• 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: External Reporting Board
• Response to IFAC Member Body Survey on Standard Setting and Regulation
• Participant in the Asian-Oceanian Standard-Setters Group (AOSSG)

Updates

Auckland: (North Island)

Christchurch (South Island):

• 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.

In September 2011, the XRB formally released its proposals for a new Accounting Standard Framework for New Zealand (more details).

• Section A: Reporting obligations (PDF 320k) – This section provides background information regarding the reporting requirements and legislative framework in New Zealand.
• Section B: Model annual report (PDF 267k) – This section contains model annual report disclosures and commentaries, including subjects such as corporate governance, the Companies Act 1993 disclosures and stock exchange disclosures.
• Section C: Model financial statements (PDF 1,993k) – This section contains the model financial statements of Green Dot Holdings Limited, for the year ended 31 December 2009.
• Section D: Other information (PDF 77k) – This section contains additional tools for users, including a listing of each NZ IFRS which is applicable for the year ended 31 December 2009, what is required in an NZX preliminary announcement, and a timeline of critical reporting dates for entities with a 31 December 2009 reporting date.

New Zealand to consider ways to reduce excessive disclosures under IFRSs

The New Zealand Accounting Standards Board (NZASB) is to consider a short-term action plan to encourage the reduction of excessive disclosures at its upcoming meeting on 2 November 2011.

A staff paper to be considered at the meeting discusses the NZASB's response to the report Losing the excess baggage: reducing disclosures in financial statements to what's important issued by The Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) in July 2011. The paper notes that "although the project was commissioned by the IASB, with the expectation that it would be exposed for comment, it appears that the IASB is unlikely to take any action before it considers comments on its Agenda Consultation 2011."

The staff paper explores the options available to ensure any advice or guidance issued by the NZASB is of sufficient standing that not only preparers but also auditors and regulators will consider that it is persuasive, whilst at the same time ensuring New Zealand's ongoing compliance with IFRSs in relation to for-profit entities. The paper discusses the options of a domestic New Zealand standard or Interpretation, an explanatory guide or an informal communication such as a communiqué.

The staff paper recommends the NZASB issue an explanatory guide, which would not have any legal status but which would provide guidance on applying the materiality concept in relation to disclosures. The guidance would be based on the recommendations in the ICAS-NZICA report that users of IFRSs should consider separately (i) whether an item is material and (ii) whether individual pieces of information are material such that they warrant disclosure in the additional notes. Consideration would be given to individual pieces of information relating to material items, as well as information that does not relate to specific items but is required for the financial statements to meet the objective of financial reporting. It would not extend to the removal of various IFRS disclosures identified for possible removal in the report.

This New Zealand development gives additional impetus to global calls for disclosure relief in financial reporting.

Click for:

• Access to the papers for the meeting (link to the New Zealand External Reporting Board website)
• Our earlier story on the ICAS-NZICA report.
   

NZASB Communique 2011-7

The New Zealand Accounting Standards Board (NZASB) met in Wellington on 28 September 2011. This was the first NZASB meeting open to the public. The main matters considered at the meeting related to the new Accounting Standards Framework and the differential reporting arrangements. The NZASB has published NZASB Communique 2011-7: 4 October 2011 (link to XRB website) summarising the discussions.

Deloitte New Zealand welcomes New Zealand Government's refocus on financial reporting

Deloitte (New Zealand) has welcomed the New Zealand Government's recent initiative to make financial reporting more relevant and reduce the reporting requirements for small businesses.

New Zealand Commerce Minister Simon Power recently announced that small and medium-sized companies (with annual revenue of less than $30 million, and assets less than $60 million) will no longer have to provide financial statements in accordance with generally accepted accounting practice (GAAP) unless their owners require them to.

While there are winners and losers based on the proposals, the overall outcomes have a ring of common sense to them. Essentially they refocus the requirements for financial reporting on to the entities where these are needed most resulting in the cost/benefit equation being better met.

The Minister estimates that compliance costs for companies may reduce by NZ$90 million per year, but the extent of relief will not be clear until the IRD releases its proposals for financial reports required for tax purposes.

Conversely, registered charities which accept donations from the public will be required to report the results of their activities. The reporting requirements have been focused to recognise that for the vast majority of these entities, a form of simple format reporting will be sufficient rather than full GAAP financial statements.

Shortening the deadline for non-listed companies with reporting obligations will also ensure timelier financial reporting, with the deadline dropped from five months to three months. This will mean companies may have to change their year-end reporting processes in order to meet the challenge of the shorter deadline.

