For-profit and not for profit organisations can no longer use differential reporting to support financial statement filings with the New Zealand Companies Office or DIA Charities.
From 31 March 2016, differential reporting will be replaced with a reduced disclosure regime (RDR). This was jointly developed with Australia so that organisations in both countries can adhere to the same reporting rules given the significant levels of mutual investment on both sides of the Tasman. And like differential reporting, RDR has also been designed to keep compliance costs to a minimum.
However, companies and registered charities will still be presented with financial reporting challenges.
“All of this change will increase the burden on those who have to prepare annual financial statements to meet their tax, filing requirements or financing obligations being imposed on them by their bankers, investors or donors”, says Mark Hucklesby, Partner and National Technical Director at Grant Thornton New Zealand.
“Disclosures in the notes support the dollar amounts included in primary financial statements and are there for good reason - they enable readers and investors to understand complex transactions. However, the financial statements often end up becoming cluttered and the truly important information is often hard to find.
“This can be avoided by taking a fresh look at your financial statements. Organisations should refocus their financial statements as an effective communication tool without losing sight of complying with technical requirements.
“An excellent set of financial statements should focus on four areas; comply, but also communicate, omit the immaterial, rethink what’s included in the notes and prioritise the accounting policies and notes by putting the important material first.
“To help organisations across all industries with these four key tips, Grant Thornton has produced “Telling your story: making your financial statements an effective communication tool,’ says Hucklesby
For the more than 400,000 organisations not required to prepare financial statements using RDR or full NZ GAAP, special purpose financial statements can be prepared. These entities are afforded the flexibility to select the most appropriate accounting policies that produce the best financial statements for their organisation.
Download your copy of Telling your story: making your financial statements an effective communication tool.