Cycle 7 of Financial Reporting Surveillance

News release
6 August 2008

Cycle 7 of Financial Reporting Surveillance Programme released

The Securities Commission has released Cycle 7 of its Financial Reporting Surveillance Programme.

With the completion of this cycle all New Zealand Exchange listed issuers, other than some dual or overseas listed entities, have been reviewed at least once.

Cycle 7 reviewed the financial statements of 44 issuers with balance dates from 31 December 2006 to 30 September 2007. The Commission had cause to write to only 17 of those issuers and agreement was reached on most matters raised.

The main issues identified are similar to those in previous cycles, in particular, related party disclosures, financial instruments and certain essential disclosures. The Commission also raised matters relating to disclosures of substantial security holder information and directors’ interests and share dealings.

“The programme encourages issuers to improve the quality of their financial reports and in that way contributes to the integrity of New Zealand's securities markets,” Commission Chief Accountant Alastair Boult says.

The Commission considers that the general quality of financial reporting in New Zealand is good. It is satisfied with the level of agreement reached with issuers over the last seven cycles and is pleased with the co-operation it has received from both issuers and auditors. Issuers showed a willingness to explain their accounting treatment and a commitment to make the necessary changes.

“We believe it is important that NZ IFRS is rigorously applied by issuers because this is integral to New Zealand having a fair, efficient and transparent securities market,” Mr Boult says.

The Commission urges issuers, during this early stage of NZ IFRS adoption, to further improve the quality of their financial reporting. This includes making transparent disclosures, ensuring that the ‘basics’ of NZ IFRS are also complied with, avoiding ‘boiler plate’ accounting policies and notes and ensuring that any ‘common industry practice’ also complies with New Zealand Generally Accepted Accounting Practice (NZ GAAP). If disclosures beg a further question, the Commission considers that transparency has not been achieved.

Listed issuers will again be selected for review when a new round of the surveillance programme commences with the next cycle.

The Review of Financial Reporting by Issuers Cycle 7 is available on www.seccom.govt.nz

ENDS

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