Whats coming up

1
Whats coming up?

• SOLGM October 2006

2
Agenda

• New NZ IFRS and amendments to existing NZ IFRS
• IFRS and NZ IFRS exposure drafts
• IPSAS exposure drafts
• And F Y I

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Section Heading

• New NZ IFRS and
• amendments to existing NZ IFRS
• NZ IAS 1 Presentation of Financial Statements
• NZ IFRS 7 Financial Instruments Disclosures
• NZ IAS 1 amendment Capital Disclosures
• NZ IAS 36 Impairment
• NZ IAS 39 Financial Instruments

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NZ IAS 1 Presentation of Financial Statements

• Added an appendix New Zealand Application
  Guidance When is an Entity a Public Benefit
  Entity?
• Classification is based on an entitys primary
  objective
• Provides guidance on determining an entitys
  primary objective
• Provides illustrative examples

5
NZ IFRS 7 Financial Instruments Disclosures

• New standard
• Applicable for 2007/08 year
• But can apply earlier
• It replaces
• NZ IAS 32 Financial Instruments Disclosure and
  Presentation

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NZ IFRS 7 Financial Instruments Disclosures

• Whats different?
• Principles based not prescriptive
• Qualitative disclosure objectives, policies,
  processes
• Quantitative extent of exposure
• Audit New Zealand local government model annual
  report includes NZ IFRS 7 disclosures

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NZ IFRS 7 Financial Instruments Disclosures

• Information that allows readers to evaluate
• The significance of financial instruments for an
  entity's financial position and performance
• Nature extent of risks arising from financial
  instruments
• Qualitative quantitive information
• Qualitative management's objectives, policies
  and processes for managing those risks.
• Quantitative the extent to which the entity is
  exposed to risk
• Extract from Introduction

8
NZ IAS 1 amendment Capital Disclosures

• How an entity manages its capital
• Objectives, policies processes
• Description of what entity views as its capital
• Externally imposed capital commitments
• Based on information provided internally
• Applicable for 2007/08
• How to do this for the public sector?

9
NZ IAS 36 Impairment

• Now applies to all PBE assets
• Including infrastructural assets
• Including assets that are revalued
• Good news
• Value in use Depreciated Replacement Cost
• Available for PBEs only
• Impact classification?

10
NZ IAS 39 Financial instruments

• Financial guarantee contracts
• E.g. guarantee of a sports club loan
• Now have to be recognised in the balance sheet
• Valuation next slide
• Applies to the 2006/07 financial statements

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NZ IAS 39 Financial instruments

• Financial guarantee contracts - Amount
• Determine in accordance with NZ IAS 37
  (provisions contingencies)
• Based on probability that will have to reimburse
  the holder
• Discount to present value
• Balance contingent liability

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NZ IAS 39 Financial instruments

• Financial guarantee contracts definition
• A contract that requires the issuer to make
  specified
• payments to reimburse the holder for a loss it
  incurs
• because a specified debtor fails to make payment
  when
• due in accordance with the original or modified
  terms of a
• debt instrument.

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Section Heading

• IFRS and NZ IFRS exposure drafts
• IASB moratorium
• FRSB new releases
• NZ IAS 1 Presentation
• NZ IAS 23 borrowing costs
• NZ IAS 37 provisions, contingencies

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IASB moratorium

• The IASB will not require the application of
• new IFRS under development or
• major amendments to existing standards
• before periods beginning on or after January 2009
• But
• Whats major?

15
Exposure draft of proposed amendments to NZ IAS
1 Presentation of Financial Statements

• 3 statements of financial position
• Current year 2 comparative years
• (Not a balance sheet anymore)
• 1 or 2 statements of recognised income
  expenditure
• Everything in 1 or
• 2nd for unrealised gains/losses
• Including the items currently in statement of
  movements in equity

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Proposals for NZ IAS 23 Borrowing Costs

• Eliminate the option of expensing borrowing costs
• That is, must capitalise borrowing costs
• Not major
• Impact on revaluations?
• New Zealand considerations
• Differential reporting
• Continue expense option

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Proposals for NZ IAS 37 Provisions , Contingent
Liabilities and Contingent Assets

• New terms
• Non-financial liability ( provision)
• Contingency
• Recognise contingencies on the balance sheet
• Uncertainty reflected in the amount

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Proposals for NZ IAS 37 Provisions , Contingent
Liabilities and Contingent Assets

• Recognising contingencies on the balance sheet
• Uncertainty reflected in the amount
• E.g. court case at balance date
• Certain that will have to pay what the court
  orders
• Uncertain how much (if anything) that will be
• How much to settle the liability or transfer it?

