IFRS in brief

IFRS in brief is a monthly journal that highlights the impact of current accounting issues, new standards and amendments and practical guidance on how to deal with them.

 
IFRS in Brief 2009
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October 2009

Proposed changes to the New Zealand Financial Reporting Framework

What is the issue?

On 30 September 2009 the Ministry of Economic Development (“MED”) and the Accounting Standards Review Board (“ASRB”) released two discussion documents on the New Zealand Financial Reporting Framework. The MED discussion document contains proposed changes to who should be required to prepare general purpose financial reports (“GPFR”), be audited and required to file GPFR. The ASRB discussion document proposes changes to what GPFR should contain (i.e. what Generally Accepted Accounting Practice should be applied). These changes would be effected by amendments to Part 2 of the Financial Reporting Act 1993.

Which entities do the proposals impact?

These proposals have the potential to affect all entities.

What are the key points of the proposed changes?

  • For-profit entities that are not issuers, large or have fewer than 10 shareholders would generally not be required to prepare GPFR.
  • Large and medium sized not-for-profit entities would be required to prepare GPFR.
  • An entity no longer required to prepare GPFR would still be required to maintain proper accounting records.
  • An entity required to prepare GPFR would generally be required to be audited. However, the level of assurance would be relative to an entity’s tier.
  • A for-profit entity required to prepare GPFR would generally be required to file their GPFR with the Companies Office. However, the MED is seeking comments on whether a large non-issuer company (either overseas or New Zealand owned) should be required to file financial statements and whether non-filing by existing companies should be ‘grandfathered’.
  • A 3-tier approach would apply in regards to the form and content of GPFR by the ASRB due to the variability in the cost-benefit of information provided to users.
  • Accounting standards in New Zealand would no longer be sector neutral. The accounting standards applied to an entity would be determined by the entity’s sector and tier. Standards for for-profit entities would be based on International Financial Reporting Standards, whereas standards for the public sector and not-for-profit entities would be based on International Public Sector Accounting Standards.
  • Consequently, there would no longer be New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”) or the New Zealand Differential Reporting Framework (if IFRS for Small and Medium Enterprises were adopted in New Zealand).

When could the proposed changes apply?
At this stage it is uncertain.

Submissions
Submissions on these proposed changes are due on Friday 29 January 2010.

Want more information?

Download the MED discussion document.

Download the ASRB discussion document.

Alternatively, talk to your usual PwC contact.





Previous issues

August 2009

  • Accounting for financial instruments
    In this edition of IFRS in brief, we consider recent developments relating to accounting for financial instruments.
  • IFRS for SMEs
    This section of the publication draws your attention to the recently released IFRS for SMEs standard by the IASB.

July 2009

  • Accounting for pre-existing relationships in an acquisition
    NZ IFRS 3 (Revised 2008) Business Combinations is mandatory for accounting periods beginning on or after 1 July 2009. In this edition, we consider two specific issues under NZ IFRS 3 (Revised 2008) that will affect entities who have an existing relationship with the entity they are acquiring.
  • Changes to group cash-settled share-based payments
    In this edition, we summarise the key impacts of the recent amendments to IFRS 2 Share-based Payment.
  • Proposed new guidance on management commentary
    This edition also contains an overview of the proposed non-mandatory guidance on management commentary accompanying financial statements.


June 2009

  • Proposed changes to the income tax rules
    In this edition of IFRS in brief, we consider how the proposed changes in the Income Tax Exposure Draft (ED/2009/2) differ to the current requirements and highlight some of the potential implications for entities if the proposals are endorsed in their current form.
  • Areas of focus in Securities Commission’s review of issuers’ financial statements
    This edition contains a list of areas the Securities Commission has indicated it will focus in its review of issuers’ financial statements. Issuers are encouraged to improve the quality of their financial reporting, by making transparent disclosures and ensuring the basics of NZ IFRS are complied with.


March 2009

  • New pronouncements effective from 2008 and 2009
    In this edition of IFRS in brief , we list the more significant new accounting standards, amendments and interpretations with details of when they become effective, which entities are affected and the key impacts.


February 2009

  • Impairment rules for available-for-sale equity investments
    Given current market conditions, users of financial statements have a heightened interest in understanding whether entities’ assets have been impaired. Many entities find the impairment rules challenging, particularly the impairment testing of equity investments classified as available for sale. In this edition, we remind entities about the rules for testing such assets for impairment.
  • Time to focus on asset impairment disclosures
    More entities are likely to record asset impairments in the current economic environment. NZ IAS 36: Impairment of Assets sets out a formidable list of disclosure requirements, which management should be careful not to overlook. In this edition, we set out some key aspects of disclosure requirements.


December 2008

  • Current issues for reporters
    For some entities, preparing this year’s financial statements was particularly difficult given the current market environment and the application of NZ IFRS 7Financial Instruments: Disclosure. In this edition of IFRS in brief we identify some of the common current issues financial statement preparers should be aware of.


November 2008

  • Impairment testing of non-financial assets in the current crisis
    The widespread economic slowdown increases the likelihood that asset carrying amounts are greater than the expected cash flows from the assets. In this first edition of IFRS in brief in New Zealand, we list practical questions and answers on impairment indicators, timing of impairment tests and how to do an impairment test in volatile markets in accordance with NZ IAS 36: Impairment of Assets.
  • The allocation of goodwill to entities’ segments
    IASB’s 2008 proposed annual improvements project, released in September, clarifies how the new segment standard NZ IFRS 8, impacts on goodwill impairment testing under NZ IAS 36: Impairment of Assets. In this first edition of IFRS in brief we identify what entities should do to prepare for the changes.