The External Reporting Board (XRB), which oversees reporting standards, proposes a multi-standards approach, with for-profit entities following a suite of standards based on International Financial Reporting Standards, and public benefit entities following a suite of standards based on International Public Sector Accounting Standards. This change should address the needs of the differing user groups of financial statements.

However, Deloitte (New Zealand) urges caution on extending the approach too far. It is vital that the XRB ensures modifications in New Zealand are limited to only those that are necessary to ensure ongoing international comparability.

It is anticipated that differing standards between for-profit entities and public benefit entities will add complexity for a small number of mixed groups where reporting obligations exist.

While some decisions are still to be made, in particular for incorporated societies and assurance requirements for registered charities, and there are some inconsistencies and some clarifications needed, these proposals are a good step forward for New Zealand reporting.

Deloitte New Zealand has summarised the proposals in the following publications:

• Implications for for-profit entities (PDF 160k)
• Implications for public sector entities (PDF 153k)
• Implications for not-for-profit entities (PDF 158k).

New Zealand considers a new accounting standard framework

The New Zealand External Reporting Board (XRB) has released three documents outlining proposals for a new Accounting Standards Framework for New Zealand.

The proposals include a multi-standard framework, where the standards to be applied would depend on the nature and classification of the entity. In summary terms, the new structure would operate as follows:

• For-profit entities. 'NZ IFRS', converged with International Financial Reporting Standards (IFRSs), supplemented by additional New Zealand specific standards, and harmonised as appropriate with Australia, applied as follows:
  • 'Full NZ IFRS' for 'Tier 1' entities, with some entities, which will continue to be required to make an explicit and unreserved statement of compliance with IFRSs. This would apply to entities with public accountability, with some entities being 'deemed' to be publicly accountable
  • 'Reduced Disclosure Requirements' (RDR) for 'Tier 2' entities, consistent with the approach adopted in Australia and replacing the existing New Zealand differential reporting framework. This would require the same recognition and measurement requirements as full NZ IFRS (Tier 1) but would allow reduced disclosures (and so would not result in New Zealand adopting the IFRS for SMEs)
• Public benefit entities (PBE). The establishment of a set of NZ PBE standards based on International Public Sector Accounting Standards (IPSAS) modified as appropriate for New Zealand circumstances and not-for-profit entities. The application of the standards would be based on a three tier structure, with the third tier (the smallest entities) using a simple reporting approach.

The XRB proposes that the new for-profit framework be in place in time for it to be early adopted from 1 July 2012, the PBE framework so far as it applies to public sector entities be effective for financial years beginning on or after 1 July 2013, and the PBE framework for not-for-profit entities be effective for financial years beginning on or after 1 July 2014 (with early adoption allowed).

The proposals for public benefit entities differ from that proposed by the antecedent Accounting Standards Review Board (ASRB) which suggested the adoption of IPSAS without modification. The consultation papers explain the change in approach as follows:

The New Zealand Commerce Minister Simon Power has also announced complimentary proposals to simplify the financial reporting framework for small and medium-sized businesses and registered charities.

Closing date for submissions on the XRB proposals is 16 December 2011. Click for:

• Access to the NZ XRB consultation documents (link to XRB website)
• New Zealand Commerce Minister Simon Power press release (link to NZ government website).
   

Use of more concise English could help reduce translation problems

On 9 August 2011, Professor Rachel Baskerville gave her inaugural professorial lecture at Victoria University in Wellington, New Zealand. Professor Baskerville is co-author of The darkening glass, a study on translation questions and IFRSs (see our earlier story).

In her lecture, Professor Baskerville looked closely at how technical complexity and the lack of concise English render international accounting standards difficult to translate. She mainly draws on a survey in which translators of accounting textbooks and accounting standards in the EU took part.

The list of 'Translators' nightmares' discussed in the lecture highlighted "technical complexity", both in general and of particular IFRSs, as the top concern. IAS 39 Financial Instruments: Recognition and Measurement is quoted as an example of a standard that poses translation difficulties because of its technical complexity.

Translators address their 'nightmares' with a number of tools, ranging from circumlocution and paraphrasing to approximation and even omitting parts of the original text. Not surprisingly, this can lead to different interpretations of IFRSs in different jurisdictions.

