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New Zealand New Zealand is included in the IFAD GAAP Convergence Studies National Professional Organisation Website: New Zealand Institute of Chartered Accountants National Accounting Standard Setter Website: Accounting Standards Review Board Response to IFAC Member Body Survey on Standard Setting and Regulation Update for September 2007 Update for April 2007 Update for October 2006 Update for July 2006 Update for April 2006 Update for January 2006 Update for April 2005 Update for January 2005 Update for July 2004 Update for April 2004 Update for October 2003 Update for July 2003 Update for June 2003 Update for April 2003 Update for January 2003 Update for January 2001 Update for October 2000 Auckland: (North Island) Christchurch (South Island): Financial Reporting Framework in New Zealand In New Zealand, accounting standards are issued by the Financial Reporting Standards Board of the New Zealand Institute of Chartered Accountants. The standards, and any amendments to them, must be reviewed and approved by the New Zealand Accounting Standards Review Board before they become effective. New Zealand refers to its standards as 'New Zealand equivalents' to IFRSs (NZ-IFRSs). NZ-IFRSs are Standards and Interpretations approved by the Accounting Standards Review Board (ASRB) comprising New Zealand equivalents to: International Financial Reporting Standards; International Accounting Standards; and International Interpretations. There are a number of differences between NZ-IFRSs and IFRSs: wording has been amended to accommodate the New Zealand legislative environment, for example, references to the Financial Reporting Act 1993; additional or amended accounting recognition and measurement requirements for public benefit entities (non-business entities); in some cases NZ-IFRSs permit only one of a number of options available in the corresponding IFRS; additional disclosures; different effective dates; and different transitional requirements. New Zealand Accounting Alert Newsletters Deloitte (New Zealand) publishes a series of Accounting Alert Newsletters. Click here for a list of New Zealand Accounting Alerts that are available to download in PDF format. Model Annual Report for 2005 Using NZ-IFRSs Deloitte (New Zealand) has published New Zealand Model Annual Report (PDF 1,218k) – a guide to producing an annual report and consolidated financial statements on first-time adoption of New Zealand Equivalents to International Financial Reporting Standards Financial (NZ-IFRSs) for years ending on or after 31 December 2005. Annual financial statements prepared in respect of reporting periods beginning on or after 1 January 2007 must be prepared in accordance with the New Zealand Equivalents to International Financial Reporting Standards, with early adoption permitted for periods beginning 1 January 2005. The Model Annual Report provides an illustrative example of annual financial statements prepared by consolidated entities on first-time adoption of NZ-IFRSs. More generally, this model is an illustrative example of general purpose financial statements prepared in accordance with: the Companies Act 1993 and Financial Reporting Act 1993; and Standards and Interpretations issued by the Financial Reporting Standards Board of the New Zealand Institute of Chartered Accountants and approved by the Accounting Standards Review Board (except as noted in Section B) up to 31 December 2005. The publication also includes some discussion and examples of other matters that would typically be included in an entity's annual report, including: the requirements of section 211 of the Companies Act 1993; and other requirements and guidelines current as at the date of issue, including New Zealand Stock Exchange Listing Rules and New Zealand Securities Legislation. Comparison of New Zealand 'Equivalents' to IFRSs and Current New Zealand GAAP (April 2005) Deloitte (New Zealand) has published NZ IFRS and NZ GAAP: A Comparison (PDF 340k). This guide compares New Zealand 'equivalents' to IFRSs, as adopted by the NZ Financial Reporting Standards Board (FRSB), and New Zealand's current financial reporting standards. In New Zealand, reporting entities are required to adopt NZ-IFRSs at the latest for periods beginning on or after 1 January 2007, and they may elect to do so for periods beginning on or after 1 January 2004. Early adoption before 1 January 2005 is not permitted. When an entity adopts NZ-IFRSs it must do so in their entirety, not piecemeal. September 2007 Update New Zealand delays IFRS equivalents for small companies The New Zealand Accounting Standards Review Board (ASRB) and the Financial Reporting Standards Board (FRSB) have announced a decision to delay the mandatory adoption of NZ IFRSs for certain small entities. Financial reporting by small and medium sized entities (SMEs) has been the subject of recent world-wide debate. As a result of this, the IASB has produced the exposure draft of a Standard for financial reporting for SMEs. In addition, Australia has recently conducted a review of SME reporting, and in New Zealand there has been extensive consultation on the issue. The Minister of Commerce, the Hon Lianne Dalziel, recently advised the ASRB and FRSB that a government review of the financial reporting requirements applying