IFRS 19 - Reduced disclosures for subsidiaries without public accountability

On 9 May 2024, the International Accounting Standards Board (IASB) issued IFRS 19 Subsidiaries without Public Accountability: Disclosures, which permits eligible subsidiaries to apply reduced disclosure requirements while applying the recognition, measurement and presentation requirements in IFRS^® Accounting Standards. IFRS 19 is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. IFRS 19 is an optional IFRS^® Accounting Standard issued by the IASB^®. Please note, however, that IFRS 19 has not currently been released in New Zealand by the New Zealand Accounting Standards Board (NZASB).
 

If the NZASB in New Zealand elects to adopt IFRS 19, it will likely replace the current Tier 2 Reduced Disclosure Regime framework for for-profit entities. Our understanding is that the NZASB is currently investigating the implications of IFRS 19 and will likely issue a consultation document (CD) for public comment in due course in H2 of 2024.

Which subsidiaries are eligible?

An entity is eligible to apply IFRS 19 in its consolidated, separate or individual financial statements if it meets all of the following eligibility criteria at the end of the reporting period:

• The entity is a subsidiary (as defined in Appendix A of IFRS 10 Consolidated Financial Statements)

• The entity does not have public accountability
• The entity has an ultimate or intermediate parent that produces consolidated financial statements available for public use that comply with IFRS Accounting Standards.

An intermediate parent that does not have public accountability and meets the above eligibility conditions is permitted to apply IFRS 19 in its separate financial statements even if it does not apply IFRS 19 in its consolidated financial statements.

An entity has public accountability if:

• Its debt or equity instruments are traded in a public market, or it is in the process of issuing such instruments for trading in a public market, or
• It holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.

It should be noted, that if the NZASB does elect to adopt IFRS 19 in New Zealand, it is likely that the scope of the standard will need to be expanded to be eligible to be applied by all current Tier 2 for-profit reporting entities

The structure of IFRS 19 and approach adopted by the IASB for developing the disclosure requirements

The disclosure requirements in IFRS 19 are organised into subsections relating to each IFRS® Accounting Standard. A subsidiary applying IFRS 19 will apply an IFRS^® Accounting Standard to a transaction, other event or condition and then apply the disclosure requirements set out under the subheading of that IFRS^® Accounting Standard in IFRS 19.

Some disclosure requirements in IFRS^® Accounting Standards remain applicable to entities applying IFRS 19. Such disclosure requirements are specified under the subheading of each IFRS^® Accounting Standard.

Comparative information

An entity that applies IFRS 19 in the current reporting period but not in the immediately preceding period is required to provide comparative information for all amounts reported in the current period’s financial statements, unless IFRS 19 or another IFRS^® Accounting Standard permits or requires otherwise.

An entity that applied IFRS 19 in the preceding reporting period but elects not to (or is no longer eligible to) apply it in the current period and continues applying IFRS^® Accounting Standards, is required to provide comparative information with respect to the preceding period for all amounts reported in the current period’s financial statements, unless another IFRS^® Accounting Standard permits or requires otherwise.

Can IFRS 19 be applied in New Zealand now?

No. IFRS 19 can only be applied in New Zealand once (or if) it is approved by the NZASB. Based on current guidance, the NZASB (if it decides to adopt a NZ IFRS 19 equivalent) will likely only release such a standard in December 2024 after the proposed CD has been published and feedback is received thereon.
 

What does this mean for Tier 2 New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime (NZ IFRS RDR)? If IFRS 19 is adopted in New Zealand (as NZ IFRS 19 with expanded scope to apply to all Tier 2 for-profit reporting entities) it is anticipated that this standard will replace the Tier 2 NZ IFRS RDR framework in its entirety. Tier 2 reporters will thus have to transition financial reporting disclosures from the Tier 2 NZ IFRS RDR requirements to those required by NZ IFRS 19. There will thus be transition costs for preparers, such as time and effort to become familiar with the NZ IFRS 19 requirements and understanding which disclosures still need to be complied with (and which disclosures are no longer required). It should be noted that for Tier 2 entities, the disclosure requirements would now be included within the NZ IFRS 19 standard as opposed to each individual (NZ IFRS) standard. It should, however, be noted that in some instances cross reference is still made to individual NZ IFRS standards. It should also be noted that NZ IFRS 19 will only cover disclosures. Presentation requirements will remain within individual NZ IFRS standards.

Need help?

Please contact our IFRS^® Advisory team if you have questions or require assistance preparing your Simplified Disclosures 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.