RDR Concessions: Amendments to the Classification and Measurement of Financial Instruments
The External Reporting Board (XRB) recently issued an amending standard for for-profit entities, Amendments to the Classification and Measurement of Financial Instruments. This amending Standard adjusted requirements related to settling financial liabilities using an electronic payment system and added guidance for assessing contractual cash flow characteristics of financial assets including those with environmental, social and governance (ESG) linked features to help determine how to classify and measure these assets.
The XRB is now proposing to provide disclosure concessions for Tier 2 for-profit entities for some of the disclosure requirements introduced to NZ IFRS 7 by this amending standard.
Our Exposure Draft details these proposals.
The XRB is seeking feedback on the proposed RDR concessions from stakeholders who are likely to be affected by the amending standard and its disclosure implications.
About the RDR framework
The purpose of the RDR framework is to simplify the financial reporting for Tier 2 entities by removing or modifying some of the disclosure requirements in the accounting standards, while maintaining the same recognition and measurement requirements as Tier 1 entities.
The objective is to balance the benefits with the costs of preparing financial statements for Tier 2 for-profit entities. It achieves this by only requiring disclosures when they are of particular interest or value to users of those financial statements.
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Disclosure requirements introduced by Amendments to the Classification and Measurement of Financial Instruments |
Proposed RDR concession |
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NZ IFRS 9 Financial Instruments Paragraph 7.2.49 Where a class of financial assets have changed measurement category as a result of the amendments, an entity must disclose the measurement category and carrying amount determined immediately before and after the amendments were applied. |
No RDR concession has been proposed for these disclosures on the basis they relate to the accounting policy for classifying and measuring financial assets, and we therefore consider these to be useful to the understanding the impact of the amendments. |
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NZ IFRS 7 Financial Instruments: Disclosures Disclosures for investments in equity instruments designated at fair value through other comprehensive income (OCI) Paragraphs 11A and 11B Amendments to specify that the disclosures in paragraph 11A of IFRS 7 apply to each class of investment in equity instruments classified as fair value through OCI (rather than for each such investment). Introduces a disclosure to differentiate changes in fair value a between those related to investments derecognised during the period and those related to investments held at the end of the period. Introduces a disclosure to outline the cumulative gain or loss transferred within equity for investments derecognised during the period. |
We propose RDR concessions for these disclosures for cost/benefit reasons. |
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NZ IFRS 7 Financial Instruments: Disclosures Disclosures for financial instruments with contingent features Paragraphs 20B, 20C and 20D Introduces disclosures for financial instruments with contingent features – i.e. financial instruments with terms that can change the amount of contractual cash flows a result of a contingent event that does not relate directly to changes in basic lending risks and costs (e.g. loans with ESG-linked features). The disclosures require:
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No RDR concession has been proposed on the basis these disclosures help users understand these types of instruments and offer insights into an entity’s short term cashflows, exposure to a contingent event and liquidity. We understand that this information would be beneficial for users of Tier 2 financial statements. . |
How to provide feedback
We are keen to get your perspective on the proposed disclosure concessions. The Exposure Draft outlines the changes to NZ IFRS 7.
There are a couple of ways you can provide your view:
- Fill in the form below
- Email the team at accounting@xrb.govt.nz
We will put all written submissions on our website unless requested otherwise, and we reserve the right not to publish defamatory submissions.
Submissions close on 31 January 2025.
We intend on publishing all comments on the XRB website, unless they may be defamatory. If you have any objection to this, we will not publish them. However, they will remain subject to the Official Information Act 1982 and, therefore, may be released in part or in full. The Privacy Act 2020 also applies.