to small and medium-sized companies under the Financial Reporting Act (the FRA) will commence in mid-2008. As a result, the ASRB and FRSB have decided to delay, until further notice, the mandatory adoption of NZ IFRSs for certain small entities, defined as follows: Companies that are not issuers as defined by the FRA, in either the current or preceding accounting period and that: are not required by section 19 of the FRA to file their financial statements; and are not large, as defined by section 19A(b) of the FRA. A company is large if at least two of the following apply: total assets of the company and its subsidiaries (if any) exceed NZ$10,000,000; turnover or the company and its subsidiaries (if any) exceeds NZ$20,000,000; or the company and its subsidiaries (if any) have 50 or more full-time equivalent employees. Other entities that: are not subject to the FRA; and are not publicly accountable or large as defined in the Framework for Differential Reporting. An entity is large if at least two of the following apply: total assets exceed NZ$10,000,000; total income exceeds NZ$20,000,000; or 50 or more full-time equivalent employees. At this stage, the delay is for an indefinite period. Entities taking advantage of the delay should continue to use existing NZ GAAP financial reporting standards. Click for: Press Release (PDF 53k) ASRB Release Announcing the Delay (PDF 21k) April 2007 Update IASB Equivalent Standards Issued by the Accounting Standards Review Board (ASRB) The following pronouncements have recently been approved by the ASRB and are currently going through the final publication process. As such these pronouncements are subject to final editorial and formatting changes: New Zealand equivalent to IFRIC Interpretation 11 IFRS 2-Group and Treasury Share Transactions (NZ IFRIC 11) New Zealand Equivalent to IFRIC Interpretation 12 Service Concession Arrangements (NZ IFRIC 12) New Zealand Equivalent to International Financial Reporting Standard 8 Operating Segments (NZ IFRS 8) IASB Exposure Drafts and Discussion Papers Issued by the Financial Standards Review Board (FRSB) IASB Exposure Draft of a Proposed International Financial Reporting Standard for Small and Medium-sized Entities New Zealand specific matters: The FRSB is also taking this opportunity to undertake a comprehensive review of differential reporting in New Zealand. The FRSB has issued a Request for Comment on the proposed IFRS for SMEs and other issues regarding financial reporting by SMEs in New Zealand. Request for Comment on Exposure Draft of Proposed Amendments to NZ IAS 24 Related Party Disclosures New Zealand specific matters: The FRSB is proposing to: remove the existing exemption in NZ IAS 24 that applies to some public benefit (public sector/not for profit) entities; and add an exemption to apply to some public benefit entities in respect of transactions with key management personnel, provided specified criteria are met. IASB ED Proposed Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards – Cost of an Investment Subsidiary IASB DP Fair Value Measurements ED 110 Credit Rating Disclosures and the Scope of Requirements for Insurance Contracts Legislative Update In November 2006, a number of changes to the Financial Reporting Act 1993 and the Companies Act 1993 were approved with the objective of removing unneeded or excessive preparation, audit and filing requirements. It is important to understand these changes and the impact on the requirement to prepare, audit, and file financial statements. As this area is complex, it is recommended that the specific wording of the Act is consulted when assessing the impact. Overview of key changes: The effective dates of the legislation and the accounting periods affected varies and in some cases is not yet finalised Exempt company thresholds have been lifted. A new category called non-active entities has been created. Non-active entities do not need to prepare or file audited entity financial statements. The requirement to file audited entity and group financial statements for overseas companies and related entities has been changed. For example, a large criteria has been introduced for certain entities, and there is a new exemption for subsidiaries of NZ incorporated companies whose entity and group audited financial statements have been prepared and filed. Note – this is a filing change only, and does not change the preparation and audit requirements. The definition of an issuer has been expanded to include every recipient of money from conduit issuers. All issuers must prepare group financial statements, which therefore includes wholly owned issuers which were previously exempt. There is the opportunity for certain discretionary exemptions by the Securities Commission and the Registrar. There is the opportunity for the ASRB to provide exemptions from the requirement to comply with an applicable financial reporting standard (which may impact an entity's ability to assert compliance with IFRS). Rather than pursuing convictions for failing to comply, the Registrar can now impose infringement fees of NZ$7,000 in certain circumstances. Entities have the opportunity to provide annual reports electronically, and to provide and concise annual reports (also electronically). October 2006 Update IASB Exposure Drafts and Discussion Papers