Update on the review of the Financial Reporting Act

As reported in the Winter 2004 issue of Financial Services Quarterly, a discussion document was released to establish who should be subject to financial reporting requirements. Submissions on the first discussion document are now closed, with feedback on the proposed three tier structure generally positive. However, concerns were raised over the costs outweighing the benefits in tier two.

Click here to link to a Ministry of Economic Development structure diagram setting out the proposed financial reporting framework.

Ministry of Economic Development officials are now looking at the applicability of tier two and certain other aspects of the proposal, including the appropriateness of separate reporting regimes for the private and non-profit sectors.

Commerce Minister Margaret Wilson has announced that a revised proposal will be set out in a second discussion document planned for release later this year. Following release of that discussion document, a Bill is expected to be introduced into the House by the middle of next year.

Ms Wilson has stated that this will not affect those entities seeking to adopt International Financial Reporting Standards (IFRS) from 2005, noting that the current framework is sufficiently flexible to enable early adoption. Ms Wilson has also indicated that there will be a suitable transition period and that some entities will not be required to produce reports until 2009.

Early adopters for global financial reporting standards

Gareth Vaughan, The Independent, 11 August 2004

This article is one of the first of what commentators expect to become a deluge as the adoption date for International Financial Reporting Standards (IFRS) draws near. The article reports Telecom’s intention to adopt IFRS starting with its 2005-2006 financial year, noting that it will stop amortising goodwill, leading to a prima facie increase in its reported earnings.

Sue Newberry, a senior lecturer in financial accounting at Canterbury University, has suggested that the conversion to IFRS will provide “a convenient black hole for some arrangements, especially where there are multiple subsidiaries, joint ventures and associate companies”. Ms Newberry expects any company, “especially one like Telecom that is quite aggressive with its business arrangements and financial reporting practices” to take advantage of the opportunity.

Enquiries and information

For more information on any of the cases, articles and features in Financial Services Quarterly, please email Rachel Gowing or call on 64 9 916 8825.