New financial reporting requirements for companies: do you need to comply?

The new Financial Reporting Act 2013 and Financial Reporting (Amendments to Other Enactments) Act 2013 have changed the financial reporting and auditing requirements for companies. The effect that the new Acts will have on your company depends largely on the size of your company.

Under the new regime, most small and medium-sized businesses will not have to follow XRB accounting standards (also known as Generally Accepted Accounting Practice (“GAAP”).

In summary:

• Large companies (with over $60 million total assets or $30 million revenue) will need to:
• Prepare general purpose financial statements to an applicable reporting standard;
• Have their financial statements audited unless 95% of their shareholders resolve otherwise;
• If they are 25% or more overseas owned, file their financial statements with the Companies Office; and
• Prepare annual reports to be provided to their shareholders before their annual meetings.
• Large overseas companies (with over $20 million total assets or $10 million revenue) will need to file financial statements (prepared to an applicable standard) with the Companies Office and have these audited, unless the Registrar grants them an exemption.
• Any company with 10 or more shareholders will need to prepare financial statements (to an applicable standard) and have these audited and prepare annual reports, unless 95% of their shareholders resolve otherwise.
• Non-large companies (as defined in the legislation) with fewer than 10 shareholders will not need to prepare financial statements and annual reports – unless 95% of their shareholders resolve that they will do so.

Companies with subsidiaries can prepare ‘group’ financial statements. The above requirements do not apply to entities participating in financial markets, which have separate obligations.

Will small businesses still have to prepare accounts?

Small-to-medium businesses will still need to produce accounts for governance purposes, for the IRD and for the bank.

IRD still requires most small-to-medium businesses to prepare special purpose financial reports to minimum requirements set by it. This includes subsidiaries of New Zealand companies that prepare general purpose ‘group’ financial statements.

So when does this come into effect?

Most businesses will not be directly affected by the new regime for another year. The new legislation will only apply to accounting periods beginning on or after 1 April 2014.  For example, for entities with a 31 March balance date, the new legislation will apply to their financial year ending 31 March 2015.