Issued The Financial Reporting Standards Board (FRSB) issued the following IASB and IFRIC Documents for comment: Request for Comment on NZ IFRIC Draft Interpretation D20 Customer Loyalty Programmes. NZ IFRIC Draft Interpretation D19 NZ IAS 19 The Asset Ceiling: Availability of Economic Benefits and Minimum Funding Requirements. Draft International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs). IASB DP Preliminary Views on an improved Conceptual Framework for Financial Reporting. The Discussion Paper sets out preliminary views on the objective of financial reporting (chapter 1) and the qualitative characteristics of decision-useful financial reporting information (chapter 2). IASB Equivalent Standards Issued New Zealand Equivalent to IFRIC Interpretation 10 Interim Financial Reporting and Impairment (NZ IFRIC 10) NZ IFRS Issued for New Zealand Specific Matters Amendments to New Zealand Equivalent to International Financial Reporting Standard 7 Financial Instruments: Disclosures - Differential Reporting Concessions and Financial Institution Disclosures (Amendments to NZ IFRS 7) NZ Exposure Drafts Issued for New Zealand Specific Matters Not-For-Profit Financial Reporting Guide (draft). The Public Benefit Entity (PBE) Working Group of the Financial Reporting Standards Board has released, for comment, a draft Guide on financial reporting by not-for-profit entities. ED 107 Summary Financial Statements. ED 107, which is based on FRS-39: Summary Financial Reports (FRS-39), proposes requirements for the preparation of summary financial statements for entities applying New Zealand equivalents to IFRSs. FRS-39 will continue to apply to entities that have not adopted New Zealand equivalents to IFRSs. ED 108 Omnibus Amendments. Since the development of the of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) in November 2004 a number of minor matters of clarification and other inconsistencies concerning the New Zealand paragraphs relating to these standards have been brought to the attention of the FRSB. Individually, the proposed amendments to resolve these matters do not require extensive changes to the relevant standards and a separate exposure draft for each is not an efficient due process. The FRSB has issued this Omnibus ED to address these minor matters. Request for Comment on ED 109 Proposed Amendments to FRS-37 Consolidating Investments in Subsidiaries and NZ IAS 27 Consolidated and Separate Financial Statements. This exposure draft sets out consolidation conditions for Crown related public benefit entities which have autonomy and independence. July 2006 Update IASB Exposure Drafts and Discussion Papers Issued The Financial Reporting Standards Board (FRSB) issued the following IASB and IFRIC documents for comment: Exposure draft of proposed Amendments to NZ IAS 23 Borrowing costs Constituents are invited to comment on the International Financial Reporting Interpretations Committee draft due process handbook Exposure draft of proposed amendments to NZ IAS 32 Financial Instruments: Presentation and NZ IAS 1 Presentation of Financial Instruments - Financial Instruments Puttable at Fair Value and Obligations arising on Liquidation International Public Sector Accounting Standards Board (IPSASB) Exposure Drafts and Discussion Papers Issued The Financial Reporting Standards Board (FRSB) issued the following IPSASB documents for comment: Consultation paper: Accounting for Heritage Assets Under the Accrual Basis of Accounting April 2006 Update IASB Exposure Drafts and Discussion Papers Issued The Financial Reporting Standards Board (FRSB) issued the following IASB and IFRIC documents for comment: Exposure Draft of Proposed Amendments to IAS 1 Presentation of Financial Statements Request for information from users of financial statements about information on financial instruments Amendments to IFRS 2 Share Based Payment: Vesting Conditions and Cancellations NZ ED 8 Operating Segments NZ IFRIC Draft Interpretation D18 Interim Financial Reporting and Impairment IASB Equivalent Standards Issued The following New Zealand Equivalent standards to IFRS were issued: NZ IFRIC 7 Applying the Restatement approach under NZ IAS 29 Financial Reporting in Hyperinflationary Economies New Zealand Equivalent to IFRIC Interpretation 8 Scope of NZ IFRS 2 (NZ IFRIC 8) New Zealand Equivalent to IFRIC 9 Reassessment of Embedded Derivatives IASB Amendments Issued The following New Zealand Equivalent standards to IFRS were amended for IASB amendments: Amendment to IFRS 7 Financial Instruments: Disclosures - Day 1 Profit Disclosures Amendments to New Zealand Equivalent to International Accounting Standard 39 Financial Instruments: Recognition and Measurement Cash Flow Hedge Accounting of Forecast Intragroup Transactions NZ IFRS Issued for New Zealand Specific Matters The following standards were amended for New Zealand-specific matters: Amendment to New Zealand Equivalent to IAS 19 Employee Benefits: Actuarial Assumptions - Allowance for Taxes in Defined Benefit Plans FRS 42 Prospective Financial Statements NZ Exposure Drafts Issued for New Zealand Specific Matters In addition the FRSB issued the following New Zealand-specific exposure drafts: None International Public Sector Accounting Standards Board (IPSASB) Exposure Drafts and Discussion Papers Issued The Financial Reporting