1. Compliance
  2. Financial reporting
  3. FAQs


Page last updated: 03 May 2019

Click on any of the topics below to find answers about financial reporting: 


Do I have to comply?

How do I determine if I am an FMC reporting entity?

The concept of 'FMC reporting entity' is broader than 'issuer'. It is defined in section 451 of the FMC Act.

What has changed from the requirements in the Financial Reporting Act 1993?

See Your obligations for a summary of the changes.

How do the financial reporting requirements for FMC reporting entities relate to the reporting requirements in other Acts?

If you are required to produce financial statements under the FMC Act, then these requirements will take precedence over any other NZ law. For example, the Companies Act specifically says it's financial reporting requirements do not apply to companies that have to comply with the FMC Act's requirements.

I only issued equity securities under the Securities Act (not the FMC Act) Do the FMC Act financial reporting obligations still apply?

If you issued securities under the Securities Act 1978, requiring an investment statement or a registered prospectus, (or both) and those securities have not been cancelled or forfeited, some parts of the FMC Act apply to you.

This includes the financial reporting obligations in Part 7. See Part 7 for more information about financial reporting obligations.

The link between the old regime and the new regime is set out in clause 20 of Schedule 4 of the FMC Act.

The issued securities will be treated as a regulated product. This means the obligations of being an FMC reporting entity apply to you, unless the exclusion under section 452 of the FMC Act applies.  

As an issuer of securities, you have a higher level of public accountability. See section 461K of the FMC Act for more information.

What is 'higher public accountability' and how does it affect me?

All FMC reporting entities have a designated level of public accountability. This influences which tier of the External Reporting Board Accounting Standards Framework you are in and whether you will have to use full accounting standards (eg, NZ IFRS) or reduced disclosure accounting standards (eg, NZ RDR) when preparing your financial statements.

The FMC Act identifies FMC reporting entities deemed to have ‘higher public accountability’. All other types of FMC reporting entities, therefore, have lower public accountability. These are default designations - under the FMC Act, we can vary designations for either individual FMC reporting entities, or classes of FMC reporting entities. Our exemptions page includes a summary of the designations by class of reporting entity.

Can I prepare my financial statements using the disclosure concessions of the reduced disclosure regime?

Most FMC reporting entities with lower public accountability can report using a reduced disclosure regime (eg, NZ IFRS RDR or PBE Standards with disclosure concession). FMC reporting entities with higher public accountability must comply with full NZ IFRS or PBE accounting standards.

Can I apply the differential reporting framework?

No. The differential reporting framework cannot be used by FMC Act reporting entities. Differential reporting has been replaced by the reduced disclosure regimes of the External Reporting Board - only FMC reporting entities with lower public accountability can apply the disclosure concessions allowed by the reduced disclosure regime.

Can I use financial statements prepared in accordance with overseas financial reporting standards?

You can only use overseas financial reporting standards for ongoing reporting if we have granted you an exemption to do so.  See here for details of financial reporting exemptions.

Am I still a FMC reporting entity if I haven't issued anything to the public?

What are my financial reporting obligations if I offer financial products under the trans-Tasman mutual recognition scheme?

Issuers of regulated products are ‘FMC reporting entities’.However, if you are an Australian business and your offer is a ‘recognised offer’, then you are exempt from many of the provisions of the FMC Act, including the disclosure and financial reporting requirements for offers of financial products.

However, you may be an FMC reporting entity for another reason, for example, if you are also listed on the NZX, the financial reporting obligations of the FMC Act will apply.

Can we use special purpose financial reporting for our one-person superannuation scheme?
Yes.  You can prepare special purpose financial statements where scheme members are able to obtain special-purpose information that meets their needs. These schemes are required to prepare financial statements that comply with generally accepted accounting practice and send a copy of these to the FMA. To comply with this, we believe NZ IAS 26 still applies including paragraph 1.5. Accordingly, we accept special purpose financial statements. The exact content of the special purpose financial statement is not prescribed and therefore is at the discretion of the trustees. We suggest special purpose financial statements include; a profit and loss balance sheet and a cash flow statement, as well as appropriate accounting policies and notes that reflect the investments of the scheme.

Non-GAAP financial information

The increasing use of non-GAAP financial information presents challenges to investors and analysts – in particular, the non-professional but prudent-but non-expert investor. To ensure that information is helpful to investors and gives them a better understanding of a company’s financial performance, it needs to be disclosed properly - reflecting an honest assessment of how successful management has been in its stewardship and execution of strategy. And it should come with clear linkages to information which has been prepared using GAAP.

Our guidance note on disclosing non-GAAP financial information is designed to:

  • promote meaningful and transparent communication of financial information to investors and other users of non-GAAP financial information;
  • help FMC reporting entities disclose financial information in a way that is not misleading; and
  • increase market certainty about the FMA’s views on disclosure of non-GAAP financial information and how we will assess such disclosures.

Questions and Answers

The following information is designed to help entities better understand and apply our guidance and will be updated periodically. Our examples are not exhaustive and we encourage entities to apply their judgement and focus on the spirit of the guidance to equip their investors with high quality information.


