The Minister of Commerce has announced proposals that will see SMEs enjoy drastically simplified financial reporting, a move expected to cut business compliance costs by $NZ90 million a year...
Minister Simon Power today confirmed that non-issuer companies that do not meet the definition of large – that is annual revenue of more than $30 million or assets of more than $60 million – will no longer be required to prepare general purpose financial reports, and will be asked to prepare targeted reports for tax purposes instead.
The changes will reduce the number of companies required to prepare general purpose financial reporting from 460,000 to less than 10,000, and is expected to cut business compliance costs by $90 million a year.
“The new framework will promote accountability of senior management and ensure people with an interest in the economic performance of a company can have confidence in the information they receive,” Mr Power said.
The reform follows a review of the financial reporting framework which found that the current situation was overly costly and not meeting users’ needs or expectations.
The New Zealand Institute of Chartered Accountants will work with Inland Revenue in the development of the revisions, with the reform being welcomed by the Institute’s chief executive Terry McLaughlin.
“The decision reflects New Zealand’s unique business landscape; it makes sense for smaller businesses to be exempt from preparing general purpose financial reports,” says Mr McLaughlin.
“What will be important now is to find the balance between cutting unnecessary bureaucracy and having the right tools for solid financial management and assessment of business health”.
“For example, businesses will still generate financial reports for tax purposes, if they have shareholders with vested interests or if they need to prepare financial reports for major creditors such as banks or lenders,” says Mr McLaughlin.
The minister also said the government intends to introduce a Financial Reporting Amendment Bill to Parliament next year.
