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Financial Reporting Bill

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Hon Craig Foss

Financial Reporting Bill

Government Bill

42—2

As reported from the Commerce Committee

Contents

Part 1
Preliminary provisions

4 Overview of financial reporting duties

5 Interpretation

6 Meaning of financial statements

7 Meaning of group financial statements

8 Meaning of generally accepted accounting practice

9 Act binds the Crown

Part 2
External Reporting Board, standards, and provisions that apply to other enactments

Subpart 1 —External Reporting Board

10 Continuation of External Reporting Board

11 Functions of Board

12 Board must act independently

13 Membership of Board

Subpart 2 —Financial reporting standards and auditing and assurance standards

Financial reporting standards

14 Financial reporting standards

15 Prospective, summary, or interim financial information

16 Financial reporting standards may cover non-financial reporting

17 Non-GAAP standards

18 Financial reporting standards may classify entity as subsidiary

Auditing and assurance standards

19 Auditing and assurance standards

Provisions relating to making of and status of standards and authoritative notices

20 Interpretation in sections 21 to 25

21 Consultation

22 Disclosure required to comply with standards does not breach privacy principles

23 Public notice

24 Disallowance of instruments by House of Representatives

25 Certificates of Board

Miscellaneous matters relating to application

26 When standards and authoritative notices take effect

27 Accounting period to which standards and authoritative notices apply

Tiers of financial reporting

28 Tiers of financial reporting for different classes of reporting entities

29 Board must implement strategy for tiers of financial reporting

30 Minister may approve variation or replacement of strategy

31 Process for preparing proposals to vary or replace strategy

32 Consultation on proposals

Subpart 3 —Standard provisions relating to auditor qualifications and access to information

33 Purpose and application

Auditor qualifications

34 Meaning of qualified auditor

35 Qualifications of auditor

36 Appointment of partnership

Auditor access to information

37 Specified entity must give auditor access to information

38 Auditor may require information and explanations from director or employee

Subpart 4 —Standard provisions relating to balance dates

39 Purpose and application

40 Meaning of balance date

41 Entity must have balance date in each calendar year

42 Approval of Commissioner of Inland Revenue and other provisions relating to change of balance date

Subpart 5 —Meaning of large and specified not-for-profit entity

~~44 Meaning of large~~

44 Meaning of large

45 Meaning of specified not-for-profit entity

~~46 Financial reporting standards must be complied with~~

46 Financial reporting standards must be complied with

47 Minister must regularly review amounts to take into account inflation

48 Order may amend amounts

Part 3
Miscellaneous provisions

Subpart 1 —Regulations and levies

51 Levy regulations

52 Payment of levies

Subpart 2 —Repeal, revocations, and amendments to other Acts

53 Repeal and revocations

54 Amendments to other Acts

55 Consequential amendments to other Acts

56 Transitional provision in relation to amendments

Subpart 3 —Transitional provisions

57 Financial Reporting Act 1993 continues to apply to issuers

58 Financial reporting standards and auditing and assurance standards continue in effect

59 External Reporting Board may exercise power before commencement

60 Approvals for auditors continue in effect

Part 4
Amendments to other Acts

Subpart 1 —Amendments to Building Societies Act 1965

61 Principal Act

62 Section 2 amended (Interpretation)

63 Sections 90 to 94 and cross-heading above section 90 replaced

Accounting records and financial reporting

90 Accounting records must be kept

91 Financial statements must be prepared

92 Half-yearly financial statements must be prepared

64 Sections 95 to 97B replaced

95 Directors' report

96 Distribution of copies of financial statements and reports

97 Depositors and members entitled to be supplied with copy of financial statements

97A Offences relating to half-yearly financial statements, directors' report, and distribution of financial statements

65 Section 98 amended (Appointment of auditors)

66 Section 100 replaced (Disqualifications for appointment as auditor)

100 Qualifications of auditors and access to information

67 Section 101 amended (Auditors' report, right of access to books, and right to attend meetings)

68 Section 102 repealed (Accounts of groups in terminating society)

69 Section 106 amended (Auditors' report on annual return)

70 Section 121B amended (Registration of documents)

71 Section 130 amended (Form in which records may be kept)

72 Section 137 amended (Regulations)

73 Consequential amendments to Building Societies Regulations 1989

74 Transitional provision

Subpart 2 —Amendments to Charities Act 2005

75 Principal Act

76 Section 41 amended (Duty to prepare annual return)

77 New sections 42A and 42B inserted

42A Content of financial statements

42B Offence to knowingly fail to comply with standards

77A Section 46 amended (Board or chief executive may treat parent entity and 1 or more other entities as forming part of single entity on certain terms and conditions)

