Commission alerts issuers to financial reporting matters
The Securities Commission has identified matters issuers need to focus on as a result of its recent review of financial statements.
The areas requiring particular attention are:
the fair value of assets - the basis of determination and how well this has been disclosed
- impairment of assets such as goodwill
- related party information, in particular, key management personnel compensation
- disclosure of significant judgments, key assumptions and major sources of estimation uncertainty.
Other significant matters are:
- support for the value of intangible assets
- definition and classification of cash flows.
The Commission is keen to see that issuers pay particular attention to these matters when preparing upcoming interim and full-year reports.
"These issues take on greater significance in today's tight market conditions and require greater transparency in the manner in which they are presented in financial statements", Securities Commission Chief Accountant Alastair Boult says.
The Commission reviewed the reports of 40 issuers with March and June 2008 balance dates as part of its financial reporting surveillance programme. It is in the process of discussing its findings with issuers.
"Full and timely disclosure is essential to keep the market well informed in the changing economic environment," Alastair Boult says. "It is important for market confidence that issuers tell the full story about their operations in their financial statements. Boiler-plate disclosure will not suffice."
The Commission considers that the manner in which transactions, assets and liabilities are recognised, measured and disclosed, takes on a different significance in current market conditions. This includes, for example:
- valuation of assets - the determination of the fair value of assets and the impairment of assets
- financial instruments - maturity profiles, liquidity and classification as current or non-current and the significance of this for assessing going concern.
The Commission's review of financial statements is ongoing. For the next cycle it will select issuers with balance dates between 1 July and 31 December 2008.