes: (a) NZ IAS 11 Construction Contracts (b) NZ IAS 18 Revenue (c) NZ IFRIC 13 Customer Loyalty Programmes (d) NZ IFRIC 15 Agreements for the Construction of Real Estate (e) NZ IFRIC 18 Transfers of Assets from Customers (f) NZ SIC-31 Revenue Barter transactions Involving Advertising Services The core principle of NZ IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: (a) Step 1: Identify the contract(s) with a customer (b) Step 2: Identify the performance obligations in the contract (c) Step 3: Determine the transaction price (d) Step 4: Allocate the transaction price to the performance obligations in the contract (e) Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation. EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 15

16 NZ IFRS 9 (2014) Financial Instruments The final version of NZ IFRS 9 Financial Instruments, brings together the classification and measurement, impairment and hedge accounting phases of the International Accounting Standards Board s project. The standard will replace NZ IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of NZ IFRS 9. An entity may elect to apply earlier versions of NZ IFRS 9 if, and only if, the entity s relevant initial application is before 1 February Otherwise, early application is only permitted if the complete version of NZ IFRS 9 is adopted in its entirety for reporting periods beginning after 4 September 2014.The transition to NZ IFRS 9 differs by requirements and is partly retrospective and partly prospective. Despite the requirement to apply NZ IFRS 9 in its entirety, entities may elect to early apply only the requirements for the presentation of gains and losses on liabilities designated as at fair value through profit or loss without applying the other requirements in the standard. An entity that elects to do so is required to disclose that fact and provide the related disclosures set out in paragraphs of NZ IFRS 7 Financial Instruments: Disclosures. 1 January April 2018 EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 16

17 NZ IFRS 16 Leases NZ IFRS 16 is the new standard on the recognition, measurement, presentation and disclosure of leases. This standard will replace: (a) NZ IAS 17 Leases; (b) NZ IFRIC 4 Determining whether an Arrangement contains a Lease; (c) NZ SIC-15 Operating Leases Incentives; and (d) NZ SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. 1 January April 2019 The scope of the new standard includes leases of all assets, with certain exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. NZ IFRS 16 requires lessees to account for all leases under a single on-balance sheet model (subject to certain exemptions) in a similar way to finance leases under NZ IAS 17. Lessees recognise a liability to pay rentals with a corresponding asset, and recognise interest expense and depreciation separately. Reassessment of certain key considerations (e.g., lease term, variable rents based on an index or rate, discount rate) by the lessee is required upon certain events. Lessor accounting is substantially the same as today s lessor accounting, using NZ IAS 17 s dual classification approach. of NZ IFRS 16 is required for annual periods beginning on or after 1 January Early application is permitted, but not before an entity applies NZ IFRS 15. NZ IFRS 10, NZ IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments require a full gain or loss to be recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves 1 January 2020** 1 April 2020 EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 17

18 assets that do not constitute a business, even if these assets are housed in a subsidiary. * Designates the beginning of the applicable annual reporting period unless otherwise stated **Please note, the effective Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to NZ IFRS 10 and NZ IAS 28 )may change because the IASB has yet to select an effective date for Amendments to IFRS 10 and IAS 28. EY New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 December 2015 EY 18

19 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young, New Zealand. All Rights Reserved. APAC no. NZ This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance to any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that replies on the information does so at its own risk. ey.com/nz