Appendix 2: Example disclosures for ITP early adoption of PBE IPSAS 41

Commentary for 31 December 2021 reporting by Te Pūkenga subsidiaries

This appendix illustrates those disclosures of the model that would be affected by the early adoption of PBE IPSAS 41 from PBE IPSAS 29. Under each note affected, a brief guidance narrative is provided that explains how the note would be affected and revised disclosures are provided. In preparing the disclosures, we have elected not to restate the comparative year information in accordance with the transitional provisions of PBE IPSAS 41.

Tier 2 concessions: The example disclosures identify by green highlight disclosure concessions available under the reduced disclosure regime for tier 2 entities. Tier 2 entities do not have public accountability and have total expenses that are over $2 million and less than $30 million. We encourage ITPs who are eligible to take advantage of the available disclosure concessions. Additional disclosure concessions might be available to an ITP in preparing its financial statements that are not identified by the model, as the model does not include all possible disclosures of the PBE accounting standards.

6 Cash and cash equivalents

	Guidance: Disclosures added on the application of the expected credit loss model to cash and cash equivalents.
PBE IPSAS 30.42G	Although cash and cash equivalents at 31 December 2021 are subject to the expected credit loss requirements of PBE IPSAS 41, no loss allowance has been recognised because the estimated loss allowance for credit losses is trivial.

7 Receivables¹

	Guidance – This entire note has been updated for the new credit risk disclosure of PBE IPSAS 41. The accounting policy for receivables ECL is mandatory. However, an entity has an accounting policy choice for lease receivables (PBE IPSAS 41.87). Receivables that result from transactions within the scope of PBE IPSAS 9 and 23 shall always measure the loss allowance at an amount equal to lifetime ECL. For lease receivables that result from transactions within scope of PBE IPSAS 13 an entity may elect as their accounting policy to always measure the loss allowance at an amount equal to lifetime ECL (similar to receivables as illustrated below) or they may elect to assess changes in credit risk to determine whether to calculate the ECL on a 12-month or the lifetime basis.
PBE IPSAS 30.25	Accounting policy
PBE IPSAS 41.60 PBE IPSAS 41.87	Short-term receivables are recorded at the amount due, less an allowance for expected credit losses (ECL). This allowance is calculated based on lifetime ECL.
PBE IPSAS 30.42F(c)	In measuring ECL, short-term receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due.
PBE IPSAS 30.42F(e)	Short-term receivables are written off when there is no reasonable expectation of recovery. Previous accounting policy for impairment of receivables
PBE IPSAS 29.72	For the previous year, the allowance for credit losses was based on the incurred credit loss model. An allowance for credit losses was recognised only when there was objective evidence of impairment that the amount due would not be fully collected.

Breakdown of receivables and further information

	Institute		Group
	2021 $000	2020 $000	2021 $000	2020 $000
Student fee receivables
Student fee receivables	2,111	2,794	2,111	2,794
Less: Allowance for credit losses	(267)	(355)	(267)	(355)
Net student fee receivables	1,844	2,439	1,844	2,439
Other receivables
Commercial receivables	0	0	2,951	2,180
Research receivables	2,350	2,250	2,350	2,250
Receivables from subsidiaries	898	428	0	0
GST receivable	116	0	0	0
Other	163	100	277	225
Total receivables	5,371	5,217	7,422	7,094

	1 The allowance for credit losses at 31 December 2021 and 1 January 2021 was determined as follows:
PBE IPSAS 30.42N PBE IPSAS 30.IG22D	31 December 2021	Receivable days past due
PBE IPSAS 30.42N PBE IPSAS 30.IG22D	31 December 2021	Current	1 to 30 days	31 to 90 days	More than 90 days	Total
PBE IPSAS 30.42G(a)	Expected credit loss rate	4.7%	10.2%	17.7%	45.9%	–
	Gross carrying amount ($000)	922	569	424	196	2,111
	Lifetime expected credit loss ($000)	44	58	75	90	267

