• What’s New for 30 June 2016 Annual Financial Statements?

What’s New for 30 June 2016 Annual Financial Statements?

30 June 2016

Public Benefit Entities

For Not-for-profit Public Benefit Entities with a 30 June 2016 reporting date, this is the first reporting period that the new Public Benefit Entities (“PBE”) accounting frameworks need to be complied with (i.e. it is the first period after 1 April 2015, the effective date of the new PBE accounting frameworks). What accounting framework you previously reported under, and what tier you are required to report under now, will impact on the magnitude of your transition to the PBE Standards. 

For more on the impact of the new PBE accounting frameworks, Tier 1 and Tier 2 entities please refer to the September 2014 edition of Assurance Alert and Tier 3 and Tier 4 entities, the January 2013 of Assurance Alert and November 2015 editions of Accounting Alert.

For Public Sector Public Benefit Entities, this is the second year end of reporting under the new PBE Standards, and the good news is that there are no new standards effective for the first time for  30 June 2016 year ends.

For-profits - the good news 

Tier 1 and Tier 2 for-profits for 30 June 2016, the good news is that there are no new accounting standards, and only one small change to NZ IAS 28 Investments in Associates and Joint Ventures that could impact your 30 June 2016 annual financial statements for the first time. 

The calm before the storm 

However, this is just the calm before the storm, with NZ IFRS 9 Financial Instruments and NZ IFRS 15 Revenue from Contracts with Customers effective for your 30 June 2019 annual periods, and NZ IFRS 16 Leases effective for June 2020. In addition, there are numerous changes to existing accounting standards that are effective from 1 January 2016  (including the disclosure initiative) which may impact your 30 June 2017 financial statements. 

The disclosure initiative 

The disclosure initiative is a broad-based project that aims to improve disclosure in general purpose financial statements. The International Accounting Standards Board (IASB) has currently completed two disclosure initiative projects and is working on further projects in this area. 

The two completed disclosure initiative projects have been adopted and issued by the New Zealand Accounting Standards Board (NZASB), being:

Amendments to NZ  IAS 1 Presentation of Financial Statements  – effective for periods beginning on or after 1 January 2016 

Amendments to NZ IAS 7 Statement of Cash Flows – effective for periods beginning on or after 1 January 2017. 

The NZASB has also released similar amendments to the PBE Standards in relation to the disclosure initiative, which are effective for periods beginning on or after 1 January 2016.

Is there any reason to adopt these changes early? 

In this first suite of changes made to NZ IAS 1, entities are now able to apply judgement when determining which disclosures to include in their financial reports. This means that you now have the ability to only include disclosures that you consider to be either quantitatively or qualitatively material (or otherwise useful) to users of your financial report.

While such changes are not mandatory for entities with years ending 30 June 2016, the improvements we have seen in listed companies that have early adopted these amendments have significantly improved their financial statements because they are now highlighting information considered to be of high importance to users. 

What steps can I take to improve my financial statements? 

Action points 

This process will become mandatory for all Tier 1 and Tier 2 entities with a financial year commencing on or after 1 January 2016, which means that you will be required to go through this decluttering process for your 30 June 2017 financial statements. 

Steps you can start now include: 

Conduct a parallel test run on your 30 June 2016 financial statements – start thinking about what your 30 June 2017 final product will look like, and 

Read ED IFRS Practice Statement Application of Materiality to Financial Statements.

For more on the disclosure initiative, please refer to the December 2015 and February 2016 editions of Accounting Alert.

For more on the above, please contact your local BDO representative.