Standards Board (FRSB) issued the following IPSASB documents for comment: IPSASB ED 29 Revenue from Non-Exchange Transactions January 2006 Update IASB Exposure Drafts and Discussion Papers Issued The Financial Reporting Standards Board (FRSB) issued the following IASB and IFRIC documents for comment: IASB DP: Management Commentary IASB DP: Measurement Bases for Financial Accounting - Measurement on Initial Recognition IASB Draft Technical Correction 1 Proposed Amendments to IAS-21 The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation IASB Invitation to Comment: Policy for Technical Corrections IASB ED 7 Financial Instruments: Disclosures - Day 1 Profit Disclosures IASB ED Proposed Amendments to New Zealand Equivalent to IAS-37 Non-Financial liabilities (formerly known as Provisions, Contingent Liabilities and Contingent Assets and New Zealand Equivalent to IAS 19 Employee Benefits IASB ED Proposed Replacement of the New Zealand Equivalent to IFRS-3 Business Combinations IASB ED Proposed Amendments to New Zealand Equivalent to IAS 27 Consolidated and Separate Financial Statements IFRIC Draft Interpretation D16 Scope of IFRS 2 IFRIC Draft Interpretation D17 IFRS 2 Group and Treasury Share Transactions IASB Equivalent Standards Issued The following New Zealand Equivalent standards to IFRS were issued: NZ IFRS 7 Financial Instruments: Disclosure and Amendments to NZ IAS 1 Presentation of Financial Statements-Capital Disclosures. NZ Amendment - Financial Institutions will be required to continue to comply with NZ IAS 30 and NZ IAS-32 if they choose to adopt NZ IFRS-7 early. An exposure draft of additional disclosures to be added to NZ IFRS 7 for financial institutions has also been released (see ED 106 below). An exposure draft of proposed differential reporting exemptions in relation to NZ IFRS 7 has also been released (see ED 104 below). NZ IFRIC 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment IASB Amendments Issued The following standards were amended for IASB amendments: Amendments to NZ IFRS 4 and NZ IAS 39 Financial Instruments: Recognition and Measurement - Financial Guarantee Contracts Amendments to NZ IFRS 6 and NZ IFRS 1 Withdrawal of NZ IFRIC 3 Emission Rights NZ IFRS Issued for New Zealand Specific Matters The following standards were amended for New Zealand specific matters Amendments to NZ IFRS 4 Insurance Contracts, Appendix C Life Insurance Entities and Appendix D Financial Reporting of Insurance Activities - The Fair Value Option. This amendment was necessary to align the requirements for those entities with insurance activities with the amendments made by the IASB to IAS-39 in relation to the restriction of the fair value option. Amendments to Appendix D Financial Reporting of Insurance Activities of the New Zealand Equivalent to IFRS 4 Insurance Contracts - Liability Adequacy Test Amendments to NZ IAS 1 Presentation of Financial Statements (Assertions and When is an Entity a PBE?). This amendment clarifies what assertions in relation to compliance with NZ GAAP and IFRS must be made. Guidance has also been added to assist in determining when an entity is a public benefit entity (PBE). NZ Exposure Drafts Issued for New Zealand Specific Matters In addition the FRSB issued the following New Zealand specific exposure drafts: ED 106 Proposed Additional Disclosure Requirements for Financial Institutions Applying New Zealand Equivalent to IFRS 7 Financial Instruments: Disclosures. ED 106 proposes to require additional disclosures for financial institutions over and above those required by IFRS 7. The ED has been developed in consultation with the Securities Commission and the Reserve Bank, among others, as part of the regulatory environment in New Zealand. The requirement for including the disclosures as part of the financial reporting process avoids the possibility of competing or contradictory requirements that could arise if the disclosures were required in legislation by different regulators. The FRSB approved the ED and accompanying Discussion Paper for issue with a comment date of 26 February 2006. ED-105 Proposed Amendments to New Zealand Equivalent to IAS 19 Employee Benefits: Actuarial Assumptions-Allowance for Taxes in Defined Benefit Plans. This ED proposes to remove two New Zealand specific paragraphs NZ 55.1 and NZ 55.2 to align with changes to the recently approved corresponding Australian standard AASB 119. ED-104 Proposed Differential Reporting Concessions for the forthcoming New Zealand Equivalent to IFRS 7 Financial Instruments: Disclosures and Amendments to New Zealand Equivalent to IAS 1 Presentation of Financial Statements-Capital Disclosures. This ED proposes concessions for those entities qualifying for differential reporting. Discussion Paper: Control and Public Benefit Entities that have Autonomy and Independence. This paper explores whether public benefit entities that have autonomy and independence should be consolidated by the Crown. ED 103 Prospective Financial Information. This exposure draft proposes to update FRS-29 Prospective Financial Information to ensure it is appropriate for application by public benefit entities, to remove the distinction between 'projection' and 'forecast' and to specify additional disclosures to be made in relation to prospective financial information. April 2005 