PBE IPSAS 30.42N PBE IPSAS 30.IG22D	1 January 2021	Receivable days past due
PBE IPSAS 30.42N PBE IPSAS 30.IG22D	1 January 2021	Current	1 to 30 days	31 to 90 days	More than 90 days	Total
PBE IPSAS 30.42G(a)	Expected credit loss rate	4.7%	10.2%	17.7%	45.9%	–
	Gross carrying amount ($000)	1,220	753	561	259	2,794
	Lifetime expected credit loss ($000)	58	79	99	119	355
PBE IPSAS 30.42G(a),(b)	The expected credit loss rates for receivables at 31 December 2021 and 1 January 2021 are based on the payment profile of revenue on credit over the previous 2 years at the measurement date and the corresponding historical credit losses experienced for that period. The historical loss rates are adjusted for current and forward-looking macroeconomic factors that might affect the recoverability of receivables. Given the short period of credit risk exposure, the impact of macroeconomic factors is not considered significant.
PBE IPSAS 30.42G(c)	There have been no changes during the reporting in the estimation techniques or significant assumptions used in measuring the loss allowance.
	The movement in the allowance for credit losses is as follows:
					2021 $000	2020 $000
PBE IPSAS 30.49P	Allowance for credit losses as at 1 January 2021 calculated under PBE IPSAS 29				235	228
PBE IPSAS 41.173	PBE IPSAS 41 expected credit loss adjustment - through opening accumulated surplus/deficit				120	N/A
	Opening allowance for credit losses as at 1 January 2021				355	228
	Revision in loss allowance made during the year				(25)	192
PBE IPSAS 30.42I(c)	Receivables written off during the year				(63)	(185)
	Balance at 30 June				267	235

1: For the credit risk disclosures of PBE IPSAS 30, entities, will need to consider how much detail to disclose, how much emphasis to place on different aspects of disclosures requirements, the appropriate level of aggregation or disaggregation, and whether users of financial statement need additional explanation to evaluate the quantitative information disclosed (PBE IPSAS 30.42D)

9 Other financial assets

Guidance – The accounting policy section has been updated, new information added in relation to equity investments designated at fair value through other comprehensive revenue and expense, and new information added about impairment of instruments subject to credit risk.

There are new disclosure requirements for concessionary loans. If this is applicable, refer to PBE IPSAS 30: Financial Instrument: Disclosures paragraph 37 and 37A.

PBE IPSAS 30.25	Accounting policy
PBE IPSAS 41.57	Financial assets are initially recognised at fair value plus transaction costs unless they are measured at fair value through surplus or deficit, in which case the transaction costs are recognised in the surplus or deficit.
	Term deposits and loans to subsidiaries
PBE IPSAS 41.61(a)	Term deposits and loans to subsidiaries are initially measured at the amount invested, as this reflects fair value for these market-based transactions. Interest is subsequently accrued and added to the investment and loan balance. A loss allowance for expected credit losses is recognised if the estimated loss allowance is not trivial.
	New Zealand Government bonds
PBE IPSAS 41.41	Surplus funds are invested in New Zealand Government bonds and might be sold prior to maturity for liquidity reasons. Consequently, they are classified at fair value through other comprehensive revenue and expense.
PBE IPSAS 41.61	After initial recognition, the bonds are measured at their fair value, with gains and losses recognised in other comprehensive revenue and expense. These debt instruments are subject to impairment assessments.
PBE IPSAS 41.111	On disposal of the investment, the financial asset is derecognised, and the cumulative gain or loss previously recognised in other comprehensive revenue and expense is reclassified from equity to surplus or deficit as a reclassification adjustment.
	Managed fund
PBE IPSAS 41.43	The managed fund is a portfolio of financial assets that are actively traded with the intention of making profits. Therefore, the managed fund is measured at fair value through surplus/deficit.
PBE IPSAS 41.61	After initial recognition, the managed fund is measured at fair value, with gains and losses recognised in the surplus or deficit.
	Unlisted shares
PBE IPSAS 41.43	Unlisted shares that are not held for trading are irrevocably designated at fair value through other comprehensive revenue and expense at initial recognition.
PBE IPSAS 41.101	After initial recognition, the shares are measured at their fair value, with gains and losses recognised in other comprehensive revenue and expense. These equity instruments are not subject to impairment assessments. When sold, the cumulative gain or loss previously recognised in other comprehensive revenue and expense is transferred within equity to general funds.
PBE IPSAS 29.48,64(b)	Previous accounting policies for other financial assets For the prior year, an allowance for credit losses for instruments exposed to credit risk was recognised only when there was objective evidence of impairment. Additionally, for unlisted shares: impairment losses were recognised in the surplus or deficit; and some unlisted shares were previously measured at cost; the cumulative gain or loss recognised in other comprehensive revenue and expense was transferred to the surplus or deficit on disposal of the investment.
PBE IPSAS 29.70,76,77	A significant or prolonged decline in the fair value of the investment below its cost was considered objective evidence of impairment. If impairment evidence existed, the cumulative loss recognised in other comprehensive revenue and expense was transferred from equity to the surplus or deficit.
	*Break down of investments and further information*
	*Equity investments*
PBE IPSAS 30.14A	Equity investments designated at fair value through other comprehensive revenue and expense comprise of:
		2021 $000	2020 $000
	Invest Tech Limited	204	150
	StartUp Hub Limited	200	66
	FutureFuel Limited	202	250
	Total equity investments	606	466
PBE IPSAS 30.14A(b)	The Institute has designated these equity investments at fair value through other comprehensive revenue and expense. This measurement basis is considered more appropriate than through surplus or deficit because the investments have been made for long-term strategic purposes rather than to generate a financial return through trading.
	*Loss allowance for term deposits, Government bonds, and loans to subsidiaries*
PBE IPSAS 30.42F	The Institute considers there has not been a significant increase in credit risk for investments in term deposits, Government bonds, and loans to subsidiaries because the issuer of the investment continues to have low credit risk at balance date. Term deposits are held with banks that have a long-term AA- investment external grade credit rating and the New Zealand Government has a credit rating of AA+, which indicates that these entities have a very strong capacity to meet their financial commitments. The balance of loans to subsidiaries is immaterial. No loss allowance for expected credit losses has been recognised because the estimated 12-month expected loss allowance for credit losses is trivial.