In addition to complexity of financial standards, the lack of concise English and inconsistent use of terms across standards and across time cause problems for translators. Professor Baskerville claims these problems are even aggravated by the convergence project:

The lecture concluded on the note that less is sometimes better than more, and that the use of more concise language will not only ease the burden of the translators but might also assist native speakers to come to terms with the complexity of IFRSs.

Professor Baskerville has reported on these findings to the staff at the IASB in London, and has been asked also to report to the IPSASB later this year. Please click for the notes for her inaugural lecture (PDF 1.42mb), which we post with kind permission of the author.

Scottish and New Zealand accounting bodies issue report on reducing the IFRS disclosure burden

The Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) have released a report from their project focused on reducing the volume of disclosure requirements in International Financial Reporting Standards (IFRSs).

The report, entitled Losing the excess baggage - reducing disclosures in financial statements to what's important, was prepared in response to a request from the IASB (see our earlier story) and outlines the recommendations of the Joint Oversight Group of the ICAS and NZICA on which existing IFRS disclosures can be amended, reduced or eliminated.

The project used the IASB's 2010 Conceptual Framework for Financial Reporting as a guide, and considered disclosure requirements in all existing IASB standards, other than those not dealing with annual financial statements or which are subject to review under current IASB projects.

The report provides a detailed summary of changes to various standards, which if implemented, would have the effect of substantially reducing the volume of disclosures in financial statements. The ICAS and NZICA estimate implementation of the recommendations in the report could result in a 30% reduction in the volume of disclosure.

The reduction of the complexity of financial statements have arisen in many contexts in recent times. In April 2011, the Accounting Standards Board (ASB) of the United Kingdom Financial Reporting Council (FRC) published a report Cutting Clutter: Combating clutter in annual reports, which in common with the ICAS/NZICA report, noted that difficulties in reducing disclosure and applying the 'materiality' concept in the context of disclosure. The International Integrated Reporting Committee (IIRC) is also seeking to simplify and streamline various aspects of reporting through its integrated reporting initiative.

The ICAS/NZICA report has been presented to the IASB and an education session on it is being held at this week's IASB meeting. Click for:

• NZICA press release (link to NZICA website)
• ICAS press release (link to ICAS website).

New New Zealand standard setting arrangements now in place

The new XRB Board held its first meeting on 1 July 2011 to consider some governance matters and to approve a number of standards for issue. The XRB has also started producing a new communiqué. The first issue is available here (link to XRB website); it contains a summary of all decisions arrived at during the first XRB board meeting.

Furthermore, a new XRB website has been developed and is now live at www.xrb.govt.nz. The website has specific pages where accounting standards, and auditing and assurance standards, are available. The XRB will not be publishing hard copies of standards.

New Zealand financial reporting surveys reveal disclosure increase, widespread use of additional profit measures

	Deloitte (New Zealand) has released two new publications in its Financial Reporting Survey series.
	Financial statements Issue 5 in the series, Into the detail... Surveying financial statements in annual reports � 2010 (PDF 3,519k), is focused on the 2010 annual reports of a sample of 100 New Zealand companies complying with NZ IFRS and IFRS, with a separate sample of 30 companies taking advantage of New Zealand's differential reporting concessions. Some of the highlights of the survey include: Financial statements are on average 42 pages long, up from 39 pages in 2009 Accounting policies take up on average 14% of the financial statements (many of these policies repeat the requirements of accounting standards) The most commonly used market price sensitivity variations used is 100 basis points (1%) for interest rate exposures and 10% for foreign exchange exposures 326 major sources of estimation uncertainty were disclosed by 99 companies, although only 18% of the uncertainties disclosed included the impact of reasonably possible changes in assumptions The introduction of the new segment reporting standard, which requires disclosure on the same basis as internal management reporting, led to 18 companies changing their segments in 2010. The report discusses the difficulties of keeping track of the increasing volume of disclosures and notes the Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) project to review IFRS in order to determine where disclosures could be reduced (see our earlier story) and the 'Cutting clutter' report issued by the United Kingdom Accounting Standards Board (ASB) (see our earlier story). The report from the ICAS/NZICA project is expected to be discussed at the July IASB meeting (see the meeting agenda).
	Underlying profit Issue 6 in the series, Underlying profit revisited (PDF 1,080k), considers the practice of reporting underlying profit based on a sample of one hundred 2010 annual reports (finding 87 of which provided alternative earnings or profit measures), makes reference to guidance released in this area and considers what entities should think about when using underlying profit measures. The disclosure of alternate profit measures is contentious and is gaining increasing regulator interest in both New Zealand and Australia. Earlier editions of the Financial Reporting Survey are available Deloitte (New Zealand) website.

