Disclosure in financial reporting ‘satisfactory’

News release

1 April 2009

Commission finds disclosure in financial reporting ‘satisfactory’

The Securities Commission’s recent review of financial reports has found the overall quality of reporting to be ‘satisfactory’.

In the recently completed Cycle 8 of its Financial Surveillance Reporting Programme, the Commission reviewed reports of 40 issuers which included a mix of listed and unlisted entities. All of the reports were prepared under the New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS). The Commission was prompted to write to 35 issuers to seek clarification on a range of matters.

The main areas identified where disclosure needed improving were:
• valuation and fair values
• intangible assets
• impairment of assets
• financial instruments
• definition and classification of cash flows
• management judgements and estimates
• related party transactions and key management personnel compensation.

“The current market conditions make it even more important for issuers to inform investors about the health of their organisations,” Commission Chairman Jane Diplock says. “Financial report disclosures need to be refreshed each year to reflect issuers’ activities and the economic environment. Issuers should not only disclose the numbers but also explain their underlying rationale, including any judgements that management have exercised.”

Ms Diplock says the Commission recognises the challenges faced by issuers in applying the new financial reporting standards. “However, in complying with NZ IFRS, issuers must not overlook the importance of giving a complete and transparent picture of their business and its performance as this is vital to restoring and maintaining investor confidence.”

The Commission is pleased with the high percentage of matters that were settled with issuers.

The Commission will continue its surveillance programme to monitor and encourage better quality financial reporting in New Zealand.

Ends.

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