2016 march cfo seminar may 2016 v1

SMOOTH SAILING TOWARDS JUNE YEAR ENDS ACCOUNTING AND FINANCIAL REPORTING UPDATE KPMG Accounting Advisory Services

May 2016 kpmg.com/NZ

AGENDA Immediate action required • Year end reminders • Disclosure initiative New standards • Revenue • Leases What is coming up Reporting regulatory update Questions and answers

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YEAR END REMINDERS

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YEAR END REMINDERS NEWLY EFFECTIVE AMENDMENTS (30 JUNE 2016) XRB A1: Accounting standards framework

Removal of for profit tiers 3 (diff rep) and 4 (old GAAP)

NZ specific amendment

Fair value disclosures (NZ IAS 26)

2014 omnibus amendments to NZ IFRS

Various amendments to standards effective 1 April 2015

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YEAR END REMINDERS STANDARDS AVAILABLE FOR EARLY ADOPTION BUT NOT YET EFFECTIVE Amendments to existing standards

Effective

Year end

Disclosure initiative (NZ IAS 1)

01/01/2016

2017

Accounting for acquisition of interest in joint operations (NZ IFRS 11)

01/01/2016

2017

Equity method in separate financial statements (NZ IAS 27)

01/01/2016

2017

Sale or contribution of assets between an investor and its associate or joint venture (NZ IFRS 10 and NZ IAS 28)

01/01/2016

2017

Investment entities: Applying the consolidation exemption (NZ IFRS 10, NZ IFRS 12 and NZ IAS 28)

01/01/2016

2017

Agriculture: Bearer plants (NZ IAS 16 and NZ IAS 41)

01/01/2016

2017

Clarification of a acceptable methods of depreciation and amortisation (NZ IAS 16 and NZ IAS 38)

01/01/2016

2017

Annual improvements 2012 – 2014 cycle (various)

01/01/2016

2017 5

YEAR END REMINDERS STANDARDS AVAILABLE FOR EARLY ADOPTION BUT NOT YET EFFECTIVE Amendments to existing standards (cont.)

Effective

Year end

Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)

01/01/2017

2018

Disclosure Initiative (Amendments to IAS 7)

01/01/2017

2018

Effective

Year end

NZ IFRS 9: Financial Instruments

01/01/2018

2019

NZ IFRS 14: Regulatory Deferral Account

01/01/2017

2018

NZ IFRS 15: Revenue

01/01/2018

2019

NZ IFRS 16: Leases

01/01/2019

2020

New standards

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DISCLOSURE INITIATIVE

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DISCLOSURE INITIATIVE Understand who uses the financials Increased use of judgment Simple and relevant Look to market leaders

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HOW TO IMPLEMENT THIS DISCLOSURE INITIATIVE

PLAN

PRIORITISE

PURGE

PROVE

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RESULTS

Financial Statements pages

Accounting Policies pages

No. of notes

CONTACT ENERGY 2012

45

8

32

CONTACT ENERGY 2013

28

1

21

TELECOM 2013

61

6

34

CHORUS 2014

37

2

24

VECTOR 2013

59

9

29

VECTOR 2014

35

2

26 10

QUESTIONS AND ANSWERS

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NEW STANDARD REVENUE

REVENUE FROM CONTRACTS WITH CUSTOMERS

IMPORTANT Effective periods beginning on or after 1 January 2018 All revenue guidance moved into one standard

New 5 step approach to recognition of revenue [NZ IFRS 15: IN8]

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REVENUE FROM CONTRACTS WITH CUSTOMERS 1

Identify the contract with a customer

2

Identify the performance obligations

3

Determine the transaction price

4

Allocate the transaction price

5

Recognise revenue

5

1

REVENUE 4

2

3

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WORKED EXAMPLE Facts: A modem delivers broadband to Telco X customers, and is provided free

by Telco X as part of all broadband plans. The modem can only be used with Telco X lines and can also be sold on a standalone basis, but to only Telco X customers. When sold as part of a broadband bundle, is the supply of the modem a separate performance obligation?

RECOGNITION

EXISTING STANDARD

NEW STANDARD

Point in time

Yes - modem based on standalone price

No – not distinct as device is highly interrelated with the broadband offering

Over time

Yes - Broadband plan

Yes – for both modem and broadband plan

Spreading basis

Straight line over the period of the plan

Straight Line over the period of the plan

Measurement

Fair value

Consideration entitled to be received 15

REVENUE FROM CONTRACTS WITH CUSTOMERS

FINANCIAL REPORTING IMPACT

Profit and loss volatility

Estimates and judgements

Disclosures

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REVENUE FROM CONTRACTS WITH CUSTOMERS

SYSTEMS

PROCESSES

PEOPLE

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QUESTIONS AND ANSWERS

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NEW STANDARD LEASES

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LEASES STANDARD

Minimum changes for lessors Significant changes for lessees Single lease accounting model All leases on balance sheet Practical expedients and targeted relief Effective periods beginning on or after 1 January 2019 20

LEASES STANDARD

FINANCIAL REPORTING IMPACT

Statement of financial position changes

Profit and loss impact

Disclosures

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LEASES STANDARD IMPACT ON BALANCE SHEET

ASSET

LIABILITY

IMPACT ON PROFIT/LOSS

DEPRECIATION

INTEREST

CASH RENTAL PAYMENTS 22

LEASES STANDARD

FINANCIAL REPORTING IMPACT

Statement of financial position changes

Profit and loss impact

Disclosures

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LEASES STANDARD

PEOPLE

SYSTEMS

PROCESSES

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QUESTIONS AND ANSWERS

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WHAT IS COMING UP

IN THE HEADLINES Exposure drafts issued: • Guidance on materiality released • Amendments to insurance standard (NZ IFRS 4) • Annual improvements 2014 – 2016 cycle • Proposed amendments to NZ IAS 40 Draft interpretations issued: • Accounting for uncertain tax positions • Foreign currency transactions and advance consideration

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IASB WORK PLAN •

Definition of a business (ED)

•

Re-measurement of previously held interest (ED)

•

Proposed amendments to IFRS 2 (ED)

•

Clarifications arising from the post implementation review (IFRS 8) (ED)

•

Disclosure Initiative – principles of disclosure (DP)

•

Project direction decision defined benefit plans

•

Annual improvements 2015 – 2017

• • •

Insurance contracts (new standard) Classification of liabilities (proposed amendments to IAS 1) Disclosure Initiative – changes in accounting policies and estimates

•

Rate-regulated activities

•

Dynamic risk management – portfolio revaluation approach to macro hedging

Within 3 months

Within 6 months

After 6 months

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REPORTING REGULATORY UPDATE

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REPORTING REGULATORY UPDATE

New format audit report FMA reports on audit quality standards Financial Markets Conduct Regulations amended New rules for directors of New Zealand companies Regulatory Systems Amendment Bill − 2015

QUESTIONS AND ANSWERS

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THANK YOU Simon Wilkins Partner swilkins1@kpmg.co.nz

Simon Lee National Technicial Director sdlee@kpmg.co.nz

Philip Lim Senior Manager philiplim@kpmg.co.nz

Sarah Bate Senior Manager sbate@kpmg.co.nz

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