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
2
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
14
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
21
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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