Update The New Zealand Financial Reporting Standards Board (FRSB) has issued for comment seven exposure drafts of IFRS interpretations. These are: IFRIC 2 Members' Shares in c-operative Entities and Similar Instruments IFRIC 3 Emission Rights IFRIC 4 Determining Whether an Arrangement Contains a Lease IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds IFRIC D10 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment IFRIC D11 Changes in Contributions to Employee Share Purchase Plans IFRIC D12 Service Concession Arrangements - Determining the Accounting Model IFRIC D13 Service Concession Arrangements - the Financial Asset Model IFRIC D14 Service Concession Arrangements - the Intangible Asset Model IFRIC D15 Reassessment of Embedded Derivatives FRSB also issued in draft form the IASB Questionnaire on Possible Recognition and Measurement Modifications for Small and Medium-sized Entities (SMEs). Additionally, FRSB issued several exposure drafts to clarify the application of IFRSs in New Zealand. ED-98 Framework for Differential Reporting for Entities applying the New Zealand Equivalents to IFRS reporting regime This exposure draft is not a full review of the differential reporting regime in the context of IFRS. It is intended to be a short term regime until the IASB has completed its work on developing accounting standards for small and medium-sized entities and the Ministry of Economic Development (MED) has completed its review of the Financial Reporting Act 1993. Both of these projects may have an impact on what concessions are appropriate in a differential reporting regime. The proposed framework will be applicable for qualifying entities at the same time or subsequent to an entity's compliance with NZ IFRS 1: First Time adoption of New Zealand Equivalents to IFRS. Currently the framework proposes full exemption from NZ IS 14 Segments Reporting and from NZ SIC-29 Service Concession Arrangements. Partial exemptions are proposed for 21 standards and 2 interpretations. ED-99 Impairment of Non-cash Generating assets by PBEs: a proposed amendment to NZ IAS 36 Impairment Assets The exposure draft requires public benefit entities (PBEs) to measure the value-in-use of non cash generating assets using depreciated replacement cost. The adoption of a class basis in respect of recognising impairment gains and losses will be permitted. The proposed amendments will become operative for a period beginning on or after 1 January 2006 for public benefit entities that elect to adopt NZ IFRS for a period beginning before 1 January 2007. ED-100 Proposed Amendments to NZ IAS 1 Presentation of Financial Statements Entities will be required to disclose: The statutory base under which the statements are prepared. Whether the entity is a profit oriented entity, public benefit entity or a qualifying entity applying differential reporting exemptions. All entities must assert in a separate statement compliance with NZ GAAP, which will assert the entity's compliance with New Zealand equivalents to IFRS and other applicable Financial Reporting Standards, as appropriate to that entity, such as: compliance with New Zealand equivalents to IFRSs, and other applicable Financial Reporting Standards, as appropriate for profit-oriented entity; compliance with New Zealand equivalents to IFRSs, and other applicable Financial Reporting Standards, as appropriate for public benefit entity; compliance with New Zealand equivalents to IFRSs, and other applicable Financial Reporting Standards, as appropriate for profit-oriented/public benefit entity that qualifies for and applies differential reporting concessions; Entities that comply with IFRSs must assert their compliance. Entities applying differential reporting exemptions cannot assert compliance with IFRSs. ED-101 New Zealand application guidance: when is an entity a public benefit entity? The exposure draft gives guidance on which entities are public benefit entities using the following three guidelines: The founding documents of the entity (describing the purpose of the entity and its key objectives). The nature of the benefits generated by the entity. The quantum of financial surplus expected from the entity. January 2005 Update The New Zealand Accounting Standards Review Board (ASRB) and the Financial Reporting Standards Board (FRSB) have adopted 36 new accounting standards and 12 interpretations. These are the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). Application of NZ IFRS is mandatory for periods beginning on or after 1 January 2007. Entities wishing to early adopt NZ IFRS may do so for periods beginning on or after 1 January 2005. The ASRB has also issued an exposure draft, ED-96 Disclosing the Impact of Adopting New Zealand Equivalents to International Financial Reporting Standards, that would require entities to disclose in their annual and interim financial reports information about the expected impacts of adopting the New Zealand equivalents to IFRS. This will include: information regarding planning for the transition to NZ IFRS; key differences in accounting policies expected to arise on adoption of NZ IFRS, or if the key differences are not known, a statement to that effect; and known or reliably estimable information about the impacts on the financial reports under NZ IFRS, or if the impacts are not known, a