FAQs

 

Click on any of the topics below to find answers about financial reporting. If you don’t find the answers you are looking for, please contact us.

 

Topics

 

General

Do I have to comply?

How do I determine if I am an FMC reporting entity?

The concept of 'FMC reporting entity' is broader than 'issuer' under the Financial Reporting Act 1993, but doesn't include all financial market participants. 'FMC reporting entity' is defined in section 451 of the FMC Act. You can find an overview of who is an FMC reporting entity on our 'Who needs to comply?' page.

What has changed from the requirements in the Financial Reporting Act 1993?

Please see our 'What's changing' page.

When will I have to comply with the new requirements?

Entities will become FMC reporting entities at different times. Most FMC reporting entities will not prepare financial statements under the FMC Act for any full accounting period ending in 2014. But many will, for balance dates from 31 March 2015 onwards. The main transitional provisions are in sections 55 to 57 of the Financial Reporting Act 2013 and part 2 of Schedule 4 of the FMC Act. For more guidance see 'When will you need to comply?'.

How do the financial reporting requirements for FMC reporting entities relate to the reporting requirements in other Acts?

If you are required to produce financial statements under the FMC Act, then these requirements will take precedence over any other New Zealand law. For example the Companies Act specifically notes that the financial reporting requirements in the Companies Act do not apply where the company needs to comply with the FMC Act's requirements.

What is 'higher public accountability' and how does it affect me?

All FMC reporting entities have a designated level of public accountability. This influences which tier of the External Reporting Board Accounting Standards Framework you are in and whether you will have to use full accounting standards (eg, NZ IFRS) or reduced disclosure accounting standards (eg, NZ RDR) when preparing your financial statements.

The FMC Act identifies entities deemed to have ‘higher public accountability’- all other entities therefore have lower public accountability. These are default designations - under the FMC Act we can vary designations for either individual FMC reporting entities, or classes of FMC reporting entities. Our exemptions page includes a summary of the designations by class of reporting entity.

FMA has issued a notice to re-designate recipients of funds from conduit issuers and licensed derivative issuers as those having higher public accountability. This notice is available here

Can I prepare my financial statements using the disclosure concessions of the reduced disclosure regime (RDR)?

Most FMC reporting entities with lower public accountability can report using a reduced disclosure regime (e.g. NZ IFRS RDR or PBE Standards with disclosure concession). Entities with higher public accountability must comply with full NZ IFRS or PBE accounting standards.

Can I apply the differential reporting framework?

No. The differential reporting framework cannot be used by FMC Act reporting entities. Differential reporting has been replaced by the reduced disclosure regimes of the External Reporting Board - only FMC reporting entities with lower public accountability can apply the disclosure concessions allowed by the reduced disclosure regime.

Can I use financial statements prepared in accordance with overseas financial reporting standards?

You can only use overseas financial reporting standards for ongoing reporting if we have granted you an exemption to do so.  See here for details of financial reporting exemptions.

During the transitional period, can I use FMC financial statements for capital raising under the Securities Act?

Yes - but only if you are permitted to use the Securities Act for offers of that security.

Am I still a FMC reporting entity if I haven't issued anything to the public?

What are my financial reporting obligations if I offer financial products under the trans-Tasman mutual recognition scheme?

Issuers of regulated products are ‘FMC reporting entities’ under section 451 of the FMC Act. However, if you are an Australian entity and your offer is a ‘recognised offer’, then it is exempt from many of the provisions of the FMC Act, including the disclosure requirements for offers of financial products under Part 3.

Therefore, you are not considered to be an ‘FMC reporting entity’ as an issuer of a regulated product. However, you may be an FMC reporting entity for another reason, for example, if you are also listed on the NZX, the financial reporting obligations of the FMC Act will apply.

Can we use special purpose financial reporting for our “schedule 3” superannuation scheme?
 
Yes.  Schedule 3 of the Financial Markets Conduct Act 2013 allows the FMA to approve single-person self-managed superannuation schemes that meet certain criteria (Schedule 3 Schemes). Previously, these types of schemes were not ‘issuers’ as defined in the now repealed Financial Reporting Act 1993 and could prepare special purpose financial statements where scheme members are able to obtain special purpose information that meets their needs. This is permitted by NZ IAS 26 Accounting and Reporting by Retirement Benefit Plans paragraph 1.5.
 
