Background
Here at BDO IFRS Advisory, we have recently been noticing an increase in the number of entities who are transitioning into general purpose financial reporting (GPFR) under either New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) or New Zealand equivalents to International Financial Reporting Standards (Reduced Disclosure Regime) (NZ IFRS (RDR)) (being the only for-profit accounting frameworks in New Zealand that represents New Zealand Generally Accepted Accounting Principles (NZ GAAP)).
For-profit entities that have not previously been preparing financial statements under GPFR will instead be preparing financial statements under some other form of special purpose financial reporting (SPFR).
We have previously released a Cheat Sheet with specific guidance for those entities that have been applying the SPFR framework that is issued by Chartered Accountants Australia & New Zealand (CAANZ).
For those entities stepping up into NZ IFRS or NZ IFRS (RDR) from a non-CAANZ SPFR framework, this Cheat Sheet has been produced as a high-level summary of key points of difference that NZ IFRS or NZ IFRS (RDR) typically bring in (excluding disclosure differences).
The layout of this Cheat Sheet is formatted to be used as quick checklist to assist entities in highlighting the various application areas of stepping up into NZ IFRS from a general SPFR framework which may require specific attention.
This Cheat Sheet should be read in conjunction with our earlier Cheat Sheet that highlighted the specific adoption requirements of NZ IFRS 1 First-time adoption of New Zealand Equivalents to International Reporting Standards (NZ IFRS 1) that is applied when an entity adopts NZ IFRS or NZ IFRS (RDR).
Need assistance with your adoption of NZ IFRS or NZ IFRS (RDR)?
The adoption of NZ IFRS or NZ IFRS (RDR) is often an “involved” and multi-faceted exercise, requiring specialist knowledge and project management.
BDO IFRS Advisory is a dedicated service line of expert IFRS consultants available to assist entities in both the initial and subsequent accounting application of NZ IFRS or NZ IFRS (RDR).
Further details are provided on the following page for your information.
Areas covered in this Cheat Sheet
In order to navigate through these areas of accounting, this Cheat Sheet is broken down into the following sections:
Overview – areas for entities to take note of
High-level details of the common application areas of the individual NZ IFRS / NZ IFRS (RDR) standards that entities will need to consider is provided in 3. below, and we would recommend all entities work through this thoroughly.
At a high-level, key areas and types of entities/sectors that will be the most significantly impacted by the step-up to NZ IFRS / NZ IFRS (RDR) include (but are not limited to) those in the below table:
| Details | Relevant to my entity? | |
| General preparation and presenting interests in other component entities | ||
| Entities are required to prepare a Cash flow Statement. | YES (all entities) | |
| Entities with Changes in Accounting policies or the correction of Errors. | YES / NO / ? | |
| Entities preparing Consolidated financial statements (i.e. entities with Subsidiaries). | YES / NO / ? | |
| Entities with investments in Joint Arrangements. | YES / NO / ? | |
| Entities with investments in Associates. | YES / NO / ? | |
| Entities with operations in a hyper inflationary economy. | YES / NO / ? | |
| Revenue and expenses | ||
| Entities with Revenue from the sale of goods and services (excluding interest from financers). | YES (all entities) | |
| Entities with leases (as lessee) for items of property, and high-value plant and equipment. | YES / NO / ? | |
| Entities that on-lease (as sub-lessor) already leased items (as lessee) of property | YES / NO / ? | |
| Entities that are currently electing to expense Development phase expenditure (rather than capitalising). | YES / NO / ? | |
| Entities that are subject to government imposed/mandated rate regulation in the prices charged to external customers. | YES / NO / ? | |
| Entities accounting for foreign currency purchases and sales using the settlement rate (rather than spot rate). | YES / NO / ? | |
| Entities not currently accounting for deferred income tax. | YES / NO / ? | |
| Financial assets and liabilities | ||
| Entities with loans that have the ability to convert into shares. | YES / NO / ? | |
| Entities with “passive” share-holdings in other entities (i.e. not Subsidiaries, Joint Arrangements, or Associates). | YES / NO / ? | |
