Financial Reporting Act changes will reduce business compliance costs

New Zealand Government, 22 December 2005

Commerce and Small Business Minister Lianne Dalziel has announced changes to the financial reporting system, which are aimed at reducing business compliance costs.

A new "two-out-of-three" test for SMEs extends the current criteria of annual turnover of less than NZ$1m and total assets of less than NZ$450,000 to either less than NZ$2m turnover, less than NZ$1m in assets and/or five or fewer full time equivalent employees.

According to the press release, changes are also planned to remove reporting requirements for New Zealand incorporated companies with 25% or more overseas ownership. These companies will no longer have to file audited statements with the Registrar of Companies provided they qualify for the exempt companies or differential reporting systems - the latter will also include a "two-out-of-three" test of either annual turnover of less than NZ$20m, assets of less than NZ$10m and/or 50 or fewer FTE employees.

The press release also states that the Accounting Standards Review Board will have exemption powers and overseas-incorporated companies will be able to apply for these exemptions. Non-active entities will no longer be required to file financial statements with the Registrar.

Ms Dalziel expects a Bill amending the Financial Reporting Act to be introduced into Parliament in early 2006.

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