Ask the Experts

PwC Partner Owen Gibson – April 2016

I understand financial reporting requirements for SMEs have changed. What are my company’s and family trust’s obligations now regarding year end accounts?

You and your shareholders no longer have to prepare financial statements to the satisfaction of New Zealand Generally Accepted Accounting Practice (NZ GAAP).

Now only “large businesses”, those with income of over $30 million or total assets of greater than $60m, have to apply NZ GAAP.

Family trusts haven’t been affected by the act’s amendments as first thought, but trustees still need to maintain proper accounting records, such as financial statements for beneficiaries and other interested parties. Overseas companies’ valuation thresholds set under the act became a neat third of “large” local companies’ total assets at $20m total assets and $10m for revenue. Multinationals beyond those parameters still have to comply with NZ GAAP.

While there are plenty of benefits for SMEs, there’s a but.

Stakeholders such as banks and shareholders may request higher degrees of financial reporting regardless of your company size.

Some smaller companies defined as SMEs, or those who are not trading and are temporarily inactive, are the only ones exempt from minimum requirements.

Knowing what category you fit into is the key here.

The opportunity for SMEs is to prepare ‘special purpose’ financial reports, which can provide additional insights into the business. Cloud accounting systems and add-ons help and can make information more up to date.

As published by Fairfax, April 2016.

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