In changes to NZ IAS 32 that will take effect on January 1 next year, distributions to holders of an equity instrument shall be recognised by the entity directly and not net of any income tax related benefit. The same change will apply to transaction costs of an equity transaction, which shall be accounted for as a deduction from equity.

The External Reporting Board has added a new paragraph 35A to the standard:

“Income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction shall be accounted for in accordance with NZ IAS 12 Income Taxes [Disclosure of Interests in Other Entities].”

Paragraph 39, which states that the transaction costs accounted for as a deduction from equity in the period is disclosed separately under in accordance with NZ IAS 1, will no longer include the sentence that states that the related amount of income taxes recognised directly in equity is included in the aggregate amount of current and deferred income tax credited or charged to equity that is disclosed under IAS 12 Income Taxes, which requires the disclosure of tax expense or income.

The amendments, part of the Annual Improvements to NZ IFRSs 2009 - 2011 Cycle came about as a result of the publication of the exposure draft of proposed amendments to IFRSs, published in June 2011. They are also reflected in NZ IFRIC [International Financial Reporting Interpretations Committee] 2 Members’ Shares in Co-operative Entities and Similar Instruments.