Chapter 2 – Proposed minimum financial reporting requirements

2.1 These are the proposed minimum financial reporting requirements for special-purpose financial statements for foreign trusts.

2.2 These minimum requirements are high-level and, while financial statements and accompanying schedules must be prepared to at least these minimum requirements, they may be prepared to a higher standard or even be general-purpose financial statements, so long as the required information is provided.

2.3 The minimum requirements proposed are:

Form of financial statements

a) The financial statements must consist of –

i. a balance sheet setting out the assets, liabilities and net assets of the foreign trust as at the end of the income year; and

ii. a profit and loss statement showing income derived, and expenditure incurred, by the foreign trust during the income year.

Principles with which statements must comply

b) The financial statements must be prepared applying the principles of accrual accounting.

Valuations

c) The financial statements may, however, disclose amounts using the following valuation principles:

i. tax values, when those values are consistent with double-entry and accrual accounting; and

ii. historical cost with impairment or depreciation as appropriate; and

iii. market values, when, in the preparer’s opinion, market values provide a better basis of valuation than those in subparagraphs (i) and (ii).

Statement of accounting policies

d) The financial statements must contain a statement of accounting policies setting out, in sufficient detail so that a user can understand the material policies that have been applied or changed:

i. the policies and assumptions that have been used in the preparation of the financial statements; and

ii. a description of the effect of any material changes in the accounting policies used since the financial statements prepared for the previous income year.

Matters that statements must show

e) The financial statements must show the matters prescribed.

f) The financial statements must disclose comparable figures for the previous income year where financial statements have been prepared for that previous year.

Reconciliations

g) A statement of the foreign trust’s New Zealand taxable income (if any) in NZD for the income year.

h) Reconciliations from opening to closing balance for all settlor and beneficiary accounts and of the corpus on a line by line basis.

Currency

i) The financial statements may be prepared in any currency that is appropriate having regard to the circumstances of the foreign trust and its settlors and beneficiaries.