New Zealand: Financial Reporting Act 2013 – big step up on dismal 1993 model

Brief Counsel
Last Updated: 3 December 2013
Article by Roger Wallis, Geof Shirtcliffe, John Holland, Tim Tubman and Adrien Hunter
Most Read Contributor in New Zealand, September 2016

The Financial Reporting Act 2013 will slash the cost of preparing general purpose financial statements for most small to medium-sized companies.

Other changes will impose stronger requirements on certain overseas 'multinationals' and extend reporting obligations of some financial market participants.

The new Act, which is expected to come into effect on 1 April 2014, replaces one of the clumsiest pieces of legislation in the corporate statute book.

This Brief Counsel highlights the more important features of the new regime. For fuller detail, see this summary table.

Predecessor Act a dog

The Financial Reporting Act 1993 was originally intended to apply only to public issuers but all companies were added at a very late stage before enactment without sufficient regard to the excessive compliance burden the Act's provisions would create for smaller, non-public issuers.

Although the Act was subsequently amended several times, the concessions were targeted to very small "exempt companies" and "non-active companies" and failed to provide any meaningful relief for small-to-medium-sized businesses.

The new Act comprehensively restates and rationalises the obligations applying to companies, overseas companies, limited partnerships, and other forms of business organisation.

Summary of key requirements

Companies generally

Some of the most significant improvements will apply to companies that are not involved in the financial markets.

Preparation of financial statements

The requirement to prepare general purpose financial statements is much more targeted, and will be limited to:

  • large companies1
  • large overseas companies and large subsidiaries of overseas companies that carry on business in New Zealand2
  • companies with 10 or more shareholders, unless the shareholders opt out by a 95% resolution, and
  • companies with fewer than 10 shareholders, where shareholders holding at least 5% of the voting shares opt in.


Audit requirements for general purpose financial statements have been limited to the same companies as above, but large companies can opt out by a 95% shareholder resolution.

Corporate groups

A company with subsidiaries needs only to prepare group financial statements, rather than the parent having also to prepare its own separate general purpose financial statements.


The obligation to register financial statements is limited to:

  • large overseas companies
  • large companies where, in broad terms, 25% or more of the shares are overseas owned.


The five month timeframe for preparing financial statements has been carried forward, but there is no longer an additional 20 working days for financial statements to be registered.

FMC reporting entities

The requirements for entities participating in the financial markets (referred to as "FMC reporting entities"3) have been tightened. Each FMC reporting entity must prepare financial statements (or group financial statements, if it has any subsidiaries) and those financial statements must be audited and registered.

The deadline for registration has been accelerated to four months after balance date (currently five months to prepare, plus 20 working days to register).

Consistent with the main focus of the Financial Markets Conduct Act 2013 (FMCA), the primary recourse for a failure in defective financial statements will be civil action against both the reporting entity and its directors under the general enforcement provisions set out in Part 8 of the FMCA. Pecuniary penalties can run as high as $1 million for the directors and $5 million for the entity.

Criminal liability will be limited to directors who knowingly prepare false and misleading financial statements, but will expose errant directors to criminal penalty of up to five years imprisonment and/or a fine of up to $500,000.

Accordingly, the spectacle of directors having to appear in District Court for a strict liability offence – as occurred with the Feltex directors – will no long apply to FMC reporting entities. However, it will continue to apply for those entities that are required to prepare financial statements outside the FMCA.

Overseas companies

At a late stage of the Parliamentary process, the Government decided to cut by two thirds the "large" threshold for "overseas companies" and subsidiaries of "overseas companies" (generally, a body corporate incorporated outside New Zealand).

The Cabinet papers explain that this decision was made to respond to:

  • concerns "about high profile multinational companies that are paying almost no tax anywhere in the world by treaty shopping and transferring profits to low-tax jurisdictions", and
  • a G20 approved OECD action plan on "base erosion and profit shifting".

The concern was that, if the Bill had proceeded in the manner originally proposed, it would be too late to dial-back the relaxed obligations on overseas companies because of the implications under international treaties.

The additional compliance costs have been estimated at somewhere between $2 million (100 companies at $20,000 an audit) and $12 million (300 companies at $40,000 an audit) of the approximately 6,000 overseas companies currently subject to reporting obligations. Officials have conceded that it might have been possible to reduce some of these additional costs, but that time constraints prevented them from being able to properly consider the matter.

However, relief may still be available as there is a mechanism in the new Act for overseas companies to seek an exemption where they can establish an appropriate rationale, including where financial statements prepared under their local laws effectively satisfy the New Zealand requirements.

Tax compliance

Although the new Act removes the requirement for many "small" companies to prepare general purpose financial statements, the Tax Administration Act 1994 is being amended to empower the IRD to specify requirements for "small" companies to prepare more limited special purpose financial statements for taxation purposes, with other business organisations to be consulted on next year.

IRD has recently released a discussion paper outlining the key requirements, in conjunction with its existing simple filing form for companies IR10. Submissions are due by 20 December.

Chapman Tripp comments

The 2013 Act is a vast improvement on the 1993 Act and, in combination with the greatly simplified regime for income tax, is expected to result in significant cost savings for small and medium sized enterprises, as long as they do not seek funding from the financial markets.

Strangely, the Government has deferred application of the new Act to the accounting period beginning on or after 1 April 2014. For example, for entities with a 31 March balance date, this will delay the benefits of the new regime to the financial reporting year ending 31 March 2015. For 30 June balance date entities, the full benefit of the reforms will not be available until 30 June 2015.

New provisions being inserted into the FMCA will extend the regime's application to persons required to obtain a licence under Part 6 of the FMCA. At present, some of these market participants do not need to publicly file their audited financial statements or, in some cases, obtain an audit at all.

Consideration on whether large trusts (which are not charities) will need to prepare or have audited financial statements has been deferred but may be addressed in the context of the Law Commission's work on trust law reform.

But large partnerships and some other forms of business organisation which were exempt will now be required to prepare financial statements. Chapman Tripp which - as a large partnership - will be affected by this change, welcomes it.


1A company is 'large' if it and its subsidiaries had either total assets of more than $60m at the two most recent balance dates or total revenue exceeding $30 million.

2An overseas company or subsidiary of an overseas company is 'large' if it and its subsidiaries had either total assets of more than $20 million at the two most recent balance dates or total revenue exceeding $10 million.

3Broadly, entities regulated under the FMCA, including Issuers of regulated financial products, persons holding a licence under Part 6 of the FMCA, licensed supervisors, listed issuers, operators of licenced markets, registered banks and various other entities.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Roger Wallis
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.