In July, the Government introduced the Financial Reporting Bill which will repeal and replace the Financial Reporting Act 1993 and amend a number of other statutes which contain financial reporting obligations for various entities.
The introduction of the Bill is the latest stage in the review of New Zealand’s financial reporting framework which commenced in 2009. The aim of the review was to consolidate and confirm which classes of entity should be subject to general purpose financial reporting obligations and what those obligations should be for each class. The Cabinet policy decisions on the review (which form the basis of this Bill) were released last year. Click here for further background details.
A key focus of the Bill is to reduce the compliance burden on small to medium-sized companies. Changes are being introduced for these companies to remove the existing mandatory requirements to prepare general-purpose financial statements and annual reports.
The financial reporting requirements for issuers will be largely unchanged, but will be incorporated into the Financial Markets Conduct Bill under a Supplementary Order Paper (SOP) which was introduced with the Financial Reporting Bill.
We will provide a detailed overview of the impact of the Bill on New Zealand companies, overseas companies and issuers in a future client update.
There are also a number of notable changes introduced by the Bill for other reporting entities. These include:
Limited partnerships: the Bill removes the requirement on small and medium-sized limited partnerships to prepare general-purpose financial statements;
Partnerships: the Bill introduces requirements for large partnerships to prepare general-purpose financial statements. These must be audited by a qualified auditor in accordance with auditing and assurance standards (unless the partnership opts out); and
Charities: the Bill empowers the External Reporting Board to make financial reporting standards for registered charities and other not-for-profit entities that have reporting obligations.
We expect submissions will be called for on the Bill during the select committee stage, but the Bill is still awaiting its first reading. We will keep you updated with further developments.