Executive Summary
This discussion document forms a part of the Ministry of Economic Development's fundamental review of the Financial Reporting Act 1993 and deals specifically with the question of "who is required to report?"
The discussion document briefly canvasses the reasons for this review, in particular the move towards International Financial Reporting Standards. As part of the background and as an aid to developing the issues covered by this document, a brief outline of the rationales behind imposing financial reporting standards and the use of financial reports is provided.
The discussion of the financial reporting framework is split into four main areas. First, there is a discussion of reporting entities. This considers which entities should be required to comply with the financial reporting requirements, and possible exemptions or relief from the full requirements where imposing such requirements are not justified. An outline of comparative international jurisdictions is provided. As a basis for discussion, the proposal made by the Accounting Standards Review Board is provided. This proposal would result in a three-tier reporting framework, with a top tier of issuers, certain Crown agencies and departments, and large entities with "reporting responsibilities." Smaller entities with reporting responsibilities, large entities without reporting responsibilities, and certain other entities would form the second tier, with reduced reporting requirements, while the smallest entities would fall in the third tier and be largely without formal reporting responsibilities.
Secondly, the discussion document canvasses the requirements for audit and filing of financial reports on a similar basis to reporting requirements, with an outline of comparative international jurisdictions and a cost-benefit analysis.
Thirdly, the discussion document considers entity neutrality and the possibility of having one set of financial reporting standards with universal application to all types of entity.
Finally, the discussion document considers sector neutrality and the applicability of financial reporting standards outside the profit-seeking corporate sphere to governmental agencies and other "public benefit" entities. This includes a summary of New Zealand's current position and possible alternatives for moving forward.
As a point of general application, this document reflects New Zealand's particularly close economic relationship with Australia and the desire to reduce trans-Tasman impediments to business. This is especially applicable in the context of a discussion related to international standards, where the overarching desire is to promote international comparability generally.
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