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Sec Com issues final report into reporting

Friday 29th April 2011

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Issuers of financial reports need to keep up to date with developments in financial reporting, especially changes in financial instruments reporting, according to the Securities Commission.

The Commission released the findings of Cycle 14 of its Financial Reporting Surveillance Programme (FRSP), which examined 25 issuers' financial reports released between March 31, 2010 and July 31, 2010.

The Commission also said this was the last FRSP enabling it to comment on progress made since its inception in 2005.

The sample included reports from 14 NZX-listed companies, two from the unlisted trading platform and nine not listed on any exchange.

The entities reviewed included four non-bank deposit takers and five KiwiSaver schemes.

The Commission wrote to 17 of the 25 issuers raising 32 matters including inadequate disclosure of assumptions used in valuing investments, non-disclosure of fees paid to auditors, failure to provide separate financial statements for segregated funds within a scheme and goodwill impairment testing performed using inappropriate business units.

Of the matters raised, nine of the issues were resolved and 19 saw the issuer agree to changes.

The Commission said two issues were still under discussion with the relevant issuers, though "none have warranted enforcement action against an issuer or referrals to other regulators or disciplinary bodies."

Overall, the Commission said the FRSP process had provided invaluable information for the regulator as well as issuers, and that agreement was reached on 88% of matters raised with issuers, and follow-up reviews revealed 79% of issuers that agreed to make changes in subsequent reports did so.

The Commission said issues raised in recent reviews have tended to relate to new requirements rather than basic financial reporting or existing requirements.

"This indicates that most issuers have taken account of matters raised with them and are keen to improve the quality of their reporting."

The report said that general compliance with reporting standards has improved, though room for improvement remains and issuers need to be mindful of reporting standard changes.

"As well as being compliant, issuers need to keep refining financial reporting so that it is coherent, clear and concise in order to be transparent," the report said.

The full Securities Commission Financial Reporting Surveillance Programme  is on the Commissions website at: http://www.seccom.govt.nz/downloads/cycle14.pdf



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