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Section Heading

• International Public Sector Accounting Standards
• IPSAS
• Exposure Drafts
• Revenue from non-exchange transactions
• Heritage assets

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International Public Sector Accounting Standards
Board IPSASB

• Committee of the International Federation of
  Accountants IFAC
• IPSASB focuses on the accounting and financial
  reporting needs of national and local
  governments.
• Its accounting standards may provide us with
  authoritative support

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Revenue from Non-Exchange Transactions

• NZ IAS 18 doesnt cover revenue such as rates
  taxes
• These are non-exchange transactions
• There is no other standard dealing with
  non-exchange revenue.
• IPSAS ED 29
• Recognise as revenue unless
• There is a condition that have to return if not
  used as specified e.g. some grants
• Then can defer recognition

22
Accounting for Heritage Assets consultation paper

• Record at current values if reliable current
  values can be obtained
• Measurement at a notional value or at historical
  cost not permitted
• If reliable current values cant be obtained at
  reasonable cost
• Dont record on the balance sheet
• Provide additional disclosures instead

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Section Heading

• And For Your Information . . .
• IFRS and NZ IFRS exposure drafts
• FRSB new releases
• ED 108 Omnibus Exposure
• ED 109 Consolidations
• NZ ED 8 segment reporting
• Small and medium sized entities
• IASB Differential reporting
• IFRS and US GAAP convergence
• . . . at the back . . .

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And in conclusion . . .

• Any Questions?

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ED 108 Omnibus Exposure Draft proposes
amendments to

• NZ IAS 1 Presentation of Financial Statements
• reinstate fair presentation override
• But only where no legislative requirement to
  comply with GAAP
• NZ IAS 2 Inventories
• inventories held for distribution PBE
• Have to consider obsolescence
• NZ IAS 24 Related Party Disclosures
• Exemption where entities under common control of
  the Crown

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ED 108 Omnibus Exposure Draft proposes
amendments to

• NZ IAS 34 Interim Financial Reporting
• align assertions of compliance with NZ IAS 1
• NZ IAS 36 Impairment of Assets
• increase differential reporting exemptions
• NZ IAS 40 Investment Property
• align valuation requirements with NZ IAS 16
  Property, Plant and Equipment

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ED 109 proposes amendments to

• FRS 37 Consolidating Investments in Subsidiaries
  ,and
• NZ IAS 27 Consolidated and Separate Financial
  Statements
• Introduction of the autonomous and independent
  public sector entity
• Central government only.

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NZ ED 8 Operating Segments

• Segments are to be a reflection of how management
  regards the business
• Disclosed segments to reflect internal reporting
• Focus on chief operating decision maker(s) (CODM)
• Measures reported externally must be those
  reported to the CODM

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IASB version of Differential Reporting

• IASB project
• develop an IFRS to meet the needs of Small
  Medium size Entities SMEs
• IASB approach Bottom Up
• Develop standards for SMEs
• Same underpinning framework
• Set out as one standard including illustrative
  financials
• NZ differential reporting framework Top Down
• Same standards
• But disclosure exemptions

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SME reporting

• Each country will choose size criteria
• Intended to be updated every two years
• NZ will need to decide whether to
• adopt SME IFRS or
• retain differential reporting framework

31
IFRS and US GAAP convergence

• commitment to the convergence of US GAAP and IFRS
  
• Make existing standards fully compatible as soon
  as possible
• Co-ordinate future work programmes

32
Short-term convergence

• FASB projects
• Fair value option
• Investment properties
• Research and development
• Subsequent events

33
Short-term convergence

• IASB projects
• Segment reporting ED published, IFRS 4th
  quarter 2006
• Borrowing costs ED published, IFRS 1st half
  2007
• Joint ventures ED 4th quarter 2006
• Government grants ED 2nd half 2007
• Joint IASB/FASB projects
• Impairment not yet started
• Income taxes ED 4th quarter 2006

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Other convergence projects

• Business combinations ED IFRS-3, IFRS 2nd half
  2007
• Consolidations ED 1st half 2007
• Fair value measurement DP 4th quarter 2006
• Financial statement presentation phase A ED
  published
• Revenue recognition DP 2nd half 2007

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Conceptual framework

• Joint IASB/FASB project
• Very long-term progressive project (phases A to
  H)
• Phase A Objectives and qualitative
  characteristics
• Phase B Elements, recognition and measurement
• Phase C Measurement
• Phase D Reporting entity
• Phase E Presentation and disclosure
• Phase F Purpose and status
• Phase G Application to not-for-profit entities
• Phase H Finalisation

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Whats coming up?

• SOLGM October 2006