(Clauses 109 to 111)
Summary of proposed amendments
As part of the rewrite of the Financial Reporting Act it is proposed that small and medium-sized companies that are not public issuers of securities, such as bonds or shares, should not have to prepare general purpose financial statements.
However, as part of this rewrite, the Government has agreed that companies should have to continue to prepare financial statements, albeit to a lower special purpose standard. Further, Inland Revenue, as the biggest user in New Zealand of financial reports, should proscribe minimum reporting requirements. This will help ensure consistency in the Department’s requests.
The objective is for the new rules to apply for the tax year commencing 1 April 2014 or equivalent. However, the application date is activated by the effective date of the repeal of the present financial reporting requirements under the Financial Reporting Act.
Subsection 17(2), which currently requires companies to produce a form of financial statements, is being consequentially repealed.
New sections 21B and 21C will require companies to prepare financial statements, and will allow, by way of Order in Council, for the setting of requirements for:
- who shall prepare financial statements (other than companies who must prepare financial statements); and
- what the minimum requirements are for the financial statements for both companies and any other classes of taxpayers.
An explicit consultation requirement will be imposed before the Orders in Council can be approved.
Consequentially section 22, which deals with the keeping of business and other records is being amended.
While nothing has been finalised, the intention is that the financial statements will be simple and based on double entry and accrual concepts, using where possible tax-related figures. Certain notes are likely to be required, including a statement of accounting policies, disclosure of related-party transactions and where necessary, a book-to-tax reconciliation. All of this detail will be subject to full consultation later this year.