| Entities that enter into derivatives to manage financial risk (i.e. interest rate risk, foreign exchange risk), who may wish to look to apply formal hedge accounting under NZ IFRS. | YES / NO / ? | |
| Non-financial assets | ||
| Entities that are revaluing Property, Plant and Equipment and Investment properties. | YES / NO / ? | |
| Entities using Local Council valuations for valuation purposes. | YES / NO / ? | |
| Entities using Inland Revenue and/or Income Tax Act rates for depreciation purposes, and/or valuation purposes. | YES / NO / ? | |
| Entities where impairment testing will now be required at an aggregate asset level (i.e. cash-generating units), rather than solely at an individual-asset level | YES / NO / ? | |
| Entities that self-construct and/or produce-for-sale assets that take at least 6 – 9 months to complete (“qualifying assets”). | YES / NO / ? | |
| Non-financial liabilities | ||
| Entities with accreting employee annual and sick leave balances (i.e. growing year-on-year). | YES / NO / ? | |
| Entities with Defined Benefit Pans, Retirement Benefit Plans and/or Other long-term employee benefits | YES / NO / ? | |
| Entities with long-term (i.e. non-current) Provision balances. | YES / NO / ? | |
| Other areas | ||
| Entities with share-based payments (i.e. including Employee Share Option Schemes (ESOPs)). | YES / NO / ? | |
| Entities with historic business combination transactions. | YES / NO / ? | |
| Entities that are required to measure assets and/or liabilities at fair value. | YES / NO / ? | |
| Specific sectors and industries | ||
| Entities involved in the Agriculture sector and/or with “Bearer plants”. | YES / NO / ? | |
| Entities with insurance contracts (including entities that provide Loan (Debtor) waiver products to borrowers (customers)). | YES / NO / ? | |
| Entities in the extractive and mining industry. | YES / NO / ? | |
| Entities in the finance industry, and/or with material Loan receivable balances (including to related parties). | YES / NO / ? | |
Application areas by specific NZ IFRS / NZ IFRS (RDR)
Details of the common application areas to be considered when an entity steps up into NZ IFRS / NZ IFRS (RDR) from a general SPFR framework (“non-NZ IFRS frameworks”) can be downloaded by filing in the form at the bottom of this page.
Your go-forward requirements
While it is unlikely that all of the above application areas will be relevant and applicable to an entity, it is likely that a number of significant “generic” areas of accounting will need to be considered by almost all entities transitioning to NZ IFRS / NZ IFRS (RDR).
In addition to working through the above, entities adopting NZ IFRS / NZ IFRS (RDR) with also need to be aware of the requirement to apply NZ IFRS 1 First-time adoption of New Zealand Equivalents to International Reporting Standards (NZ IFRS 1).
NZ IFRS 1 is a detail-heavy standard and provides various mandatory and optional accounting treatments for balances and transactions that can differ slightly from the “normal” accounting treatments prescribed in the individual NZ IFRSs that would ordinarily apply.
To assist entities with this aspect of their adoption to NZ IFRS / NZ IFRS (RDR) we have previously issued our earlier Cheat Sheet that we would encourage all entities to also review.
It would be an understatement to say that there is a potentially a high risk for the transition to NZ IFRS or NZ IFRS (RDR) to be done incorrectly and/or incompletely, where care is not taken in working through the transition to NZ IFRS or NZ IFRS (RDR).
With that in mind, for certain entities, partnering with or formally engaging with an NZ IFRS expert to assist in analysing and documenting the entity’s transition to NZ IFRS or NZ IFRS (RDR) will be a serious consideration.
BDO IFRS Advisory
Members of BDO’s IFRS Advisory department come ready with real life experience in applying IFRS and are therefore well placed to provide entities with the expertise and assistance they require.
For more information as to how BDO Accounting Advisory Services might assist with your entity in navigating this and other areas of IFRS application, please contact James Lindsay at BDO Accounting Advisory Services (james.lindsay@bdo.co.nz, ph +64 9 366 8041), and visit our webpage.
For those entities still working through their adoption of the new lease accounting standard (NZ IFRS 16), visit our dedicated Adopting NZ IFRS 16 webpage for more information and resources on NZ IFRS 16.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact your respective BDO member firm to discuss these matters in the context of your particular circumstances.