Printed from: http://www.seccom.govt.nz/publications/documents/cycle-5/04.shtml?print=true on Wed 25 November 2009
REVIEW OF FINANCIAL REPORTING BY ISSUERS - CYCLE 5
CYCLE 5: AN OVERVIEW
Scope
25.
In Cycle 5, the Commission reviewed the financial reports of 40 issuers with balance dates from 31 March 2006 to 30 September 2006.
26.
The selection of 40 issuers was made up of:
(a)
34 issuers listed on the NZSX/NZDX;
(b)
3 issuers listed on the NZAX; and
(c)
3 issuers who are not listed.
27.
Twelve first-time adopters of NZ IFRS were reviewed in this cycle. In this report, the Commission draws particular attention to findings on the adoption of NZ IFRS to provide feedback and comments for issuers yet to transition to NZ IFRS.
Overall Comments
28.
Sixteen of the 40 reports reviewed had matters that prompted the Commission to write to the issuer. This included seven first-time adopters of NZ IFRS. One issue identified in Cycle 5 is being considered separately as an enforcement matter.
29.
The overall findings of Cycle 5 were similar to the results of earlier cycles. Although no serious issues were identified, the Commission continues to note areas of non-disclosure or poor quality disclosures as in previous cycles. The Commission also continues to find errors in the published financial statements, a clear indication that greater care could be taken in their preparation.
30.
The Commission has identified slightly fewer significant matters in this cycle compared with earlier cycles. There are a number of factors that drive the incidence of significant matters. While the surveillance programme has identified some improvement, there is room for further improvement.
31.
The Commission acknowledges that a great deal of effort is required in transitioning to NZ IFRS and considers that the level of compliance with NZ IFRS for the early adopters was generally good.
Outcome of Matters Raised
32.
Thirty percent of the matters raised in letters to issuers were viewed by the Commission as significant.
33.
Graph 1 below shows the number of significant matters and other matters identified in Cycles 1 to 5.
34.
The Commission's definition of significant matters and other matters are set out in paragraphs 15 and 16 above.
35.
Table 1 shows the outcome of significant matters raised with issuers in Cycle 5.
Table 1: Outcome of matters raised in letters to issuers
| Notes |
Outcome |
Significant |
% |
| |
|
|
| (1) |
Resolved |
10 |
|
| (2) |
Point taken/change agreed |
5 |
|
| |
Agreement reached |
15 |
79% |
| |
|
|
| (3) |
Second letter sent |
1 |
|
| (4) |
Other follow-up action |
3 |
|
| |
|
4 |
21% |
| |
|
|
|
| |
Total matters raised |
19 |
|
| |
%'s |
30% |
|
Notes to the Table
(1)
Resolved: a satisfactory explanation was provided by the issuer on the matters raised.
(2)
Point taken / change agreed: the issuer has acknowledged the point made / agreed to make changes in subsequent financial statements.
(3)
Second letter sent: a second letter closed the matter but reiterated the points made.
(4)
Other follow-up action: more action required, e.g. the need for subsequent correspondence to seek answers to follow-up questions.
36.
Satisfactory agreement was reached with issuers on 79% of significant matters raised in this cycle.
37.
Feedback on the Commission's findings (from paragraph 42 to 123) is separated into findings on the application of NZ IFRS and findings on the application of previous NZ GAAP.
38.
No occurrences of statutory non-disclosures were found in the Cycle 5 review.
39.
It is also encouraging to note that there was no occurrence of failure to date and/or sign the financial report in Cycle 5.
