Financial reporting more relevant after amendment

Tuesday 21st December 2010

The International Accounting Standards Board (IASB) has approved an amendment that should make financial reporting more relevant to New Zealand conditions, PricewaterhouseCoopers says.

The board is the international body that develops and approves International Financial Reporting Standards (IFRS).

Since New Zealand adopted IFRS there had been criticisms the global standards did not cope well when companies revalued their assets to market value within our nil capital gains tax regime, PricewaterhouseCoopers said today.

IFRS assumed that additional tax was payable on the uplift over cost and required deferred tax liabilities to be recognised, which reduced net assets.

Also, during the past six months some companies and unit trusts had to report significant additional deferred tax liabilities and tax expenses under IFRS as a result of May's budget changes to remove tax depreciation on buildings.

IFRS did not foresee or allow for such events and that had led to commentators calling for standards changes and possibly moving away from global standards altogether.

"The approved amendment will solve the problem for investment properties and provide welcome relief for those who generally were the most severely impacted by the budget changes," PricewaterhouseCoopers accounting consulting services partner Michele Embling said.

The accounting board decision was welcome news, especially as companies moved into the next reporting cycle, he said.

"It will result in financial information that is more meaningful and transparent and easier for investors to understand."

He said the IASB was sympathetic to New Zealand's remaining concerns with the tax accounting standard and was exploring further changes.

NZPA

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