statement to that effect. July 2004 Update In line with New Zealand's strategy to adopt IFRSs, the Financial Reporting Standards Board (FRSB) issued the following exposure drafts during the second quarter of 2004. The exposure drafts are based on the international standards with additional guidance for public benefit entities incorporated in shaded boxes. The FRSB has also restricted choices and required additional disclosures to ensure that the quality of current reporting in New Zealand is not diminished. Listing of Exposure Draft releases in New Zealand ED NZ IAS-26: Accounting and Reporting by Retirement Benefit Plans ED NZ IAS-27: Consolidated and Separate Financial Statements and ED NZ SIC-12: Consolidation - Special Purpose Entities ED NZ IAS-20: Accounting for Government Grants and Disclosure of Government Assistance and ED NZ SIC-10: Government Assistance - No Specific Relation to Operating Activities ED NZ IAS-39: Discussion Paper and IASB Exposure Draft of Proposed Amendments to IAS-39 Financial Instruments: Recognition and Measurement: The Fair Value Option. ED NZ IAS-30: Disclosures in Financial Statements of Banks and Similar Financial Institutions ED NZ IAS-31: Financial Reporting of Interests in Joint Ventures and ED NZ SIC-13: Jointly Controlled Entities - Non-Monetary Contributions by Venturers IASB Exposure Draft of Proposed Amendments to IAS-19: Employee Benefits: Actuarial Gains and Loses, Group Plans and Disclosures IASB Exposure Draft of Proposed Amendments to IFRS-3: Business Combinations - Combinations by Contract Alone or Involving Mutual Entities ED New Zealand Preface ED New Zealand Framework Listing of IFRIC Draft Interpretations IFRIC Draft Interpretation D6: Multi-Employer Plans Release 8 2004: The Role of the Accounting Standards Review Board (ASRB) and the Nature of Approved Financial Reporting Standards The release is designed to assist with maintaining the quality of financial reporting in New Zealand in regards to standard setting and the role the ASRB plays in standard setting. New Zealand Pending Standards The ASRB has resolved to make available the pending New Zealand equivalents to the International Financial Reporting Standards on both the ICANZ (www.icanz.co.nz) and ASRB (www.asrb.co.nz) web sites in order to assist users of the standards to identify the potential impacts on their financial statements and their financial reporting systems. The following pending standards are available: NZ IAS-2: Inventories NZ IAS-7: Cash Flow Statements NZ IAS-8: Accounting Policies, Changes in Accounting Estimates and Errors NZ IAS-10: Events after the Balance Sheet Date NZ IAS-11: Construction Contracts NZ IAS-17: Leases NZ SIC-15: Operating Leases-Incentives NZ SIC-27: Evaluating the Substance of Transactions in the Legal Form of a Lease NZ IAS-23: Borrowing Costs NZ IAS-33: Earnings per Share NZ IAS-37: Provisions, Contingent Liabilities and Contingent Assets NZ IAS-40: Investment Property The ASRB will officially approve the standards as applicable financial reporting standards when the full suite is completed. April 2004 Update The following exposure drafts were issued during the first quarter of 2004 by the Financial Reporting Standards Board (FRSB) in line with their strategy to adopt IFRS as equivalent FRSB standards. The exposure drafts include the international standards with additional guidance for public benefit entities incorporated in shaded boxes. The FRSB has also restricted choices and required additional disclosures to ensure that the quality of current reporting in New Zealand is not diminished. Listing of Exposure Draft Releases in New Zealand ED NZ IAS-18 Revenue and ED NZ Interpretation SIC-31: Revenue-Barter Transactions Involving Advertising Services ED NZ IAS-21 The effects of changes in foreign exchange rates and ED NZ interpretation SIC-7: Introduction of the Euro ED NZ IAS-29 Financial Reporting in Hyperinflationary Economies ED NZ IAS-34 Interim Financial Reporting ED NZ IAS-36 Impairment of Assets ED NZ IAS-38 Intangible Assets and NZ interpretation SIC-32 Intangible Assets-Web Site Costs. ED NZ IAS-24 Related Party Disclosures ED NZ IAS-28 Investments in Associates ED NZ IAS-39 Financial Instruments: Recognition and Measurement ED NZ IAS-32 Financial Instruments: Disclosure and Presentation ED NZ IAS 12 Income Taxes Invitation to Comment - Proposed NZ IAS-41 Agriculture Listing of IFRIC Draft Interpretations Under Consideration D3 Determining Whether an Arrangement Contains a Lease D4 Decommissioning, Restoration and Environmental Rehabilitation Funds D5 Applying IAS 29: Financial Reporting in Hyperinflationary Economies for the First Time. Review of the Financial Reporting Act 1993 The Ministry of Economic Development has released a discussion document entitled Review of the Financial Reporting Act 1993, Part 1: The Financial Reporting Structure. The discussion document is the first part of a two-part review of the Financial Reporting Act 1993 and deals specifically with the question of "who is required to report?" The discussion paper outlines a proposal put forward by the Accounting Standards Review Board (ASRB) for a new financial reporting framework. The document focuses on the specific needs of New Zealand entities and the users of the reports, with particular emphasis on eliminating