The Securities Commission’s Latest Review
The Securities Commission (the Commission) released its cycle 10 report over the festive period as part of its financial reporting surveillance programme. The report is the result of a review performed on the annual reports of 20 issuers. The Commission found there has been a general improvement in the level of compliance. However, they expressed disappointment that they continue to raise issues that were raised in previous reports. Directors are reminded that the onus is on them to ensure that financial statements meet applicable standards and “in failing to do so directors could be failing in their duty to inform investors regarding their business activities”.
The Commission is urging companies to make transparency “a goal of their financial reporting not a mere technical compliance”. Focus was also directed to new standards such as NZIFRS 8: Operating segments which require companies to publish information consistent with that reported to their management to ensure that the market has the same perspective.
Summary of Common Problem Areas
Key points identified where issuers should look to improve their prepartion of future financial statements include:
- Financial instruments – The non disclosure of fair value assumptions, the expected maturity of financial instruments and estimates of the fair value of collateral held;
- Impairment of non-financial assets- The non disclosure and reasonability of assumptions underlying goodwill and intangibles impairment testing;
- Related party information Omissions from key management personnel compensation disclosures and the non disclosure of terms and conditions of related party transactions;
- Valuations of PP&E A lack of disclosure of the assumptions underlying such valuations;
Other expenses Issuers are not providing sufficient descriptions for significant amounts of their expenditure;
- Non audit services – Non disclosure of the nature of non audit services provided by auditors.
Other issues raised in brief include:
- Accounting for associates- Identification of associates and appropriate accounting treatment.Statement of compliance with IFRS An explicit statement to be disclosed as required by NZIAS 1.
To read the full review on the Securities Commission website click here:
To download a pdf of the Cycle 10 report click here:
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If you have any questions about the above and how it impacts your business, please contact your Hayes Knight Advisor