78 Transitional provision

Subpart 3 —Amendments to Companies Act 1993

79 Principal Act

80 Section 2 amended (Interpretation)

81 Section 4 amended (Meaning of solvency test)

82 Section 80 amended (Financial assistance not exceeding 5% of shareholders' funds)

83 Section 120 amended (Annual meeting of shareholders)

84 Section 122 amended (Resolution in lieu of meeting)

85 Section 189 amended (Company records)

86 Part 11 replaced

Part 11
Accounting records and financial reporting

Subpart 1 —Accounting records

194 Accounting records must be kept

195 Place accounting records to be kept

Subpart 2 —Financial reporting

197 Non-application of subpart if alternative financial reporting duties under financial markets legislation

198 Interpretation

199 Determining number of shareholders

Preparation of financial statements

200 Application of preparation provisions

201 Financial statements must be prepared

202 Group financial statements must be prepared

203 Recognition of financial reporting requirements of overseas countries

204 Financial statements for overseas company must include financial statements for large New Zealand business

205 Balance date of subsidiaries

Audit of financial statements

206 Application of audit requirement

207 Financial statements must be audited

207A Audit must be carried out in accordance with auditing and assurance standards

207B Auditor must report to shareholders

207C Auditor's report must be sent to Registrar and External Reporting Board if requirements have not been complied with

Registration of financial statements of overseas companies and other companies with significant overseas ownership

207D Application of registration provisions

207E Financial statements must be registered

Shareholders may request copy of financial statements prepared for tax purposes

207EA Shareholders may request copy of financial statements prepared for tax purposes

Financial reporting offences

207F Financial reporting offences

Provisions relating to opting out and opting in

207G Period during which company may opt in or opt out

207H Companies with 10 or more shareholders may opt out

207I Large companies may opt out of audit requirement

207J Companies with fewer than 10 shareholders may opt in

Registrar may grant exemptions to overseas companies

207JA Registrar may grant exemptions to overseas companies

207JB Publication and status of exemptions

207JC Consultation

207JD Exemption may apply to accounting period before exemption is granted

Subpart 3 —Miscellaneous auditing provisions

207K Auditor must be appointed if financial statements must be audited

207L Registrar may appoint auditor

207M Resignation and casual vacancy

207N Auditors' fees and expenses

207O Automatic reappointment

207P Replacement of auditor

207Q Auditor not seeking reappointment or resigning

207R Auditor's attendance at shareholders' meeting

Subpart 4 —Infringement offence for failing to register financial statements

207S Interpretation in this subpart

207T Infringement offences

207U Infringement notices

207V Procedural requirements for infringement notices

207W Payment of infringement fee

87 Section 208 replaced (Obligation to prepare annual report)

208 Obligation to prepare annual report

88 Section 209 amended (Obligation to make annual report available to shareholders)

89 Section 209A amended (Board must send copy of annual report or concise annual report on request)

90 Section 211 amended (Contents of annual report)

91 Section 211A repealed (Obligations to prepare and make available annual reports or financial statements do not apply to non-active companies)

92 Section 212 amended (Shareholders may elect not to receive documents)

93 Section 300 amended (Liability if proper accounting records not kept)

94 New section 340A inserted (Financial reporting requirements for large overseas companies)

340A Financial reporting requirements for large overseas companies

95 Section 373 amended (Penalty for failure to comply with Act)

96 Section 374 amended (Penalties that may be imposed on directors in cases of failure by board or company to comply with Act)

97 Section 386F amended (Exception in relation to non-dormant phoenix company known by pre-liquidation name of failed company for at least 12 months before liquidation)