Regulation 113 of the Financial Markets Conduct Regulations 2014 requires Schedule 3 Schemes to prepare financial statements that comply with generally accepted accounting practice and send a copy of these financial statements to the FMA. In complying with  this requirement we consider that NZ IAS 26 still applies including paragraph 1.5. Accordingly we are accepting special purpose financial statements. The exact content of the special purpose financial statement is not prescribed and therefore is at the discretion of the trustees. As such, we suggest special purpose financial statements include a profit and loss, balance sheet, cash flow statement, as well as appropriate accounting policies and notes that reflect the investments of the scheme.

Transitioning to the FMC regime

Do I need to opt-in if I’m a retirement village operator?

No. Retirement village operators are considered issuers under the Financial Reporting Act 1993. However, retirement village operators are not FMC reporting entities under the FMC Act.

The Financial Reporting Act 1993 ceased to apply to retirement village operators for accounting periods beginning on or after 1 April 2014. The financial reporting obligations for retirement villages can be found in the Retirement Villages Act 2003.

There is no need for retirement village operators to opt into the FMC Act.

Can I elect to prepare financial statements under the FMC Act after my accounting period has finished?

No. You must elect and give us and the Registrar at least 20 working days’ notice prior to your balance date. For example:

Balance date Notification must be/been received by
31 March 2015 3 March 2015
30 June 2015 2 June 2015
30 September 2015 2 September 2015

However, directors have discretion to exclude information that is not material to users of the parent financial statements – (see FMA’s report Quality Financial Reporting).

I am an issuer under the Financial Reporting Act 1993. I qualify for the closely-held-issuers exception under the FMC Act and wouldn’t therefore be a FMC reporting entity, do I still need to report under the Financial Reporting Act 1993?

Yes. However, we are looking into this matter.

The Financial Reporting Act 2013 states that the Financial Reporting Act 1993 continues to apply to issuers under the Financial Reporting Act until they are required to prepare financial statements under the FMC Act.

If a company opts in or elects an effective date for its shares and qualifies for the closely-held issues exemption, the company still appears to have to comply with the requirements of the Financial Reporting Act 1993.

This is because, under section 452 of the FMC Act, Company A is not an FMC reporting entity, and therefore not required to prepare financial statements.

However, this does not appear to align with the general policy and intent of the FMC Act (ie, to reduce the burden on small entities such as Company A), and we are looking into possible solutions.

When do recipients of funds from conduit issuers become FMC reporting entities?

Recipients of funds from conduit issuers become FMC reporting entities when the securities issued by conduit issuer have transitioned to the FMC Act. This is the effective date for those securities and the date when the conduit is considered an 'issuer of a regulated product' under the FMC Act. The recipients of the funds do not become FMC reporting entities if the conduit issuer has transitioned for any another reason – for example, as being a listed issuer.

Financial Reporting Exemptions

If appropriate, we can exempt you from your financial reporting obligations. Please refer to our exemptions section for more information on qualifying for an exemption and how to apply.

Auditors and auditing

Who can audit my financial statements?

In general only licensed auditors or registered audit firms can audit financial statements of FMC reporting entities. However, the Auditor General can audit FMC reporting entities that are public entities. (Section 461E of the Act)

Where appropriate, we can grant an exemption to enable entities to use another auditor. Please refer to our policies for granting exemptions.

The register of licensed auditors and registered audit firms is maintained by the Ministry of Business, Innovation and Employment.

Not all qualified audit reports indicate that you have breached your financial reporting obligations. However, if your auditor's report indicates that you have breached your obligations, your auditor must notify us, and we will take appropriate action.

Who should the audit report specify as having responsibility for preparing the financial statements?

Audit reports should state that “the directors’ are responsible on behalf of the entity for the preparation of the financial statements and fair presentation of these financial statements in accordance with New Zealand Equivalents to International Financial Reporting Standards and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.”

Under Part 7 of the FMC Act although the FMC reporting entity, rather than its directors, has the primary responsibility for preparation, audit and lodgment of financial statements, the directors are also treated as being liable for contraventions of any financial reporting obligations. Directors retain responsibility for the governance of the FMC reporting entity, including preparation of compliant financial statements.

 

Lodging your financial statements

When do I have to lodge my financial statements?

You have four months after your balance date to lodge your financial statements with the Companies Office.

How do I lodge my financial statements?

Please lodge your financial statements using the Companies Office online services.

Do I have to lodge my financial statements with FMA?

Generally, no. 

  • financial statements to FMA that are prepared as part of a winding-up report for a managed investment scheme
  • if the auditor’s report indicates that you have not complied with the FMC financial reporting requirements then the auditor is required to send us a copy of their report, with the financial statements.
  • if you hold a market service license and we  include a special condition that requires you to give us these documents

What happens if I am late lodging?