unnecessary compliance costs unless they can be justified and there is a net benefit. The Ministry of Economic Development is seeking written submissions on the proposal and the issues raised in the document. The closing date for submissions is Friday, 14 May 2004. Corporate Governance The Securities Commission has released a document outlining the corporate governance principles it expects to be generally applied to the governance of entities that have economic impact in New Zealand or are accountable in various ways to the public. The principles do not impose any new legal obligations on issuers. However they set out standards of corporate governance that the commission expects boards of issuers to observe and to report on to their investors and stakeholders. October 2003 Update The following exposure drafts were issued during the quarter by the Financial Reporting Standards Board (FRSB) in line with their strategy to adopt IFRS as equivalent FRSB standards. The exposure drafts include the international standards with additional guidance for public benefit entities incorporated in shaded boxes. The FRSB has also restricted choices and required additional disclosures to ensure that the quality of current reporting in New Zealand is not diminished (for example the direct method is required for Cash Flow Statement presentation under ED NZ IAS-7 whereas either the direct or indirect method is allowed under IAS-7): ED NZ IAS-1 Presentation of Financial Statements ED NZ IAS-2 Inventories ED NZ IAS-7 Cash Flow Statements ED NZ IAS-8 Accounting Policies, Changes in Accounting Estimates and Errors ED NZ IAS-10 Events After the Balance Sheet Date ED NZ IAS-23 Borrowing Costs ED NZ IAS-33 Earnings Per Share ED NZ IAS-37 Provisions, Contingent Liabilities and Contingent Assets IASB ED-4 Disposal of Non-current Assets and Presentation of Discontinued Operations ED NZ IASB-5 Insurance Contracts ED NZ SIC-29 Disclosure Service Concession Arrangements ED Proposed Amendments to IAS 39: Financial Instruments: Recognition and Measurement - Fair Value Hedge Accounting for a Portfolio Hedge of Interest Rate Risk ED IFRIC Draft Interpretation D2, Changes in Decommissioning, Restoration and Similar Liabilities July 2003 Update Recent Financial Reporting Standards Activity The following activity has taken place in New Zealand during the second quarter of 2003: No new Financial Reporting Standards (FRS) were approved. No new auditing standards were approved. ED 92, Preface to Financial Reporting Standards, was withdrawn by the FRSB. The IFRS Conversion Programme is going ahead. The Financial Reporting Standards Board (FRSB) has a work programme. A Working Group has been formed to assist the FSRB. A corporate reporting report has been completed and presented to the Minister of Finance. This is to be reviewed by a working group including the Institute of Chartered Accountants of New Zealand and the Securities Commission to advance the report's recommendations. The new ICANZ Code of Ethics came into effect on 1 July 2003. June 2003 Update New Zealand Will Continue NZ-GAAP Based on IFRS Rather than replacing national GAAP with IFRS, as is being done for listed companies in Europe, the Financial Reporting Standards Board of New Zealand (FRSB) has begun a programme of adopting IFRS by converting them into NZ Financial Reporting Standards (FRS), with minor amendments generally in the form of additional requirements and guidance. For each international standard to be adopted in New Zealand, the FRSB will publish an exposure draft containing a summary of the main differences between the international standard and current NZ FRS together with a marked-up version of the international standard showing any modifications, additional requirements, and guidance proposed by the FRSB. It is likely that auditors' reports will refer to conformity with NZ Financial Reporting Standards. April 2003 Update Recent Financial Reporting Standards FRS 3 Accounting for Property, Plant and Equipment. FRS 3 was issued in March 2001 and is applicable for all financial reporting periods ending on or after 31 March 2002. The standard covers all aspects of accounting for items of property, plant and equipment with the exception of investment properties and properties intended for resale, which are covered by SSAP 17. Certain changes have been made to FRS 3, notably in the transitional provisions for revaluations of assets and capitalisation of borrowing cost. The following standards took effect for financial reporting periods ending on or after 31 December 2002. They had been issued in October 2001: FRS 36 Accounting for Acquisitions Resulting in Combinations of Entities and Operations. FRS 37 Consolidating Investments in Subsidiaries FRS 38 Accounting for Investments in Associates. FRS-39 Summary Financial Reports. The standard was issued in September 2002 and is applicable for periods ending on or after 31 December 2002. TPA 9 Service Performance Reporting. This technical practice aid was approved in September 2002. For entities that report a Statement of Service Performance, TPA 9 provides guidance in relation to the specification, measurement, and reporting of service performance. Current Exposure Drafts ED-90 Agriculture. ED 90 is based on the corresponding international standard IAS 41, Agriculture, and