Statement of reasons

This notice, which comes into force on 16 September 2011 and expires on the close of 30 September 2016, exempts the directors of companies incorporated in Australia that are issuers for the purposes of the Financial Reporting Act 1993 (the Act) from various provisions of the Act. The notice relates to ongoing financial reporting requirements of those issuers. It does not affect the financial disclosure of the issuers in offer documents for offers of securities.

The exemptions allow the directors of exempt issuers to register consolidated financial statements for the group and summary information on the parent entity that comply with the preparation and audit requirements of Australia. The principal differences between financial statements that comply with the Act and the financial statements to be filed under this notice are—

• the exempt issuer will not need to prepare, have audited, and register full separate parent entity financial statements because this is no longer required under Australian law; and

• the consolidated financial statements of the exempt issuer, and the associated audit report, will comply with generally accepted accounting practice in Australia and Australian requirements for audit reports.

The Financial Markets Authority (FMA), after satisfying itself as to the matters set out in section 35A(2) of the Act, considers that it is appropriate to grant the exemptions because—

• changes made to financial reporting laws in Australia in June 2010 removed the requirement for consolidated financial statements to be accompanied by separate parent entity financial statements. Associated changes, however, require specified summary financial information about the parent entity to be provided in the note disclosures of the consolidated financial statements:

• the exemptions reduce regulatory compliance costs of Australian issuers that are reporting entities under the Financial Reporting Act 1993 by exempting them from the need to prepare, have audited, and register with the Registrar of Companies financial statements that comply with New Zealand generally accepted accounting practice, including full separate parent entity financial statements, that they are otherwise not required to prepare in Australia:

• FMA has had regard to the financial reporting and audit requirements that Australian issuers must comply with and considers that the financial reporting obligations under the laws of Australia, together with any additional information required under the conditions of the exemption, will provide New Zealand securities holders with adequate financial information about companies in which they invest. FMA also considers that Australia has adequate regulatory and enforcement mechanisms in this regard:

• FMA considers that full consolidated financial statements of a company supplemented with summary financial information on the parent entity will, in most cases, provide sufficient information to satisfy the information needs of an entity's investors. However, there may be some circumstances where additional material information on the parent entity needs to be disclosed for investors to understand the financial position, performance, and cash flows of the parent entity as those matters affect their investment. The conditions of this notice require directors of the exempt issuers to consider and disclose any such information:

• in the light of the Australian requirements, and the additional information that must be disclosed under the conditions of the notice if necessary to provide investors with all material information about the financial position, financial performance, and cash flows of the parent entity, FMA does not consider the exemption will cause significant detriment to New Zealand security holders of the exempt issuers. Further, the exemptions only apply to Australian issuers, and those issuers are still required to prepare, have audited, and publicly file financial statements in New Zealand but may do so on the basis of compliance with Australian laws and the additional information required by this notice. Accordingly, FMA is satisfied that the extent of the exemptions is not broader than is reasonably necessary to address the matters that gave rise to the exemptions.