98 Schedule 4 amended

99 Transitional provision

Subpart 4 —Amendments to Friendly Societies and Credit Unions Act 1982

100 Principal Act

101 Section 2 amended (Interpretation)

102 Section 9 amended (Registrar may publish statements, etc)

103 Section 41 repealed (Inspection of books and accounts of society)

104 Cross-heading above section 59 replaced

105 Section 59 amended (Financial year)

106 Sections 60 to 64 replaced

107 Section 65 amended (Reappointment and removal of auditors)

108 Section 68 repealed (Auditors' report)

109 Section 69 amended (Auditors' rights of access)

110 Section 70 amended (Annual return)

111 Section 72 replaced (Annual return to be supplied to members)

72 Annual return to be supplied to members

112 Section 73 replaced (Accounts and statement of financial position to be available)

73 Financial statements must be available

~~113 Section 110 amended (Credit union may make loans to members)~~

114 Cross-heading above section 119 replaced

~~115 Section 119 amended (Credit union to maintain general reserves)~~

116 Section 120 amended (Financial year of credit union)

117 Sections 121 to 125 replaced

121 Accounting records must be kept

122 Financial statements must be prepared

123 Obligation to appoint auditors

124 General matters relating to auditors

118 Section 127 amended (Annual return)

119 Section 129 replaced (Annual return to be supplied to members)

129 Annual return to be supplied to members

120 Section 131 repealed (Inspection of books and accounts of credit union)

121 Section 132 replaced (Accounts and statement of financial position to be available)

132 Financial statements must be available

122 Schedule 2 amended

123 Schedule 3 amended

124 Transitional provision for registered societies and branches

125 Transitional provision for credit unions

Subpart 5 —Amendments to Gambling Act 2003

126 Principal Act

127 Section 107 amended (Corporate society must provide annual report to Secretary)

128 Section 108 replaced (Contents of annual report)

108 Contents of annual report

108A Audit must be carried out in accordance with auditing and assurance standards

108B Clubs that operate gambling equipment at non-commercial class 4 venues must make financial statements available to members

108C Other corporate societies must make financial statements available on Internet

129 Transitional provision

Subpart 6 —Amendments to Income Tax Act 2007

130 Principal Act

131 Section EX 21C amended (Applicable accounting standards for section EX 21E)

132 Section EX 21E amended (Non-attributing active CFC: test based on accounting standard)

133 New section EZ 32F (Applicable accounting standard for section EX 21E: former generally accepted accounting practice without IFRS)

EZ 32F Applicable accounting standard for section EX 21E: former generally accepted accounting practice without IFRS

134 Section FE 36B amended (Identifying members of New Zealand banking group: Crown-owned, no interest apportionment)

135 Section YA 1 amended (Definitions)

Subpart 7 —Amendments to Industrial and Provident Societies Act 1908

136 Principal Act

137 Section 8 amended (Duties and obligations of societies)

138 New sections 8A to 8M inserted

139 Section 16 amended (Penalties)

140 Section 19 amended (Appointment of auditors)

141 Transitional provision

Subpart 8 —Amendments to Limited Partnerships Act 2008

142 Principal Act

143 Section 10 amended (Contents of partnership agreement)

144 Section 74 amended (Records of limited partnership)

145 Section 75 replaced (Obligation to prepare financial statements)

146 Transitional provision

Subpart 9 —Amendments to Partnership Act 1908

147 Principal Act

148 New sections 34A to 34G and cross-heading inserted

149 Transitional provision

Subpart 10 —Amendments to Retirement Villages Act 2003

150 Principal Act

151 Section 5 amended (Interpretation)

152 Section 13 amended (Annual return)

153 New sections 35AA to 35F inserted

154 Section 97 amended (Registrar's powers of inspection)

155 Transitional provisions

Subpart 11 —Amendments to Te Ture Whenua Maori Act 1993

156 Principal Act

157 Section 4 amended (Interpretation)

158 Section 276 replaced (Accounts and statement of financial position)

276 Accounting records to be kept

276A Financial statements must be prepared

276B Financial statements must be filed

159 Section 277 amended (Appointment and duties of auditor)

160 Section 281 amended (Power of court to require officers to attend to explain non-compliance with statutory requirements)

161 Section 282 (Winding up of incorporation)

162 Transitional provision

Schedule 1
Amendments to other Acts

Schedule 2
Consequential amendments

Legislative history

The Parliament of New Zealand enacts as follows: