Eight things to remember for 31 December 2024 annual reporting

This article highlights eight things to remember when preparing 31 December 2024 financial statements.

This article highlights eight things to remember when preparing 31 December 2024 financial statements. Entities should also consider continuing global geopolitical and economic uncertainty, including the impact of interest rate increases and inflation, and the effects those uncertainties might have when accounting for various items in your financial statements.
  1. Changes to classification requirements for liabilities
  2. Climate-related matters and mandatory sustainability reporting
  3. New standards applying for the first time to 31 December 2024 annual and half-year periods
  4. Pillar Two 'top-up' income taxes
  5. Recent agenda decisions
  6. Hyperinflationary economies
  7. Standards issued but not yet effective
  8. Material accounting policies.

These changes apply to Tier 1 and Tier 2 for-profit entities to annual periods beginning on or after 1 January 2024. Classification of your liabilities may be impacted by one or more of the changes to NZ IAS 1 Presentation of Financial Statements, namely:

a. The right to defer settlement need not be unconditional and must exist at the end of the reporting period

b. Classification is based on rights to defer, not intention

c. Early conversion options for convertible notes that can be settled before maturity by issuing the entity’s own equity instruments will result in the underlying liability being classified as CURRENT if the conversion feature is classified as a liability/derivative liability rather than as equity.  

Regarding a., if your entity has loan arrangements subject to covenants, the amendments clarify when the covenants affect classification at the reporting date. This is illustrated in the diagram below.



Assessing whether the entity must comply with a loan covenant before the reporting date may depend upon whether bankers have provided a ‘waiver’ or a ‘period of grace’. Our publication uses a flowchart and examples to help you determine the correct classification of your loan arrangements. 

For Public Benefit Entities, please note the External Reporting Board (XRB) has incorporated similar requirements for liability classification as current or non-current via the 2024 Omnibus Amendments to PBE Standards which is effective for annual periods beginning 1 January 2026.

With the New Zealand Government committed to reducing New Zealand's greenhouse gas emissions by 50% below 2005 levels by 2030, and achieving net zero emissions by 2050, preparers need to consider the implications of climate-related matters when preparing 31 December 2024 financial statements. Educational materials published by the International Accounting Standards Board (IASB) summarise how companies must consider climate-related issues when applying IFRS® Accounting Standards. 

This includes when determining values for assets, liabilities, and provisions, and making disclosures regarding estimates and judgements. Please refer to our publication for a summary of these educational materials. 

ESMA’s ‘Heat is On’ Report also provides real-life, practical examples to illustrate how entities can improve their climate-related disclosures for areas where climate matters are likely to have the greatest impact. Our article contains more information on this. 

New Zealand entities that fall under the Climate-Related Disclosures (CRD) regime also need to ensure compliance with the New Zealand’s climate reporting standards (Aotearoa New Zealand Climate Standards) (NZ CS). 


The table below summarises amendments to standards that apply for the first time to 31 December 2024 annual periods. The changes for classifying liabilities and supplier finance arrangements are likely to affect many for-profit entities. 

Please ensure you have considered the impact of these in your 31 December 2024 annual financial statements. You can find more information about these amendments in the listed resources, or contact our Financial Reporting Advisory team for assistance.

Tier 1 and Tier 2 For profit entities

Amending standard numberTopicBDO resources
Amendments to NZ IAS 1Classification of liabilities as current or non-current

Publication

Bulletin

Amendments to NZ IAS 7 & NZ IFRS 7 Supplier finance arrangements

IASB approves changes to the accounting for supplier finance arrangements

How to account for reverse factoring/supply chain financing arrangements

Amendments to NZ IFRS 16Lease liability in a sale and leasebackLease liabilities for sale and leaseback transactions to include variable lease payments that do not depend on an index or rate
Amendments to FRS-44Disclosure of Fees for Audit Firms' Services Disclosure of fees for audit firms’ services (amendments to FRS-44 and PBE IPSAS 1)


Tier 1 and Tier 2 Public benefit entities

Amending standard numberAmending standard number
BDO resources
Amendments to PBE IPSAS 1 Disclosure of Fees for Audit Firms' ServicesDisclosure of fees for audit firms’ services (amendments to FRS-44 and PBE IPSAS 1)
Omnibus Amendments2024 Omnibus Amendments to PBE Standards (Amendments to PBE IAS 12)2024 Omnibus Amendments to PBE Standards



In March 2024 the New Zealand Government implemented the Pillar Two ‘top-up’ tax regime in New Zealand for large multinational enterprise groups (MNE groups) to ensure these MNE Groups pay at least 15% tax on their income in jurisdiction in which they operate. The legislation introduces:

  • The income inclusion rule (IIR) and Under Taxed Profits Rule (UTPR) which are the primary mechanisms of the Pillar Two rules. These rules will apply in New Zealand to both New Zealand-headquartered groups and inbound groups for the income years beginning on or after 1 January 2025, and
  • The Domestic Income Inclusion Rule (DIIR) which applies to New Zealand-headquartered companies allowing the New Zealand Government to collect top-up tax on undertaxed New Zealand profits that would ordinarily be paid offshore under the UTPR (subject to the level of overseas assets and employees). The application of the DIIR has been deferred to the income year beginning on or after 1 January 2026.

These rules will apply to MNE groups with consolidated revenue exceeding €750 million.

Entities part of an MNE group with consolidated revenue exceeding €750 million must assess and recognise Pillar Two tax liabilities for the IIR and QDMTT as appropriate.  


IFRS Interpretations Committee (Committee) agenda decisions are those issues the Committee decided not to take onto its agenda. Although not authoritative guidance, these decisions are regarded as being highly persuasive in practice. All Tier 1 and Tier 2 for-profit entities reporting under NZ IFRS standards should be aware of these decisions, as they could impact how particular transactions and balances are accounted for. In addition, Tier 1 and Tier 2 PBE entities should also take note of these decisions, if the topics covered are consistent with requirements under PBE Standards

While agenda decisions have no start date, they are expected to be applied as soon as possible, usually by the next reporting date. Agenda decisions merely clarify existing accounting principles. Therefore, any adjustments required are generally treated as a voluntary change in accounting policy (with retrospective restatement), rather than an error.


Over the past twelve months, the Committee has issued the following agenda decisions:

  • Disclosure of revenue and expenses for reportable segments (July 2024)
  • Climate-related commitments (April 2024)
  • Payments contingent on continued employment during handover periods (April 2024)
  • Merger between a parent and its subsidiary in separate financial statements (January 2024).

Please ensure your 31 December annual financial statements reflect the conclusions in these agenda decisions. You can find more information about these agenda decisions in our previous articles: 


Despite a recent spike in inflation, New Zealand has experienced low inflation levels for decades, and many entities may need to be aware of special accounting requirements when an entity operates in countries whose economy and functional currency are considered hyperinflationary.

When a for-profit entity’s functional currency is ‘hyperinflationary’, NZ IAS 29 Financial reporting in hyperinflationary economies requires the financial statements (including any comparative periods) to be stated in terms of the measuring unit current at the end of the applicable reporting period. This is because the currency of a hyperinflationary economy loses a significant amount of purchasing power from period to period, such that presenting financial information based on historical amounts, even if only a few months old, does not provide relevant information to users of financial statements.

Economies which were considered hyperinflationary as at 31 December 2023
Economies that became hyperinflationary in 2024
Economies that have a risk of becoming hyperinflationary (watchlist for 2025 onwards)
  • Argentina
  • Ethiopia 
  • Ghana
  • Haiti
  • Islamic Republic of Iran
  • Lebanon
  • Sierra Leone
  • South Sudan
  • Sudan
  • Suriname
  • Turkey 
  • Venezuela
  • Zimbabwe
  • Malawi
  • Lao People’s Democratic Republic

  • Angola
  • Burundi
  • Egypt
  • Myanmar
  • Nigeria
  • Pakistan
  • Sri Lanka
  • Syria



Entities preparing Tier 1 financial statements must disclose the anticipated effect of new and amended standards issued, which are not effective at the reporting date (refer to NZ IAS 8.30 and PBE IPSAS 3.35). These are listed in the tables below. Please refer to the resources listed for more information or contact our Financial Reporting Advisory team for assistance.

Tier 1 and Tier 2 For profit entities

Standard number
Topic
BDO resources
Effective for annual periods commencing
NZ IFRS 18Presentation and disclosure in financial statements

Publication

1 January 2027
Amendments to NZ IFRS 9 and NZ IFRS 7

Classification and measurement of financial instruments, including:

  • The appropriate date for derecognising financial assets and liabilities
  • Application guidance to clarify the ‘SPPI test’

Do financial assets with ESG-linked features meet the SPPI test? 

When is the appropriate time to derecognise trade receivables and payables settled via electronic bank transfers? 

Bulletin		1 January 2026
Amendments to NZ IAS 21 and NZ IFRS 1Lack of exchangeabilityHow to determine the exchange rate when a currency is not exchangeable into another currency1 January 2025
Annual improvementsAnnual Improvements to NZ IFRS 2024-1 January 2026


Tier 1 and Tier 2 Public benefit entities

Standard number
Topic
BDO resources
Effective for annual periods commencing
Amendments – PBE Conceptual FrameworkPBE Conceptual Framework Update-1 January 2028
Omnibus Amendments2024 Omnibus Amendments to PBE Standards-1 January 2026
Amendments to PBE IFRS 17Insurance Contracts in the Public Sector-1 January 2026

For years ending on or after 31 December 2023, Tier 1 and Tier 2 for-profit entities only need to disclose material accounting policy information. Changes to NZ IAS 1 Presentation of Financial Statements mean that the long laundry list of accounting policies, which merely repeat recognition and measurement requirements from the accounting standards, can be removed. 

While these changes applied last year, we noted that many for-profit entities did not undertake an exercise to streamline their accounting policies to include only material accounting policy information. Keeping immaterial accounting policies is a big-time waster both for preparers and auditors. Culling unnecessary accounting policies in December 2024 financial reports is a good investment - a little time spent now will deliver time savings in the future and more clarity for users of the financial statements.


Our article explains what accounting policy information is material and what is not.


We are here to help

Please contact our Financial Reporting Advisory team if you need support with any financial reporting matters for your 31 December 2024 financial reports.

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

This article has been based on an article that originally appeared on BDO Australia, read the original article here.