24A Financial instruments categories

PBE IPAS 30.11	Guidance – The financial instrument categories disclosure for the 2021 year have been updated for the new PBE IPSAS 41 financial instrument categories.
	The carrying amounts of financial assets and liabilities in each of the financial instrument categories are as follows:
		Institute		Group
		2021 $000	2020 $000	2021 $000	2020 $000
	Mandatorily measured at fair value through surplus or deficit – (2020: Held for trading)
PBE IPSAS 30.11(a)(ii)	Financial Assets:
	Derivative instruments	203	17	203	17
	Managed fund	0	0	8,320	8,919
	Total	203	17	8,523	8,936
	Financial liabilities:
	Derivative instruments	105	32	105	32
PBE IPSAS 30.11(f)	Financial assets measured at amortised cost (2020: Loans and receivables)
	Cash and cash equivalents	5,922	19,966	22,983	31,754
	Receivables	5,371	5,217	7,422	7,094
	Other financial assets:
	Term deposits	9,796	5,191	9,796	5,386
	Loans to subsidiaries	735	281	0	0
	Total	21,824	30,655	40,201	44,234
PBE IPSAS 30.11(h)	Financial assets measured at fair value through other comprehensive revenue and expense
	Other financial assets:
	New Zealand Government bonds	179	164	179	164
	Shares (designated)	606	466	606	466
	Total	785	630	785	630
PBE IPSAS 30.11(g)	Financial liabilities measured at amortised cost
	Payables	15,191	12,870	16,665	13,724
	Secured loans	16,252	0	16,252	0
	Total financial liabilities at amortised cost	31,443	12,870	32,917	13,724

24C Financial instrument risks

	Guidance – The credit risk exposure by credit rating disclosure has been updated to remove information about counterparties without credit ratings and to provide information about whether impairment is based on 12-month or lifetime expected credit losses.
PBE IPSAS 30.42M	Credit risk exposure by credit risk rating grades
	The gross carrying amount of financial assets, excluding receivables, by credit rating is provided below by reference to Standard and Poor’s credit ratings
		Institute		Group
		2021 $000	2020 $000	2021 $000	2020 $000
	Cash at bank and term deposits
	AA	10,217	16,352	21,306	24,141
	AA–	5,501	8,805	11,473	12,999
	Total cash at bank and term deposits	15,718	25,157	32,779	37,140

	Government bonds
	AAA	179	164	179	164

	Derivative financial instrument assets
	AA	203	17	203	17

	Managed fund (bonds)
	AAA–	0	0	936	1,026
	AA–	0	0	2,246	2,462
	A	0	0	562	615
	Total managed fund	0	0	3,744	4,103
	All instruments in this table have a loss allowance based on 12-month expected credit losses.

