IFRS in New Zealand. The Treasury/code

Transcription

1 IFRS in New Zealand The Treasury/code

2 Session Content Impact on Accounts The project to implement IFRS A review of the challenges Were the numbers affected? The human impact reaction from accountants Impact on standard Setting From sector neutrality Current IFRS developments When should changes be made?

3 NZ IFRS : Impact on financial Statements Decision made to move to IFRS resulted from a decision to move NZ s corporate sector to IFRS Previous NZ GAAP was quite close to NZ IFRS New Zealand did not have the accounting resources for a big bang approach, allowed early adoption from 2005, required adoption by 2007

4 Timetable New GAAP was fully adopted from 1 July 2007: Transition Date Old GAAP Comparative Period New GAAP NZ IFRS reporting only 1 July June June 08 Start collecting New GAAP info Last report under Old GAAP First New GAAP Annual Report

5 Complexity Challenges understanding the impact Segment reporting Other Disclosures Pension schemes Capitalised Interest Share-based payments Government Grants Employee provisions Other intangibles Brands Leases Hedging/ Derivatives Insurance Goodwill Provisions Revenue recognition Impairment Deferred tax testing Investments Financial impact

6 Govt: The two big changes Govt (State Servants) Super Fund - $3.2 B Under NZ IFRS PV on a pay-as-needed basis Under Old GAAP based on amount to be paid into the Fund today to fully fund future pension payments The only differences is the treatment of investment taxes Accident Compensation Claims + $1.4 B NZ IFRS requiring risk margin and adequacy test

7 IFRS: The people speak From: Sent: Wednesday, 15 August :38 p.m. To: CFISnet Subject: Arguably one of the... most happiest days of the year, completing and sending the dreaded cfis file. I thought to myself, that wasn t so bad, I might as well do the new GAAP one too, and then I opened it up and Oh my God!! and shut it quickly before the full impact of the changes could ruin my day completely. It is evil. Michelle J

8 But then From: Sent: Tuesday, 4 September :27 p.m. To: CFISnet Subject: Overdue return... Kia ora koutou! I attach our return many many apologies for being late, but damn was that hard to do. I hope this gets the all clear will be waiting here for your response either way And finally, I would like to say that I have nothing but admiration for everyone involved at that end on the new IFRS is the ugliest thing I have come across and I take my hat off to the esteemed Treasury for what you are currently having to consolidate into the Crown Accounts. Unbelievable. Michelle

9 Impact on Standard Setting Previous New Zealand approach had been sector or transaction neutral No longer possible under NZ IFRS IFRS has required us to conceptualise when IFRS is appropriate and when it isn t for the public sector This hasn t been an issue on the international front But we are observing that it increasingly important

10 Sector Neutrality What does it mean Similar transactions and events treated similarly But not applying private sector standards Both a process or an outcome. Critiques of Sector Neutrality Nonsensical results Right wing bias Successes of Sector Neutrality Property Plant and Equipment Consolidating Investments in Subsidiaries but incomplete!

11 Back to Standards IFRS Supportive of transaction neutrality in theory Comments from David Tweedie Result of Constitutional Review Not-for-profit phase of Conceptual Framework Project Destructive of transaction neutrality in practice Focus on a narrow concept of assets Focus on one side of transactions Focus on investor decision-making Convergence with FASB Conceptual Framework project

12 Introduction of IFRS to New Zealand More complete, more detailed, more explained Global convergence a major driver Maintaining the benefits of sector neutrality? The concept of public benefit entities: Reporting entities whose primary objective is to provide goods or services for community or social benefit and where any equity has been provided with a view to supporting that primary objective rather than for a financial return to equity holders.

13 Why might public benefit entity accounting be different: Initial views Don t want to lose accountability IASB has not dealt with an item or dealt with it perfunctorily Inappropriate because of regulatory requirements Unduly onerous for PBEs in cost-benefit terms Current Debate Public Sector differences (types and incidence of transactions)

14 Internationally Separate Standard setting structures for the public sector because different users have different needs different objectives mean different performance reports absence of ownership interests compulsion (taxation) demands greater accountability more knowledgeable people focus on issues while acknowledging tendency for unsupportable differences to develop credibility issues resource constraints

15 Getting the balance right - An International Challenge: NZ ASRB/FRSB Process Document about to be exposed IPSASB Rules of the Road Australian FRC roundtable on public sector issues FRAB approach in the UK?

16 Any clarifications?