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

Transcription

1 New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 1

2 Introduction This document is applicable for Tier 1 for-profit entities applying New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS). It 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 2017 and are applicable for Tier 1 for-profit entities applying NZ IFRS with 31 March 2017 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 2017 yearend. 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 financial 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. Part B Accounting standards issued but not yet effective This table lists all applicable NZ IFRSs issued but not yet effective for Tier 1 for-profit entities with 31 March 2017 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 7 March 2017 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 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 the entity s financial statements should be added based on the entity s specific circumstances. The tables in Par A and B will be updated and released for reporting periods ending 31 March, 30 June, 30 September and 31 December. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 1

3 Part A Changes in accounting policy The following Standards and Interpretations would have been applied for the first time for Tier 1 forprofit entities with years ending 31 March 2017 (unless early adopted): Reference Title Summary Effective date of Standard* 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. NZ IFRS 7 Servicing contracts: The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial 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. The amendment need not be applied to periods beginning before the annual period for which the entity first applies this amendment. Applicability of the offsetting disclosures to condensed interim financial statements: The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. The amendment must be applied retrospectively. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 2

4 Reference Title Summary Effective date of Standard* NZ IFRS 5 NZ IFRS 7 NZ IAS 19 NZ IAS 34 Annual Improvements to NZ IFRSs Cycle (continued) 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 from the beginning of the earliest period presented. NZ IAS 34 Disclosure of information elsewhere in the interim financial report : The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report (e.g., in the management commentary or risk report). The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. The amendment must be applied retrospectively. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 3

5 Reference Title Summary Effective date of Standard* NZ IFRS 1 NZ IFRS 5 NZ IFRS 9 NZ IAS 1 NZ IAS 8 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 financial statements 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). The amendment clarifies that on initial application of NZ IFRS 9 (2014), contracts already existing at that purchase or sale of a non-financial item may be designated as measured at fair value through profit or loss, if NZ IFRS 9 (2014) would have allowed these contracts to be so designated upon inception. The resulting change in net assets is recognised in retained earnings at the date of initial application of NZ IFRS 9 (2014). This amendment is applicable for periods beginning 1 January 2018, with early application permitted. NZ IAS 1: Amends the definition of NZ IFRS to be the same as the amended definition of NZ IFRS in NZ IFRS 1. 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 statements of compliance with NZ IFRS. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 4

6 Reference Title Summary Effective date of Standard* NZ IFRS 1 NZ IFRS 5 NZ IFRS 9 NZ IAS 1 NZ IAS 8 NZ IAS 34 FRS-43 FRS-44 Amendments to For-profit Accounting Standards as a Consequence of XRB A1 and Other Amendments (continued) FRS-43: Requires an entity to display which accounting requirements the financial statements 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 27 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 of Interests 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). 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. Consequential amendments have been made to NZ IFRS 7 and NZ IAS 34. NZ IAS 16 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. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 5

7 Reference Title Summary Effective date of Standard* NZ IAS 16 NZ IAS 41 Agriculture: Bearer Plants Amendments to NZ IAS 16 and NZ IAS 41 The amendments to NZ IAS 16 Property Plant and Equipment 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. Consequential amendments derived from the amendments to NZ IAS 16 and NZ IAS 41 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 financial statements 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. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 6

8 Part B Accounting standards issued but not yet effective 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 Reference Title Summary Effective date of Standard* NZ IAS 7 Disclosure Initiative Amendments to NZ IAS 7 The amendments to NZ 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 financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. 1 January April 2017 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. NZ IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses Amendments to NZ IAS 12 The amendments to NZ IAS 12 Income Taxes 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. 1 January April 2017 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. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 7

9 Part B Accounting standards issued but not yet effective Reference Title Summary Effective date of Standard* NZ IFRS 1 NZ IFRS 12 NZ IAS 28 Annual Improvements to NZ IFRSs Cycle The following standards are amended by this standard: NZ IFRS 1 Deletion of short-term exemptions for first-time adopters Deletes the short-term first-time adoption exemptions in paragraphs E3 to E7 of NZ IFRS 1, as the periods to which these exemptions applied have passed. 1 January April 2018 NZ IFRS 12 Clarification of the scope of the standard Clarifies that the disclosure requirements of NZ IFRS 12, other than the requirement in paragraphs B10-B16 to disclose summary financial information, apply to interests in other entities that are classified as held for sale or discontinued operations under NZ IFRS 5 This amendment must be applied retrospectively. 1 January April 2017 NZ IAS 28 Measuring an associate or joint venture at fair value Clarifies that for a venture capital organisation (and similar entities), the election to measure investment in an associate or joint venture at fair value through profit or loss should be made separately for each associate or joint venture, at the date of initial recognition. Clarifies that for an entity that is not an investment entity, the election to retain fair value measurement for the subsidiaries of an associate or joint venture that is an investment entity should be made separately for each associate or joint venture. This election should be made at the later of (a) the date of the initial recognition of the associate or joint venture; (b) the date when the associate or joint venture becomes an investment entity, and; (c) the date when the associate or joint venture becomes a parent. Early application is permitted. This amendment must be applied retrospectively. 1 January April 2018 NZ IFRS 2 Classification and Measurement of Share-based Payment Transactions Amendments to NZ IFRS 2 The amendments to NZ IFRS 2 Share-based Payment relate to the classification and measurement of share based payment transactions. The amendments clarify the accounting requirements in the following three main areas: The effects of vesting conditions on the measurement of a cash-settled share based payment transaction; The classification of a share-based payment transaction with net settlement features for withholding tax obligations The accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cashsettled to equity-settled. Entities are required to apply the amendments without restating prior periods. However, retrospective application is permitted if elected for all three amendments and if other criteria are met. 1 January April 2018 Early application is permitted. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 8

