Securities Commission reviews financial reports

21 February 2006

News Release

Securities Commission reviews financial reports

The Securities Commission has completed a second cycle of its financial surveillance programme which aims to help issuers improve the quality of their financial reports.

"High quality reporting enables investors to have confidence in the financial information provided by issuers, and contributes to the integrity of New Zealand’s securities markets,” says Chief Accountant Alastair Boult.

The Commission reviewed the audited full-year financial reports of 46 issuers with balance dates from 31 December 2004 to 31 March 2005. It also considered financial information in any current prospectuses, substantial security holder information, continuous disclosure notices and other sections of the annual report, such as the chairman’s report.

The selection of 46 issuers was made up of:

- 35 issuers listed on the NZX;

- 5 issuers listed on the NZAX;

- 1 issuer whose shares are traded on Unlisted, and

- 5 other non-listed issuers.

Reports of 19 issuers had some shortcomings. The Commission’s report on the Cycle 2 Review identifies the various shortcomings and how they should be addressed.

Some of the matters found were:

- large differences between actual and prospective information in one instance;

- inadequate actual versus prospective financial information comparisons and explanation;

- lack of a total recognised revenues and expenses line in the Statement of Movements in Equity;

- failure to date/and or sign the financial statements;

- apparent overstatement of value of a property intended for sale; and

- disclosure of an intangible under a separate heading in addition to current and non-current assets.

Cycle 2 findings were similar to Cycle 1 results in that few serious problems were identified, but a number of issuers need to raise the standard of their financial reporting.

The Commission will continue its Financial Reporting Surveillance Programme. The financial reports of early adopters of New Zealand equivalents of International Financial Reporting Standards with a 31 December 2005 balance date will be reviewed early in 2006. This will be part of the Commission’s plan to review disclosures and adjustments made by issuers as they move to NZ IFRS.

“We are publishing the report because this information will be useful to issuers who want to improve the quality of their financial reporting,” Alastair Boult says.

The report can be printed from the Commission’s website: www.sec-com.govt.nz or alternatively a hard copy can be ordered by calling 04-472 9830 or emailing seccom@sec-com.govt.nz .

ENDS

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