Update on Changes to Financial Reporting
You may have heard about changes to the financial reporting legislation. In the short term, many people are finding it a bit hard to work out how or whether the changes affect them.
The requirements are changing for some businesses that used to have to file financial statements based on the New Zealand version of International Financial Reporting Standards (NZ IFRS). For example, your requirements have changed if your business:
- has less than $30m in turnover or less than $60m in assets, or
- is a subsidiary of a multi-national company and your annual revenue is $10m or less, your assets $20m or less
Inland Revenue has said businesses like this won’t have to file financial statements based on NZ IFRS but do have to prepare financial accounts to the standard of IRD’s minimum reporting requirements. You may see some changes to the way your financial statements are presented while we transition to the new regime.
Your bank, of course, will still be interested in seeing financial statements, as will any investors. And business owners, boards, and shareholders will still need enough information to have a good grasp of how the business is progressing against key financial targets
Talk to us about how the financial reporting changes affect you.
Options for financial reporting for companies
The changes to financial reporting have had a knock-on effect, driving changes to report requirements for companies from accounting periods
beginning on or after 1 April 2014. Some companies have options about which financial reporting regime they fall under or about whether or not they will have an audit. But, if you want to exercise your options, it’s important to have the paperwork straight within the timeframe allowed.
Companies with 10 or more shareholders default to audited NZ IFRS, but are in a position to opt-out of the NZ IFRS regime and/or the audit if at least a 95% majority of the shareholder's vote to do so and pass the required company resolution.
Most large companies may opt out of an audit with a similar 95% resolution. ‘Large’ companies must prepare financial statements based on NZ IFRS in any case. This is what happens already, but the definition of ‘large’ has changed. Call us to find out whether your company will be ‘large’ if (including subsidiaries) your sales or assets will exceed $10 million
Companies that don’t qualify as ‘large’ under the legislation, and that have fewer than 10 shareholders don’t have to comply with NZ IFRS or have an audit. However, they may opt in to the regime if shareholders of the company holding at least 5% of the voting shares require the company to comply.
Getting the timing right
Company resolutions are required, whether opting in or opting out. The resolutions to opt-in or opt out must be passed well before the accounts are prepared. The date of the choice is critical. In many cases it will be the date of the company’s annual meeting, but in some circumstances, it can be earlier.
The rules for counting shareholders are tricky, too, so if you think you may be affected by the new laws call us today.