New Zealand harmonises standards with IFRSs, Australian Accounting Standards

The New Zealand Accounting Standards Review Board (ASRB) has approved the release of two standards which more closely harmonise New Zealand equivalents to International Financial Reporting Standards (NZ-IFRS) with both International Financial Reporting Standards (IFRSs) and Australian Accounting Standards.

New Zealand for-profit entities fully complying with NZ-IFRS have been able to make an explicit and unreserved statement of compliance with IFRSs. The effect of the new standards is to:

• reintroduce options available under IFRSs into NZ-IFRS, e.g. the ability to use the cost method for investment property, or present the statement of cash flows using the indirect method
• remove specific New Zealand requirements, e.g. the requirement to involve an independent valuer in the determination of the fair value of property, plant and equipment where the revaluation model is adopted
• remove other New Zealand guidance from NZ-IFRS which is not also in IFRSs
• delete a number of New Zealand specific disclosures, or move retained disclosures to a separate 'domestic' standard
• ensure consistent terminology and requirements (particularly as to disclosures that are additional to those required by IFRSs) are adopted in New Zealand and Australia – the Australian Accounting Standards Board is expected to release equivalent amendments and standards in due course. The New Zealand and Australian regulators are also expected to consider 'mutual recognition' of financial reporting between the two countries

The revised requirements are required to be applied for annual reporting periods beginning on or after 1 July 2011. Click for:

• AASB/FRSB press release (link to NZICA website)
• ASRB Communiqué announcing the approval of the standards (link to ASRB website)
• Harmonisation Amendments (link to NZICA website, PDF 282k)
• FRS-44 NZ Additional Disclosures (link to NZICA website, PDF 198k)
• Our story on Australia's issue of equivalent standards
• Our earlier story on the harmonisation programme.
   

Changes to New Zealand IFRS equivalents to apply to for-profits only

The New Zealand Accounting Standards Review Board (ASRB) and Financial Reporting Standards Board (FRSB) have agreed on a 'position statement' that all new New Zealand equivalents to International Financial Reporting Standards (NZ IFRSs) and amendments to existing NZ IFRSs with a mandatory effective date for annual reporting periods commencing on or after 1 January 2012 will be applicable to profit-oriented entities only.

An extract from the position statement follows:

This effectively means that the financial reporting requirements for 'public benefit entities' (PBEs) and 'qualifying entities' (i.e. those entities that apply New Zealand's differential reporting concessions) will effectively be frozen for the short-term.

The ASRB has previously outlined a new accounting framework for New Zealand consisting of two sets of accounting standards for entities required to prepare general purpose financial reports (see our previous story). New Zealand has being considering the possible adoption of International Public Sector Accounting Standards (IPSASs) for some time. It is possible that the ASRB may propose standards based on IPSASs for public benefit entities under the new arrangements.

Click for the full text of the position statement (link to the NZICA website).
 

New Zealand restructures standard setting regime

Standard setting in New Zealand is currently undergoing transformation to a new regime. The New Zealand Accounting Standards Review Board (ASRB) and Financial Reporting Standards Board (FRSB) are being replaced with effect from 1 July 2011.

The ASRB will be replaced by an External Reporting Board (XRB). The New Zealand Accounting Standards Board (NZASB) and the New Zealand Auditing and Assurance Standards Board (NZAuASB) will be responsible for accounting and auditing and assurance standards respectively.

The New Zealand Minister of Commerce, the Hon Simon Power, has announced the appointment of the members of the External Reporting Board. The XRB will comprise the existing members of the ASRB (Kevin Simpkins who will continue as Chairman, Simon Carey, Michele Embling, Graeme Mitchell, Ralph Simpson, and Ken Warren) plus two new members, Neil Cherry and Annabel Cotton.

More information about the changes is available in an ASRB Communiqué (link to ASRB website).

New Zealand moves towards two sets of accounting standards

The New Zealand Accounting Standards Review Board (ASRB) has outlined a new accounting framework for New Zealand consisting of two sets of accounting standards for entities required to prepare general purpose financial reports. One set of accounting standards would be applied by entities with a for-profit objective, and the other would be applied by 'public benefit entities' (PBEs).

The ASRB is expected to release a Position Paper and Consultation Papers explaining the framework and the accounting standards to be applied by each category of entities by the end of April.

