Objective
The principal objective in producing the model is to guide Councils in preparing NZ IFRS compliant financial statements.
The model financial statements have been prepared using a fictitious Council, Te Motu District Council (TMDC). The Council has three subsidiaries, an associate, and a jointly controlled operation.
Updates to the model
The tables below explain the updates to the model. These are grouped into financial instrument changes and other changes. The page numbers below refer to the 30 June 2008 model.
Financial instrument disclosure changes
Although NZ IFRS 7 Financial Instruments: Disclosures (NZ IFRS 7) was applied in the prior model, we have made significant changes to the financial instrument disclosures in this update. The changes to financial instrument disclosures reflect increased practical knowledge developed in the application of the NZ IFRS 7 disclosure requirements, and the evolving good practice that has been generated from application by early adopters.
It is important to highlight that there may be more than one way of presenting the information required by NZ IFRS 7, and the extent of certain disclosure requirements will depend on the materiality of risks arising from financial instruments. Councils will need to consider the most appropriate presentation, and the extent of disclosures, based on their particular facts and circumstances.
| Note number |
Description of change |
| |
Borrowings and investment effective interest rate disclosures have been removed from the updated model because NZ IFRS 7 does not specifically require their disclosure. However, information on effective interest rates may be required if that information is provided to the key management personnel of the Council (refer NZ IFRS 7 paragraph 34(a)). |
| 11 |
Note 11 Debtors and other receivables: Community and related party loans are now included in the "Other financial assets" note. An ageing analysis for receivables, and information on those receivables that are impaired, has been inserted as required by the NZ IFRS 7 credit risk disclosures. |
| 12 |
Note 12 Derivative financial instruments: This note has been expanded to provide guidance on disclosures for derivatives that are classified as held for trading, including interest rate swaps and forward foreign exchange contracts that are not hedge accounted. There were no derivatives classified as held for trading in the previous model. |
| 13 |
Note 13 Other financial assets: Additional information has been disclosed about the methods and assumptions applied in determining fair value, as required by NZ IFRS 7 paragraph 27. |
| 35A |
Financial instrument categories: A table has been inserted that presents the financial instrument categories by total, in a single note. A single note was not included in the previous model. |
| 35B |
Currency risk exposure disclosures have now been included in the model. |
| 35B |
Maximum exposure to credit risk: A table has been inserted that presents the maximum exposure to credit risk by class of financial instrument in a single note. A single note was not included in the previous model, but has evolved as good practice to meet the requirements of NZ IFRS 7 paragraph 8. |
| 35B |
Credit quality of financial assets: A table has been inserted demonstrating one way in which information about the credit quality of financial assets that are neither past due or impaired can be disclosed. The note providing credit quality information by reference to credit ratings was not included in the previous model, but has evolved as good practice to meet the requirement of NZ IFRS 7 paragraph 36(c). |
| 35B |
Liquidity risk: A table has been inserted presenting the contractual maturity analysis for financial liabilities as a single note. The contractual maturity analysis of the previous model did not include all contractual cash flows, such as interest payments as required by NZ IFRS 7 paragraph 39(a). |
| 35B |
Sensitivity analysis: A table has been inserted demonstrating one way the information required by NZ IFRS 7 paragraph 40 can be presented. This approach has been adopted as it provides a more transparent presentation of the sensitivity to market risks arising from financial instruments through providing both the sensitivities of individual classes of instruments and total sensitivity. The previous model presented this information in a non-tabular manner. |
Other changes
| Note number |
Description of change |
| |
The NZ IFRS 1 First-time Adoption of NZ IFRS (NZ IFRS 1) transitional disclosures required to be disclosed in a Council’s first NZ IFRS financial statements have not been included in the updated model. There is no requirement to disclose the NZ IFRS 1 transitional disclosures in reporting periods subsequent to the first financial statements prepared under NZ IFRS. |
| |
Statement of financial performance: A new descriptor “Finance income” has been added to the statement of financial performance (previously included in other revenue). This is not a requirement of NZ IFRS, however it enables readers to easily compare the components of finance income and finance costs by presenting both as a single note. |
| |
