Revenue Minister Todd McClay has released an Inland Revenue tax policy officials’ paper seeking public feedback on the minimum financial reporting requirements that should apply for most companies.
The proposals in the paper will apply to most small and medium-sized companies, which have no more than $20 million in turnover or $60 million in assets. Under reforms set out in the current Financial Reporting Bill, these companies will no longer be required to prepare general-purpose financial statements.
Instead, the Government has said the companies will prepare simplified statements to a minimum requirement determined by IRD - the biggest user of financial statements.
"The officials’ issues paper, Minimum financial reporting requirements for companies, sets out proposals for special-purpose financial statements, based on everyday accounting principles," McClay said.
Minimum requirements suggested in the paper include:
- that statements be based on double-entry cost-based accrual accounting;
- that they have a balance sheet and profit and loss, together with supporting notes and a statement of accounting policies and changes;
- they include a schedule of certain related-party transactions; and
- if necessary, include a financial statements to taxable income reconciliation.
The paper suggests that the minimum reporting requirements would apply to relevant companies from April 1 next year, with the present general-purpose requirements to be "turned off" on the same date.
The major exception to these proposals for small and medium-sized companies would be the New Zealand subsidiaries of multi-nationals whose turnover exceeds $10 million or whose assets exceed $20 million.
As the Government recently announced, these companies will still be required to prepare general-purpose financial statements that will continue to be made public.
"It is important for companies likely to be affected to provide feedback on the suggested minimum reporting requirements. Compliance costs will be an important consideration in determining the final requirements," McClay said.
Submissions close on Friday, December 20.
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