In relation to for-profit entities, New Zealand currently has a set of standards that are equivalent to IFRSs and a number of domestic standards and additional requirements. In the first phase of a convergence project between New Zealand and Australia, convergence of financial reporting requirements for these entities is currently being worked towards by the boards of both countries (expected to be completed by 30 June 2011).

New Zealand has being considering the possible adoption of International Public Sector Accounting Standards (IPSASs) for some time. It is possible that the ASRB may propose standards based on IPSASs for 'public benefit entities' under the new arrangements.

Click for ASRB notice (link to ASRB website). More background on the possible adoption of IPSASs in New Zealand can be found in this ASRB analysis (link to ASRB website).

New Zealand looks for further improvements in deferred tax accounting

A summary of recent meetings of the New Zealand Financial Reporting Standards Board (FRSB) provides some insight into the ongoing debate about deferred taxes in New Zealand and points to further possible changes in deferred tax accounting.

FRSB expressed some disappointment that the IASB's recent amendment to IAS 12 Income Taxes, as although it provides relief for entities that measure investment property using the revaluation model in accordance with IAS 40 Investment Property, the amendment does not incorporate all the amendments as initially proposed and supported by the FRSB.

New Zealand does not have a capital gains tax and has recently changed its tax treatment of buildings, resulting in many entities recognising substantial deferred tax liabilities. Many in New Zealand hold the view the application of IAS 12 in these circumstances produces outcomes that do not best reflect an entity's tax position.

In its 3 December 2010 meeting, the IASB noted the concerns of New Zealand and expressed a willingness to work towards a solution if it can be quickly and easily implemented. If such a solution can be formulated, the IASB may consider and expose a limited amendment to IAS 12. If such a solution cannot be found, then the matter would be considered when the Board conducts a comprehensive review of IAS 12 in future. The FRSB has agreed to establish a subcommittee to consider the matter further with a view to liaising with the IASB in the near future.

Similar deferred tax issues also arise in Hong Kong and other jurisdictions. Hong Kong for instance has amended its local implementation of the IFRS for SMEs to change the way deferred taxes are calculated to address some of these issues.

Click for FRSB Alert (PDF 34k, link to NZICA website).

New Zealand moving away from the IFRS for SMEs

The New Zealand Accounting Standard Review Board (ASRB) has released an updated summary of its 'Reporting by For-Profit Entities' project, which seeks to implement an updated differential reporting framework for New Zealand entities.

At its July 2010 meeting, the ASRB agreed to establish an Working Group involving the ASRB, New Zealand Financial Reporting Standards Board (FRSB) and New Zealand Securities Commission to consider key issues.

The October 2010 ASRB meeting considered and agreed with the Working Group's recommendations, which include the need to operationalise the IASB "public accountability" definition in the New Zealand context, and the benefit of having a consistent set of recognition and measurement requirements across the 'tier' structure. Accordingly, this means New Zealand is unlikely to adopt the IFRS for SMEs but will instead require IFRS recognition and measurement requirements for all entities, with disclosure relief for particularly classes of entities.

New Zealand and Australia are working together on cross-Tasman harmonisation and this development may be a key plank in achieving consistent reporting requirements between the two countries. Proposals for the revised regime are expected to be issued in 2011 after further NZ-Australia discussions.

Click for ASRB project summary (link to ASRB website).

Deferred taxes arising on buildings

Further to the update below regarding issues arising in New Zealand related to deferred tax accounting for certain buildings for which tax depreciation had been removed by a tax law change. The effect of the tax law change is resulting in many New Zealand companies recognising a deferred tax liability in respect of existing buildings, significantly impacting profits. These issues are related to the IASB's current consideration of an exemption to the principles of IAS 12 Income Taxes for certain revalued assets.

The New Zealand Financial Reporting Standards Board (FRSB) recently held a meeting where the issue was further discussed. The FRSB considered, but ultimately rejected, a proposal to modify the New Zealand equivalent of IAS 12 to permit an exemption from the recognition of deferred taxes on affected buildings. This decision was communicated to the New Zealand Accounting Standards Review Board (ASRB) and an updated Communiqué was issued on 18 August 2010 confirming that deferred tax should be recognised in many instances.

In respect of a possible departure from IFRSs, the Communiqué states:

Click for:

• Updated Communiqué (link to ASRB website)
• Deloitte (New Zealand) Special Accounting and Tax Alert (PDF 131kb). Past alerts are available Here
• Related discussion on deferred taxes at the July 2010 IASB meeting.