Statement of changes in equity: The updated model demonstrates the required adjustment to opening retained earnings for the early adoption of the amendment to NZ IAS 2 Inventories. |
| |
Changes in accounting policies: A narrative has been inserted explaining the early adoption of the amendment to NZ IAS 2 Inventories. |
| |
Standards, amendments, and interpretations issued that are not yet effective and not early adopted: Information on those relevant standards, amendments, and interpretations that have not been early adopted has been inserted. |
| 1,25 |
The ACC Partnership Programme disclosures have been simplified. |
| 6 |
Note 6 Gains: Gains from financial instruments and non-financial instruments have been grouped separately, and sub-totals presented, to provide better information to the readers of the financial statements on the sources of gains. |
| 9 |
Note 9 Tax: Additional disclosure added for the change in the corporate tax rate from 33% to 30% that was effective from 1 April 2008. |
| 14 |
Note 14 Inventories: Disclosures have been updated for the early adoption of the amendment to NZ IAS 2 Inventories. |
| 17 |
Note 17 Property, plant and equipment: Separate property, plant and equipment reconciliation tables have now been prepared for the parent and group. Previously, the subsidiary property, plant and equipment reconciliation was prepared below the parent reconciliation. In our view, the revised presentation better meets the requirements of NZ IAS 16 paragraph 77 by presenting separate reconciliations for the parent and group. |
| 17 |
Note 17 Property, plant and equipment: A table has been inserted that more clearly discloses the total fair value of property, plant and equipment valued by each valuer, as required by NZ IAS 16 paragraph NZ 77.2(c). |
| 18 |
Note 18 Intangible assets: A description has been inserted explaining why easements have an indefinite useful life, as required by NZ IAS 38 paragraph 122(a). |
| 19 |
Note 19 Forestry assets: The valuation assumption disclosures have been expanded to better meet the requirements of NZ IAS 41 paragraph 47. |
| 31 |
Note 31 Related party transactions: An illustrative disclosure has been added where close family members of key management personnel are employed by a Council. |
| 31 |
Note 31 Related party transactions: An amount for total key management personnel compensation has been inserted as required by NZ IAS 24 paragraph 16. |
| 34 |
Note 34 Events after the balance date: Two illustrative examples demonstrating the disclosure requirements for events after the balance date have been inserted. |
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Content
Included in the model is:
- Statement of compliance;
- Audit report;
- Statement of financial performance;
- Statement of financial position;
- Statement of changes in equity;
- Statement of cash flows;
- Statement of accounting policies; and
- Notes to the financial statements.
The model does not include a model statement of service performance.
Not all of the accounting policies and notes will be applicable to a particular Council. Although it is not practical for this model to cover all of the possible financial reporting issues that could arise in the local government sector, we have included in the model a wide range of accounting policies and notes, including all those that we would expect to occur commonly in the sector.
The model illustrates a possible financial statement format for a Council, for example the statement of financial performance has been prepared by classifying expenses based on the nature of the expenditure. Alternatively, expenses could be classified based on their function. This is just one example where there may be more than one way in disclosing the information required under NZ IFRS.
While the model provides guidance on disclosure matters, it does not deal with the underlying accounting treatment.
Councils will need to make choices about the accounting policies and presentation options appropriate for their circumstances.
The model does not address all the possible recognition and disclosure requirements of NZ IFRS. Councils should not use the model as a substitute for referring to individual NZ IFRS standards and interpretations applicable to their specific circumstances.
We have included references to specific NZ IFRS standards in the left margin of the model for easy searching. References to the NZ IFRS standards are sourced from the January 2007 NZ IFRS Standards Volumes 1 and 2, with the exception of NZ IAS 2 Inventories references which are sourced from the January 2008 NZ IFRS Standards Volume 1.
Standards not covered by the model
The model does not consider any recognition or disclosure requirements of the following standards:
- NZ IFRS 2 Share-based Payment;
- NZ IFRS 6 Exploration for and Evaluation of Mineral Resources;
- NZ IFRS 8 Operating Segments;
- NZ IAS 26 Accounting and Reporting by Retirement Benefit Plans;
- NZ IAS 29 Reporting in Hyperinflationary Economies;
- NZ IAS 33 Earnings per Share; and
- NZ IAS 34 Interim Financial Reporting.
In addition any standards, interpretations and amendments issued after 31 May 2008 will not be reflected in this set of financial statements.
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