is similar to the corresponding Australian standard. The proposed standard will govern the accounting treatment for all biological assets (living animals or plants) during the period of growth, procreation, and degeneration, and for agricultural produce only at the point of harvest. ED-91 Related Party Disclosures. This proposed financial reporting standards is a revision of SSAP 22, Related Party Disclosures, and an update of ED 74. The standard distinguishes between director transactions and transactions with other related parties. It also proposes to abolish the current differential reporting exemptions and to require full disclosure of related party information. ED 92 Preface to Financial Reporting Standards. This exposure draft was issued in June 2002 prior to the announcement by the ASRB to recommend to government and other interested bodies that listed issuers be required to comply with International Reporting Standards. Among other things this standard sets out the Board's policy on international convergence and harmonisation therefore revision of this exposure draft is likely. ED 93 Share Based Payment. ED 93 was issued in November 2002 and is based on ED 2, Share Based Payment, issued by the International Accounting Standards Board. ED 94 Business Combinations. ED 94 was issued in December 2002 and is based on ED 3, Business Combinations, issued by the International Accounting Standards Board. Other Releases New Zealand Code of Ethics 2002 was issued in November 2002 and is applicable from 1 July 2003. It provides new guidance for members in public practice and expanded guidance for members in employment. ED New Zealand Code of Ethics: Independence in Assurance Engagements was issued in July 2002. The exposure draft is substantially based on the IFAC Code of Ethics section 8 and provides guidance on safeguards to independence. January 2003 Update Following consultation with many interested parties, New Zealand's Accounting Standards Review Board (ASRB) has recommended to the Government the compulsory adoption of International Financial Reporting Standards by listed issuers by 1 January 2007. The ASRB has also recommended that both the public and private sector entities have the option to adopt IFRSs from 1 January 2005. Press Release (PDF 12k). In December 2002, the ASRB – the government appointed body that approves accounting standards – announced that it is recommending to government that listed issuers be required to comply with International Financial Reporting Standards by 2007. They would have the option to adopt IFRS earlier, say by 2005. The ASRB also reaffirmed its policy of aiming for a single set of standards to apply to both the private and public sectors. The ASRB is currently consulting with government, the stock exchange, the Securities Commission, the Office of the Auditor General, and others on their decision. Australia has also announced a plan to move to IFRS (by 2005), and ASRB is working with Australia regarding the transitional issues. Click for ICANZ Press Release (PDF 49k). January 2001 Update The Financial Reporting Standards Board (FRSB) is continuing with its policy of harmonising New Zealand Financial Reporting Standards with International Accounting Standards and Australian Accounting Standards. FRS-15: Provisions, Contingent Liabilities and Contingent Assets, was issued in November 2000 and applies to periods ending on or after 31 October 2001. FRS-15 is in substantial agreement with IAS-37 (1997), Provisions, Contingent Liabilities and Contingent Assets. Differences concern the application of parts of the standard to the Crown, the definition of contingent assets, the treatment of reimbursements, and certain additional disclosure requirements. Financial Reporting Standards issued but not yet applicable: FRS-5 Events After Balance Date: periods ending on or after 30 June 2001. Exposure drafts that are likely to give rise to financial reporting standards in the foreseeable future are: ED 82 Accounting for Property, Plant and Equipment ED 83 Accounting for Acquisitions Resulting in Equity Combinations ED 84 Consolidating Investments in Subsidiaries ED 87 Accounting for Intangible Assets ED 89 Summary Financial Statements (Submissions close 31 January 2001) October 2000 Update Exposure drafts are issued by the Financial Reporting Standards Board (FRSB). After due process, the FSRB submits a proposed standard to the Accounting Standards Review Board (ASRB) for approval. Once approved by the ASRB as an applicable financial reporting standard, the requirements of the standard are legally enforceable under the Financial Reporting Act, 1993. The FRSB has a policy of harmonising the standards as far as possible with the international and Australian standards. FRS 5, Events after Balance Date, was issued as a financial reporting standard in July 2000 and applies to all general purpose financial reports covering periods ending on or after 30 June 2001. Exposure drafts that are likely to give rise to financial reporting standards in the foreseeable future are: ED 82 Accounting for Property, Plant and Equipment ED 83 Accounting for Acquisitions Resulting in Equity Combinations ED 84 Consolidating Investments in Subsidiaries ED 86 Provisions, Contingent Liabilities and Contingent Assets ED 87 Accounting For Intangible Assets