In one review, the Commission identified significant differences between the comparative figures in the cash flow statement and the prior year's cash flow statement. Further investigation revealed that the differences were due to a change in the basis of preparing the cash flow statement on first-time adoption of NZ IFRS (specifically NZ IAS 7).

NZ IAS 7 (para. 18(a)) requires major classes of gross cash receipts and gross cash payments be disclosed. NZ IAS 7 does not explicitly address the treatment of GST.

The International Financial Reporting Interpretations Committee (IFRIC) has identified that the treatment of GST is unclear under IAS 7 and has referred it to the International Accounting Standards Board (IASB). IFRIC has recommended that the treatment of the tax component is considered as part of the review of IAS 7 being carried out within the IASB's project on performance reporting.

The issuer in our sample presented cash receipts and cash payments gross of GST in its first cash flow statement under NZ IFRS. The issuer did not disclose the change nor explain that the change was due to the entity's first-time adoption of NZ IFRS. The Commission believes that an explanation should be provided so that readers understand changes resulting from the adoption of NZ IAS 7.

NZ IFRS 1 (para. 40) specifically requires such changes to be explained, stating that if an entity presented a cash flow statement under its previous NZ GAAP and comparatives are restated, any material adjustments should be explained.

In addition, NZ IAS 1 (para. 103 (a)) requires the notes to the financial statements to present information about the basis of preparation of the financial statements and the specific accounting policies used.

A number of common non-disclosures were found in Cycle 5. Some NZ IAS 1 and NZ IAS 24 disclosures were poor.

The Commission noted the following non-disclosures of NZ IAS 1 requirements.

NZ IAS 1 (para. 113) requires an entity to disclose the judgements management have made in the process of applying the entity's accounting policies that have the most significant effect on the amounts recognized in the financial statements.

Some examples of areas that require management to make judgements are provided in NZ IAS 1 (para. 114).

Five issuers describe in their financial statements that judgements were made by management in the process of applying the entity's accounting policies, but failed to disclose what these judgements were as required by NZ IAS 1.

Another issuer indicated in its accounts that significant judgements were made by management but, on enquiry, the issuer confirmed that in fact no such judgements were made in applying the issuers accounting policies. The issuer has appeared to use boiler plate language for this disclosure without management properly considering making disclosures specific to the issuer.

The Commission is of the view that to comply with the requirement of NZ IAS 1 it is not sufficient to simply state that significant management judgements have been made. Issuers need to explain what these judgements were and the accounting policies that were affected by these judgements.

NZ IAS 1 (para. 116) requires an entity to disclose "information about the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities."

Three issuers describe in their financial statements that directors made estimates and assumptions that affected reported assets and liabilities, but did not disclose what those estimates and key assumptions were.

Three other issuers provided no disclosures on key sources of estimation uncertainty in their financial statements.

The Commission believes that it is good business practice for the boards of issuers to consider the assumptions and estimates that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities before finalising the financial statements.

The objective of NZ IAS 24 is "to ensure that an entity's financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with such parties."

Details of terms and conditions of settlement of outstanding balances with related parties, including whether they are secured, and the nature of the consideration to be provided should be disclosed (NZ IAS 24 (para. 17)).

The Commission found that in some cases the amounts of the transactions with related parties during the period were not disclosed. In one instance the terms and conditions of those outstanding balances were not provided.

NZ IAS 24 (para. 9) defines a related party as including key management personnel of the entity and requires specific disclosures of key management personnel compensation.

One entity disclosed key management personnel compensation with regard to directors and overlooked the chief executive officer of the company.

Another entity provided disclosures about key management personnel compensation in the statutory information section. The Commission believes disclosures required by accounting standards should be made within the audited financial statements.

Minor matters identified were:

NZ IFRS 7 Financial Instruments: Disclosures

• inadequate disclosure of credit risk.

NZ IAS 12 Income Taxes

• non-disclosure of a deferred tax liability; and
• non-disclosure of the nature of evidence supporting recognition of a deferred tax asset.

NZ IAS 32 Financial Instruments: Presentation

• non-disclosure of risk management objectives and policies relating to financial instruments.

NZ IAS 33 Earnings per Share

• earnings per share calculation incorrectly performed using the number of shares at the end of the period instead of the weighted average over the period.