10 Part B Accounting standards issued but not yet effective Reference Title Summary Effective date of Standard* NZ IFRS 15 Revenue from Contracts with Customers NZ IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. 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 1 January April 2018 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. NZ IFRS 15 Clarifications to NZ IFRS 15 Revenue from Contracts with Customers This amendment to NZ IFRS 15 was issued in May The amendment clarifies how to: (a) Identify a performance obligation in a contract; (b) Determine whether an entity is a principal or an agent, and; 1 January April 2018 (c) Determine whether revenue from granting a licence should be recognised at a point in time or over time. The amendment also provides additional relief to reduce cost and complexity for an entity when it first applies NZ IFRS 15. The amendment is effective for annual reporting periods beginning on or after 1 January Earlier application is permitted (provided the entity early adopted NZ IFRS 15). New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 9

11 Part B Accounting standards issued but not yet effective Reference Title Summary Effective date of Standard* 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. 1 January April 2018 An entity may elect to apply earlier versions of NZ IFRS 9 if, and only if, the entity s relevant date of 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 financial 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. NZ IFRS 4 Applying NZ IFRS 9 Financial Instruments with NZ IFRS 4 Insurance Contracts - Amendments to NZ IFRS 4 Please note: This amendment may only be applied by entities that issue insurance contracts and do not apply either Appendix C Life Insurance Entities or Appendix D Financial Reporting of Insurance Activities of NZ IFRS 4. The amendments address concerns, including concerns around temporary volatility in reported results, arising from implementing NZ IFRS 9 (effective 1 January 2018) before implementing the new insurance standard that IASB is developing as a replacement for NZ IFRS 4 (effective date to be decided, but will not be earlier than 1 January 2020). The amendments introduce the following two approaches for the adoption of NZ IFRS 9 by entities that issue insurance contracts, other than those that apply Appendix C or Appendix D of NZ IFRS 4: (a) (b) The overlay approach, which gives all entities to whom this amendment applies the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when NZ IFRS 9 is applied before the new insurance contracts standard is issued; and The deferral approach, which give entities whose activities are predominantly connected with insurance an optional temporary exemption from applying NZ IFRS 9 until The entities that defer the application of NZ IFRS 9 will continue to apply the existing financial instruments standard, NZ IAS 39. These two approaches are optional. Insurers that do not choose to follow one of the above options will have to apply NZ IFRS 9 in periods beginning 1 January January April 2018 New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 10

12 Part B Accounting standards issued but not yet effective Reference Title Summary Effective date of Standard* NZ IFRIC 22 Foreign Currency Transactions and Advance Consideration This interpretation addresses how to determine the exchange rate to use on the initial recognition of an asset, revenue or expense when an entity had paid or received advance consideration in foreign currency prior to recognising the asset, revenue or expense. 1 January April 2018 The interpretation clarifies that, for the purpose of determining the exchange rate to use on initial recognition of the asset, expense or income (or part of it), the date of the transaction is the date on which the entity initially recognised the related non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. Early application is permitted. On initial application, this interpretation may be applied prospectively to all assets, expenses and income within the scope of this interpretation that were initially recognised: On or after the start of the reporting period in which the entity first applies the Interpretation, or; On or after the start of the comparative period. Otherwise, this interpretation may be applied retrospectively, applying NZ IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. NZ IAS 40 Transfers of Investment Property Amendments to NZ IAS 40 The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendment clarifies that: A change in use of a property occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use; A change in management s intentions for the use of a property does not, by itself, provide evidence of a change in use; The list of examples of evidence of change in use provided in the standard is not exhaustive. 1 January April 2018 This amendment must be applied prospectively from start of the reporting period when the amendment is first applied, unless retrospective application is possible without hindsight, in which case it may be applied retrospectively. Early application is permitted. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 11

13 Part B Accounting standards issued but not yet effective Reference Title Summary Effective date of Standard* NZ IFRS 16 Leases NZ IFRS 16 is the new standard on the recognition, measurement, presentation and disclosure of leases. This standard will replace: 1 January April 2019 (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. 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 assets that do not constitute a business, even if these assets are housed in a subsidiary. 1 January 2020*** 1 April 2020 * Effective for annual periods beginning on or after this date. ** Assuming that the entity has not early adopted the pronouncement according to specific provisions in the Standard. ***Please note, the effective date of 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. New Accounting Standards and Interpretations for Tier 1 For-profit Entities 31 March 2017 EY 12

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