Australia and New Zealand to harmonise Standards, more closely align with IFRSs

The Australian Accounting Standards Board (AASB) and New Zealand Financial Reporting Standards Board (FRSB) have issued joint exposure drafts of proposals to harmonise Australian and New Zealand Standards in relation to entities applying IFRSs as adopted in Australia and New Zealand. The exposure drafts propose to eliminate many of the IFRS-related differences between the two countries for for-profit entities and represent the first phase of a longer-term project to harmonise accounting requirements in Australia and New Zealand.

For-profit entities applying Australian Accounting Standards or NZ IFRSs in full already make an explicit and unreserved statement of compliance with IFRSs, and the proposals would not impact this ability.

Click for:

• New Zealand Financial Reporting Standards Board (FRSB) announcement (link to FRSB website)
• Australian Accounting Standards Board (AASB) announcement (link to AASB website)
• Our Australia country page
• Our summary of use of IFRS by jurisdiction.

New Zealand debates income tax accounting under IFRS

A recent tax law change in New Zealand has resulted in an intense debate in the country about how (the New Zealand equivalent) of IAS 12 Income Taxes should be applied, and impacts on reported profits. The New Zealand government recently changed the tax law to deny tax deductions for certain buildings. New Zealand also does not have a capital gains tax, meaning affected buildings are outside the scope of the tax law altogether. The effect of the tax law change is resulting in many New Zealand companies recognising a deferred tax liability in respect of existing buildings, significantly impacting profits.

The Accounting Standards Review Board (ASRB) and Financial Reporting Standards Board (FRSB) have jointly issued a communique discussing the changes and Deloitte (New Zealand) has published an alert discussing the changes and their accounting implications.

The IASB is currently undertaking a limited scope project on IAS 12 and has tentatively decided to consider a related issue of the treatment of revalued buildings.

Click for:

• Deloitte (New Zealand) Special Accounting and Tax Alert (PDF 131kb). Past alerts are available Here
• Accounting Standards Review Board (ASRB) and Financial Reporting Standards Board (FRSB) Communique (PDF 58kb)
• Summary of the IASB's IAS 12 project.

New accounting alert from Deloitte New Zealand

Deloitte New Zealand has published a What's New Alert (PDF 127k) that reviews all of the new and revised pronouncements that either are to be applied for the first time at 31 March 2009, or which may be early adopted at that date. The Alert also summarises a current exposure draft that may be approved with retrospective effective dates before an entity's financial statements for 31 March 2009 are authorised for issue. The Alert identifies two 'big picture issues' for March 2009:

• The impact of the 'credit crunch' on financial reporting, including such areas as fair value and impairment, classification of debt as current or non-current, foreign exchange exposures, and associated disclosure requirements.
• Whether piecemeal early adoption of the standards comprising 'the next wave of IFRS' should be considered, or left to a 'big bang' for 2009/10 periods. These include new or revised standards on segment reporting, borrowing costs, financial statement presentation, share-based payment, business combinations, and consolidated and separate financial statements.

New Zealand Accounting Alert for Year-end 2008 Reporting

Deloitte (New Zealand) has published February 2009 New Zealand Accounting Alert (PDF 121k). The Alert provides a high level overview of new and revised financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2008. You can use this Alert to perform a quick check that all the new financial reporting requirements have been fully considered as part of your December reporting close process. The Alert includes tables that outline:

• New and revised pronouncements that either are to be applied for the first time at 31 December 2008, or which may be early adopted at that date; and
• Current exposure drafts, which may be approved with retrospective effective dates before you authorise your 31 December 2008 financial statements for issue;
• The disclosure requirements required in relation to new and revised accounting pronouncements.

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.

• Press Release (PDF 53k)
• ASRB Release Announcing the Delay (PDF 21k)

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 Reporting Standards Board (FRSB)

• IASB Exposure Draft of a Proposed International Financial Reporting Standard for Small and Medium-sized Entities

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

The FRSB is proposing to:

1. remove the existing exemption in NZ IAS 24 that applies to some public benefit (public sector/not for profit) entities; and
2. 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).

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.

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

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

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.

• 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.

• 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.

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) websites 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.

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-website 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.

• 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

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 FRSB.
• 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.

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.

Recent Financial Reporting Standards

FRS 3 Accounting for Property, Plant and Equipment.

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.

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).

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)

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