Under amendments to the Companies Act 1993 made by the Financial Reporting (Amendments to Other Enactments) Act 2013 which came into force on 1 April, the majority of New Zealand’s small to medium sized companies (SMEs) will no longer be required to prepare general purpose financial statements for reporting periods beginning on and after 1 April 2014.
In general, a statutory obligation to prepare general purpose financial statements will apply only to:
- large New Zealand companies with turnover over $30 million or assets over $60 million;
- New Zealand subsidiaries of multinationals with turnover over $10 million or assets over $20 million;
- companies which are ‘FMC reporting entities’ (as defined in the Financial Markets Conduct Act 2013);
- companies with ten or more shareholders (unless they opt out); and
- companies with fewer than ten shareholders who opt in.
The External Reporting Board (XRB) mandates the standards for general purpose financial statements. Further details on these new statutory obligations are available in our earlier client updates here.
A recent amendment to New Zealand’s tax legislation (see new section 21B of the Tax Administration Act 1994) requires all other companies (that is, those companies which are not subject to financial reporting requirements under another enactment) to prepare special purpose financial statements to applicable minimum requirements specified by the Inland Revenue Department for tax purposes. These minimum requirements are set out in the Tax Administration (Financial Statements) Order 2014which came into force on 1 April. They include requirements for:
- the form of the special purpose financial statements;
- the accounting principles with which the statements must comply;
- the valuation principles to be applied;
- a statement of accounting policies; and
- matters that the financial statements must show.
The Order exempts non-active companies from the minimum requirements as well as ‘micro’ companies (that is, companies that are not part of a group of companies and have not derived income in excess of $30,000, or incurred expenditure in excess of $30,000, during the income year).