Does the definition of non-GAAP in the guidance note capture all information disclosed outside of the financial statements?

No, our guidance note primarily focuses on how entities should present non-GAAP financial information in communications and other documents when that information has a potential to be misleading.  It does not apply to:

  • non-financial information such as numbers of employees or subscribers;
  • statutory information required by another regulator (for example, capital adequacy information required by the Reserve Bank of New Zealand);
  • prescribed forms or documents provided for disclosure of information from a registered exchange that are completed based on information contained within statutory financial statements (for example, the NZX Appendix 1 disclosures);
  • separate analysis of individual components of statutory profit, such as impairment losses; 
  • information to explain compliance with the terms of an agreement or a legislative requirement - provided the information is not represented as an alternative to GAAP measures or given undue and greater prominence relative to the GAAP measure; and
  • comparisons of GAAP financial information to non-financial information (e.g. sales revenue per unit). 

While our guidance note does not apply to these categories of information, the general principles in the guidance note (eg relating to relative prominence) may be useful to preparers of this information. 


How should the principle of prominence be applied?

Entities must strive to give a balanced “whole” picture of their performance, exercising their judgement to ensure that non-GAAP information is not given undue and greater prominence than GAAP information. Consideration should be given to various factors, such as, for example:

  • the type of the document or commentary;
  • the nature of the non-GAAP financial information presented; 
  • how significant the variances are between non-GAAP and GAAP financial information;
  • the nature, relevance and materiality of the adjustments and components of non-GAAP financial information; and, 
  • whether the reconciliation between non-GAAP and GAAP figures is prominently disclosed in the document or is provided by reference. 

While a directly comparable GAAP figure should appear in every document containing a non-GAAP figure, this does not mean that the GAAP figure must appear every time a non-GAAP figure is mentioned in a document.

What are some examples of undue and greater prominence?

The following are examples of giving undue and greater prominence to non-GAAP financial information and are therefore potentially misleading:

  • where commentary on the entity’s performance relates only to non-GAAP financial information, with little or no analysis of the reconciling items from directly comparable GAAP financial information; 
  • not presenting the GAAP profit measure or where the GAAP measure is presented it is only in a footnote to the non-GAAP profit measure; 
  • changing the emphasis given to GAAP financial information and non-GAAP financial information from period to period (e.g. emphasising whichever information gives the most favourable outcome for a period); 
  • not presenting the reconciliation or a reference to the reconciliation at least once in every document containing non-GAAP profit measure; and
  • presenting non-GAAP financial information using a style of presentation (e.g. bold, larger font) that emphasises the non-GAAP financial information over the comparable GAAP financial information.

The following are examples which may not give undue and greater prominence to non-GAAP financial information compared to directly comparable GAAP financial information and are therefore unlikely to be misleading: 

  • giving prominence to the GAAP profit measure on the first page of a document and analysing components of the non-GAAP profit measure by division or segment on subsequent pages of the document. Often a non-GAAP profit measure is a subset of the GAAP profit. However, it will still be necessary to give similar prominence to the analysis of the adjustments between the non-GAAP and the GAAP profit measure as are given to components of the non-GAAP profit measure - having regard to the relevance and materiality of the adjustments and components; 
  • including both the GAAP and the non-GAAP profit measure in the headline of an announcement; and
  • providing a summary of the reconciling items between the non-GAAP profit measure and GAAP profit measure on the first page of the market announcement, cross-referred to a more detailed reconciliation. 

The examples listed in the above paragraphs are not exhaustive and are provided to assist in understanding the approach to the guidance note.

One-off or non-recurring items

Can entities describe items that have occurred in the past or are reasonably likely to occur in a future period as ‘one-off’ or ‘non-recurring’?

Entities should be careful when describing items as one-off or non-recurring, in particular, if non-GAAP financial information is presented as an alternative to a GAAP profit measure. This is particularly relevant for items that are reasonably likely to recur over a life of a business (albeit they may only arise in some years), or are activities that affected the entity in the recent past. This also includes items which are reflective of operational circumstances of an entity’s business, for example, impairment losses recognised from closed down or underperforming stores. For many entities restructuring and impairment costs reflect the activities and performance of their business and, as such, should not be adjusted for in non-GAAP financial information that represents an alternative performance measure or an operating measure. These items should also not be referred to as non-recurring or a one-off cost.

Defining non-GAAP financial information: why information is useful to investors

How detailed does the explanation need to be of why non-GAAP financial information is useful to investors?

The level of detail will be down to management’s judgement taking into account the complexity of the information and how familiar the investors are with the measure. However, your explanation should be specific to the entity and provide enough detail to enable a prudent but non-expert investor to understand how non-GAAP financial information can assist them in evaluating and understanding the entity’s performance or position, as compared with the GAAP financial information. Entities with unique non-GAAP measures, or measures that are similar to their competitors but with different calculations, must not imply their measures are comparable and should highlight the key differences. A generic explanation like “we consider this information is useful to the investor as it allows a better comparison of the entity with the other entities in industry X” must have reasonable grounds.

