CHANGES TO FINANCIAL REPORTING STANDARDS

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Aniela Tkacz, National Technical Manager

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Roadmap • NZ IFRS 15 Revenue from

Contracts with Customers

• NZ IFRS 9 Financial instruments

• NZ IFRS 16 Leases – what can we expect?

• Questions

NZ IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS

Effective 1 January 2018

1. Mai 2023

FIVE STEP MODELRETRANSFER OF GOODS OR SERVICES

Step 1• Identify the contracts with the customer

Step 2• Identify the separate performance obligations

Step 3• Determine the transaction price

Step 4• Allocate the transaction price

Step 5• Recognise revenue when a performance obligation is

satisfied

CONTRACT MODIFICATIONS

Are the goods and/or services

distinct?

Are elements of the modification

distinct?

Are the additional goods/services provided at the

standalone selling price?

Are all remaining goods/services

distinct?

Treat as part of existing contract (IFRS

15.21 (b)

Combination – judgement needed

(IFRS 15.21 (c))

Considered a new separate contract

(IFRS 15.20)

Treat as termination of

old and creation of new contract (IFRS 15.21 (a))

Yes

Yes Yes

Yes

No No

No No

NZ IFRS 9 FINANCIAL INSTRUMENTS

Effective 1 January 2018

1. Mai 2023

OBJECTIVE

Hedge accounting

Impairment

Classification and measurement of financial assets and financial

liabilities

NZ IFRS 9

Establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows

𝟐

𝟏

𝟑

CLASSIFICATION OF FINANCIAL ASSETS

*Excludes investments in equity instruments. An entity can elect to present FV changes in OCI. Source: IASB’s project summary.

Business model = hold

to collect

Other business models

Business model = hold to collect and

sellCash flows are solely principal

and interest (SPPI)

Other types of cash flows

Amortised cost FVOCI*

FVTPL FVTPL FVTPL

FVTPL

Step 1 Step

2

1. Mai 2023

Other changes – risk management

Risk management

• Objective• Hedging instruments• Hedged items• Qualifying criteria• Accounting for qualifying hedge

relationships• Groups and net positions• Discontinuation and rebalancing• Presentation and disclosure

Hedge accountin

g

NZ IFRS 16 LEASESEffective 1 January 2019

WHAT’S NEW?IAS 17

Classify leases as operating or financing based on the

transfer of risks and rewards

Significant analyst ‘back of the envelope adjustments’ to estimate the impact of

leases.

Off balance sheet lease financing numbers were

substantial. Listed companies using IFRS or US GAAP disclosed almost US$3 trillion of off balance sheet

lease commitments.

IFRS 16

All leases on the balance sheet excluding short-term or low-

value leases.

and more… enhanced disclosure requirements, lessor accounting model substantially unchanged

and so on….

Lessee has a right-of-use asset and a corresponding lease

liability

Effective APB 1 January 2019

DEFINITION OF A LEASEA contract that conveys the right to use an asset for a period of time in exchange for consideration

Is there an identified asset?

Does the customer have the right to

substantially all the benefits from the

asset?

Who directs how and for what purpose the

asset is used?

Customer operates the asset or has designed its construction

Contract contains a lease

Contract does not contain a

lease

Yes

CustomerNo No

Yes

DefinedSupplier

YesNo

EFFECTS ON THE INCOME STATEMENTFor many companies the overall effect on profit or loss is not expected to be significant.

IFRS 16 is expected to result in higher EBITDA and operating profit for companies that have material off balance sheet leases.

Profit before tax

EBITDA

Operating profit and finance costs

Interest expense and the depreciation charge during the first half of the lease term is generally expected to be higher than a straight-line expense for off balance sheet leases recognised applying IAS 17.

This is because the depreciation of the lease asset typically will be recognised on a straight-line basis while the interest expense generally decreases over the lease term as the lease liability decreases.Metric Measure Calculation Effect

EBITDA Profitability

Earning before interest, tax, depreciation and amortisation

Increase

EBITDAR Profitability

Profit before interest, tax, depreciation, amortisation and rent.

No change

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