The Securities Commission's latest review of financial reporting standards continues to highlight the need for a greater focus on transparency.
"Ensuring stakeholders and investors are fully informed about all areas of their investment is vital, and issuers must ensure they provide clear, concise and transparent financial statements which are easily understood," says Securities Commission Chairman Jane Diplock.
The Commission's Cycle 13 review focused on segment reporting (NZ IFRS 8 Operating Segments). The standard was introduced at the beginning of last year to ensure investors have a clear insight into an entity's operations and the information management uses to make operating decisions. The Commission is concerned some disclosures do not meet the core principle of the standard. The Commission reminds issuers that the financial reporting standard requires a greater level of transparency than the previous standard.
This cycle looked at the financial statements of 20 companies with 31 March 2010 balance dates. The Commission wrote to 16 of the assessed companies to raise 30 issues.
The latest results show an improvement in the level and type of disclosures relating to investment property revaluations. However there are still some areas needing better disclosure, particularly about:
- operating segments
- key judgements and significant assumptions
- impairment relating to goodwill.
The Commission's ongoing Financial Reporting Surveillance Programme (FRSP), is designed to encourage high-quality financial reporting to enhance the credibility of financial information provided by issuers.
The Cycle 13 report will be published in due course.