Financial reporting burden relaxed for small and medium companies with revenues of NZ$2 mn-NZ$30 mn
A bill allowing shareholders of small and medium companies to decide whether the firm must prepare financial statements has passed its third reading in the New Zealand parliament.
The Financial Reporting Bill removes the complex and costly reporting requirements for smaller firms, as well as clarifying reporting requirements for charities, says the government.
‘Passing the bill is part of the government’s business growth agenda to improve capital markets and reduce compliance costs,’ explains Craig Foss, commerce minister, in a press statement. ‘The changes will remove some expensive reporting obligations and can reduce compliance costs for many companies with revenues of NZ$2 mn-NZ$30 mn ($1.6 mn-$24.6 mn) a year.’
Companies with an annual revenue of more than NZ$30 mn, or assets of NZ$60 mn or more, which are not classed as smaller but do not meet the definition of ‘large’, will be able to prepare a special purpose financial report (SPFR) rather than a general purpose financial report. While details are yet to be released on SPFR requirements, ‘there will be a reduction in the number of disclosures [small and medium-sized companies] will need to make,’ says the New Zealand government.
The default requirement for small and medium companies with at least 10 shareholders will be to continue preparing general purpose financial reports, adds the government. These companies can opt out of these reporting obligations, however, if 95 percent of voting shares support the motion.
Equally, small and medium companies with fewer than 10 shareholders will have to prepare the lengthier general purpose statements only if shareholders representing at least 5 percent of voting shares require it. ‘With the financial reporting burden lifted, smaller companies will be able to focus their time and energy on growing their businesses, innovating and creating jobs,’ says Foss.