If you anticipate that you will be late filing, you should contact us, outlining the reasons why you are late, how you have communicated your financial performance to your investors, when you intend to file and how you will avoid late filing in the future. We, however, reserve our right to take action we consider appropriate.

 

Enforcement

What enforcement powers does FMA have in respect of financial reporting?

Under the Act, FMA has a wide range of tools to promote compliance with financial reporting requirements. These are included in part 7 and 8 of the Act. This includes the ability for FMA to issue infringement notices for failure to:

  • keep accounting records in English (infringement fee: $7,500)

  • allow the entity's directors, supervisors, FMA, or any other person permitted by an enactment to inspect of accounting records (infringement fee: $12,500)

  • lodge financial statements within four months of the balance date (infringement fee: $7,500)
  • direct reporting entities to comply with requirements to keep and retain accounting records and prepare, have audited and lodge financial statements Failure to comply with a direction order could result in civil or criminal proceedings
  • apply to the High Court for civil remedies for failure to keep and retain accounting records; prepare, have audited and lodge financial statements; and for failing to complying with an FMA direction order
  • take criminal proceedings against entities and their directors if they knowingly fail to comply with financial reporting standards.

 

Winding Up

If you cease to be a FMC reporting entity during an accounting period (for example when you repay outstanding financial products or your license expires), you will still need to prepare and lodge financial statements for the period up until your next balance date. For example, if you are an issuer with a 31 March balance date and you repay all outstanding debt products on 1 January 2015, you will still need to comply for the period ending 31 March 2015.

Also see – financial reporting exemptions under consideration here.

 

Additional guidance for market service license holders

I am considering applying for a market service license. For the purpose of the FMA application, do I need to provide audited financial statements by an FMA-approved auditor?

No. Essentially, there are no specific requirements to have previously used or engaged an NZ licensed auditor or registered audit firm prior to holding a license.

However, if you are granted a license, to meet the conditions of that licence you will need to engage a NZ licensed/qualified auditor. In the licensing process, we are looking for evidence that you have engaged, or in the process of engaging a NZ licensed or qualified auditor so we know you will be able to comply with your conditions.

DIMS providers

I manage a DIMS book of less than $250 million. Do I still need to provide audited financial statements and lodge these with the Registrar?

Derivative issuers

  • If you're licensed before 31 March 2015: you'll only have an FMC balance date before 31 March 2015 if you're licensed and make a regulated offer under the FMC Act before then.
  • If you're licensed on or after 31 March 2015: you must produce your financial statements under the FMC Act, regardless of whether or not you have issued financial products.

Futures dealers

We haven’t finished preparing our 2015 financial statements. Can we use our 2014 financial statements for our first derivatives offer?

Yes - provided you meet certain conditions.

We recently granted a class exemption notice (the Financial Markets Conduct (Derivatives Issuers—Link to Financial Statements) Exemption Notice 2015) to address this problem. In summary, our exemption allows issuers with balance dates from 1 February to 31 May 2015 to file their previous year’s financial statements in place of their financial statements required by the Regulations as a temporary measure.  Once you’ve completed your financial statements for the most-recent period, you’ll need to update your register entry.

Check here to see if you can use the exemption.

I hold a transitional licence, what assurance procedures am I required to have — the ones under my old authorisation, or the ones in the new standard conditions?

Transitional licences are subject to the same conditions, limitations and restrictions that were imposed under your previous authorisation and approval. You are still required to have performed the same assurance procedures under your previous authorisation or approval until you are issued a new licence by us, or we replace those conditions.

Scheme Managers

I am a fund manager and have a different balance date to my schemes. Do I really have to prepare my scheme’s financial statements within four months of my balance date?

Section 461A of the Act requires managers of registered schemes to prepare financial statements for those schemes within four months of their balance date. Where a manager’s balance date is different to its scheme’s balance date this make compliance difficult or impossible. 

My managed investment scheme has subsidiaries. Do I need to prepare both parent and group financial statements for my scheme?

Under section 461A of the Act managers are required to prepare financial statements for their schemes that comply with GAAP. In practice many schemes will meet the definition of an investment entity under NZ IFRS 10:  Consolidated Financial Statements and therefore are required not to consolidate its subsidiaries. However, if your scheme doesn’t meet that definition we do not expect you to produce both parent and group financial statements. We consider that GAAP for the purpose of section 461A means group financial statements.