Frequently asked questions

Frequently asked questions relating to the Financial Reporting Amendment Act 2006 (“the Act”) – to which all section references relate

 

• What companies are required to prepare annual financial statements?
• What does it mean if my company is an exempt company?
• If my company is not “large” does that mean it is an “exempt company”?
• Are overseas companies, subsidiaries of overseas companies and issuers able to qualify as exempt companies?
• What is the effect of section 19(2) of the Act?
• Do I have to prepare financial statements for my company even if I am not required to file them or I have an exemption under section 19(2)?
• If my company is an “Issuer” but a subsidiary of a New Zealand parent company that files group financial statements, will my company be covered by section 19(2) exemption?
• If my company is non-active, will it still be required to appoint an auditor or prepare and file nil audited accounts?
• If my company is an issuer and no longer trading or non-active for a specific accounting period, can it file a non-active declaration form and avail of exemption under section 10A of the Act?

 

Related FAQs

• Does (1) an overseas company that is no longer carrying on business in New Zealand or (2) a subsidiary - of a company or body corporate incorporated outside New Zealand - that is not or is no longer carrying on business in New Zealand, need to file financial statements?  Read more...
• What is the procedure for withdrawing from the overseas register?  Read more...

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What companies are required to prepare annual financial statements?

As a general rule all companies (that is, reporting and exempt entities ) are required to prepare annual financial statements under section 10.  In order to minimise compliance costs for small companies, the Act allows companies which qualify as “exempt companies” to comply by preparing simplified financial statements.

What does it mean if my company is an exempt company?

If a company is exempt under section 6A, it will be able to prepare a simplified form of financial statements in accordance with section 12.  The form for these is set out in the Schedule to the Financial Reporting Order 1994.

If my company is not “large” does that mean it is an “exempt company”?

No.  The criteria for qualification as an exempt company should not be confused with the those set out in section 19A(1)(b) that determine whether a company is “large”.  The latter are only relevant to companies that have 25% or more overseas-held shareholding (“overseas owned companies”).  If an overseas owned company meets two out of the three section 19A(1)(b) criteria it will be considered to be “large” and will be required to deliver audited financial statements to the Registrar of Companies (“the Registrar”) for registration under section 19.

Are overseas companies, subsidiaries of overseas companies and issuers able to qualify as exempt companies?

No.  Only companies incorporated in New Zealand that are not subsidiaries of other companies, and which do not themselves have subsidiary companies and meet certain asset values, turnover and employee levels, can be exempt companies.  Companies incorporated overseas or companies that are issuers, as defined in section 4, cannot qualify as exempt companies.

What is the effect of section 19(2) of the Act?

Under section 19(2), a company (Company A) will not have to register its financial statements if the following requirements are satisfied:

1. Company A is a subsidiary of a company that is incorporated in New Zealand (Company B); and
2. Financial statements in relation to Company B that comply with section 11 are completed and signed within the time specified in section 10; and
3. Group financial statements in relation to a group comprising Company B, Company A, and all other subsidiaries of Company B that comply with section 14 are completed and signed within the time specified in section 13; and
4. A copy of the financial statements referred to in paragraph (b) and a copy of the group financial statements referred to in paragraph (c), together with the auditor’s report on those statements, are delivered to the Registrar for registration.

Do I have to prepare financial statements for my company even if I am not required to file them or I have an exemption under section 19(2)?

Yes.  Even though New Zealand incorporated companies, which are not issuers or “overseas owned companies”, are not required to file financial statements, all companies are required to prepare financial statements.  Whether these are full financial statements or simplified financial statements will depend on whether the company qualifies as an exempt company.  Section 19(2) only covers the filing of the financial statements – it has nothing to do with their preparation.

If my company is an “Issuer” but a subsidiary of a New Zealand parent company that files group financial statements, will my company be covered by section 19(2) exemption?

No.  Section 18 applies to issuers, not Section 19.  Issuers are still required to prepare and file separate audited financial statements regardless of whether their New Zealand parent company files group financial statements.  (Example: if a company is a retirement village operator, it is deemed to be an issuer and as such it would not be entitled to such an exemption).

If my company is non-active, will it still be required to appoint an auditor or prepare and file nil audited accounts?

 

Non-active companies are not required to prepare or file audited financial statements. However, such companies are still required to appoint an auditor under section 196 of the Companies Act 1993.  There will not be any statements to audit, but that will not be known until after the accounting period has ended whereas the auditor has to be appointed at each annual meeting for the ensuing year.

The non-active declaration form may be completed by directors of companies otherwise caught as having to file under section 19 of the Financial Reporting Act 1993.

The audit requirements of section 196 of the Companies Act 1993 that apply here are currently the subject of an amendment introduced into Parliament in late 2008.

 

If my company is an issuer and no longer trading or non-active for a specific accounting period, can it file a non-active declaration form and avail of exemption under section 10A of the Act?

No.  Section 10A only applies to companies that are caught as having to file under section 19 of the Act.  It does not apply to issuers.

Under the Act, where a person ceases to be an issuer during an accounting period, that person shall be deemed to continue to be an issuer in relation to that accounting period for the purposes of this Act.