Adoption of PBE IPSAS 41 Financial Instruments

	Guidance – This note illustrates possible transition-related disclosures that would be made only in the first financial statements prepared using PBE IPSAS 41.
PBE IPSAS 3.33(a) PBE IPSAS 41.156	The Council and group have elected to early adopt PBE IPSAS 41 Financial Instruments.
PBE IPSAS 3.33(b)	In accordance with the transitional provisions of PBE IPSAS 41, the Institute has elected not to restate the information for previous years to comply with PBE IPSAS 41. The comparative information continues to be reported under PBE IPSAS 29. Adjustments arising from the adoption of PBE IPSAS 41 are recognised in opening equity at 1 January 2021.
PBE IPSAS 3.33(c)	Accounting policies have been updated to comply with PBE IPSAS 41. The main updates are: Note 7 Receivables: This policy has been updated to reflect that the impairment of short-term receivables is now determined by applying a lifetime expected credit loss model. Note 9 Investments: Term deposiment bonds, and loans to subsidiaries: This policy has been updated to explaits, Governn that a loss allowance for expected credit losses is recognised only if the estimated loss allowance is not trivial. Share investments: This policy has been updated to remove references to impairment losses, as PBE IPSAS 41 no longer requires identification of impairment for equity investments measured at fair value through other comprehensive revenue and expense. Also, on disposal, the accumulated gains/losses are no longer transferred to surplus/(deficit) but are transferred to general funds. On the date of initial application of PBE IPSAS 41, being 1 January 2021, the classification of financial instruments under PBE IPSAS 29 and PBE IPSAS 41 is as follows:
PBE IPSAS 30.49I	Institute
		Measurement category		Carrying amount
		Original PBE IPSAS 29 category	New PBE IPSAS 41 category	Closing balance 31 December 2020 (PBE IPSAS 29)	Adoption of PBE IPSAS 41 adjustment	Opening balance 1 January 2021 (PBE IPSAS 41)
				$000	$000	$000
	Cash at bank and on hand	Loans and receivables	Amortised cost	359	0	359
	Call deposits	Loans and receivables	Amortised cost	1,849	0	1,849
	Term deposits	Loans and receivables	Amortised cost	22,949	0	22,949
	Receivables	Loans and receivables	Amortised cost	5,217	(120)	5,097
	Derivative financial instruments	FVTSD	FVTSD – Mandatory	203	0	203
	New Zealand Government bonds	FVTOCRE	FVTOCRE	179	0	179
	Managed funds	FVTSD – Held for trading	FVTSD – Mandatory	0	0	0
	Shares	FVTOCRE	FVTOCRE – Designated	606	0	606
	Total financial assets			31,362	(120)	31,242

	FVTOCRE = Fair Value through Other Comprehensive Revenue and Expense. FVTSD = Fair Value through Surplus or Deficit. The measurement categories and carrying amounts for financial liabilities have not changed between the closing 31 December 2020 and opening 1 January 2021 dates as a result of the transition to PBE IPSAS 41.

	Group
		Measurement category		Carrying amount
		Original PBE IPSAS 29 category	New PBE IPSAS 41 category	Closing balance 31 December 2020 (PBE IPSAS 29)	Adoption of PBE IPSAS 41 adjustment	Opening balance 1 January 2021 (PBE IPSAS 41)
				$000	$000	$000
	Cash at bank and on hand	Loans and receivables	Amortised cost	4,057	0	4,057
	Call deposits	Loans and receivables	Amortised cost	1,849	0	1,849
	Term deposits	Loans and receivables	Amortised cost	33,786	0	33,786
	Receivables	Loans and receivables	Amortised cost	7,094	(120)	6,974
	Derivative financial instruments	FVTSD	FVTSD	203	0	203
	New Zealand Government bonds	FVTOCRE	FVTOCRE	179	0	179
	Managed funds	FVTSD – Held for trading	FVTSD – Mandatory	8,320	0	8,320
	Shares	FVTOCRE	FVTOCRE – Designated	606	0	606
	Total financial assets			56,094		55,974
	FVTOCRE = Fair Value through Other Comprehensive Revenue and Expenses. FVTSD = Fair Value Through Surplus or Deficit. The measurement categories and carrying amounts for financial liabilities have not changed between the closing 31 December 2020 and opening 1 January 2021 dates as a result of the transition to PBE IPSAS 41.