Entities are required to disclose whether non-GAAP financial information has been subject to an audit or review. How does this apply to non-GAAP financial information which components have been extracted from audited financial statements?

We do not consider non-GAAP financial information to have been subject to an audit or review merely by virtue of the adjustment or a component being taken from audited or reviewed financial statements. It is only appropriate to label non-GAAP financial information as ‘audited’ or ‘reviewed’ when that information has been subject to an assurance engagement separate to the assurance engagement of the entity’s financial statements. As well as complying with the provisions as dictated by the relevant assurance standard, this will include, for example, separate materiality and risk considerations as well as a separate assurance report.


What factors should you consider when deciding where to present your reconciliation?

While a reconciliation from GAAP to non-GAAP information doesn’t need to be presented in every document, they are an essential piece of information for investors - therefore you should exercise careful judgement when considering where to present it. In particular, you need to make sure that if you’re providing reconciliation by reference, it will be easily and readily accessible to the investor. As a general principle, providing the reconciliation close to where non-GAAP financial information is first mentioned will facilitate investors understanding of the information. However, in determining the most appropriate location for the reconciliation you will always need to take into account the information needs of the investors and their familiarity with the non-GAAP financial information. This also includes their ability to access a reconciliation provided by reference including how tech-savvy they are likely to be. For example, where the communication is provided in hard copy it is unlikely that providing reconciliation by reference would be appropriate. Listed below are additional suggestions for entities to consider when deciding where to disclose the reconciliation:

  • the type of communication where non-GAAP financial information is disclosed. For example, is it management commentary targeting all investors or a presentation specifically targeting sophisticated investors,
  • whether financial measures are a core focus of the communication or mentioned in passing. Where financial measures are the focus of the communication, such as earnings announcements, we’d generally expect a reconciliation to be included in or be attached to the communication,
  • how familiar are the targeted investors with the non-GAAP measures,
  • whether a number of documents in which non-GAAP financial information is provided form part of one overall communication (such as a market announcement) where one document includes a reconciliation while other documents provide a reconciliation by reference to that document,
  • the nature of the non-GAAP financial information including whether has been a change in the approach from the previous period,
  • how significant is the variance between non-GAAP and GAAP financial information, 
  • the nature of the adjustments as well as the values of individual adjustments. 

The examples listed in the above paragraphs are not exhaustive and are provided to assist in understanding the approach to our guidance note.

How do I avoid cluttering my reconciliation?

We expect an entity to consider which adjustments are necessary to be made in order to support investor’s understanding of the measure. Keeping adjustments to a minimum will also:

  • reduce the amount of commentary required to explain them;
  • result in the communication being clear, concise and easier for prudent but non-expert investors to understand;
  • ensure that the measure reflects its purpose; and
  • ensure that the risk of misleading information is reduced.

The guidance note states that entities should itemise and explain each significant adjustment separately. How much detail is required when explaining each significant adjustment?

Every significant adjustment has to be quantified and explained. The level of detail will vary depending on the nature and complexity of the adjustment but should be sufficient to enable a prudent but non-expert investor to understand why the adjustment is important and necessary. The adjustments made should reflect the explanation on why the information is useful to investors and how it is used internally. Explanations should also go further than just what the item represents, but also cover the circumstances that give rise to the particular adjustment. For example, an adjustment for impairment of goodwill to an operating profit measure should be supported by the cause of the impairment.

What to include in your internal policy on disclosing non-GAAP financial information

Here are some areas to consider when preparing your policy on disclosing non-GAAP financial information

First, consider if it is actually necessary to use non-GAAP financial information or if the movements in GAAP financial information, such as net profit after tax, can be explained in management commentary. When preparing an internal policy on using and disclosing non- GAAP financial information, consider the following:

Internal use

  • Set out in detail the rationale behind using and disclosing non-GAAP financial information.
  • Document how you use non-GAAP financial information is used internally and how it facilitates operational decisions.
  • Include the policy about the appropriateness of the adjustments, considering their nature 
  • Tailor any policy to your unique business and its relevant circumstances. 
  • Outline any links between remuneration incentives and disclosed non-GAAP financial information.

Presenting Non-GAAP financial information

  • Consider our guidance note and which principles are relevant and material. Accordingly, apply them and document your considerations in your policy. 
  • Apply judgment to the level of disclosures for investors based on:

- the nature of the non-GAAP financial information
- its purpose
- the types of communication 
- their understanding of your non-GAAP financial information. 

  • Document how consistency, completeness and accuracy of non-GAAP financial information will be achieved.
  • Document in detail the materiality assessment.


  • Consider and assess materiality to the presentation and disclosure of non-GAAP financial information. We encourage you to apply materiality when deciding on the required level of disclosure needed to support investors’ understanding of your non-GAAP financial information but also which principles noted in our guidance note are material and must be applied

Investor understanding

  • Consider what is the intention of the specific investor communication(s) 
  • Consider the level of understanding of a “prudent, but non-expert” investor and the level of information relevant to them about non-GAAP financial information
  • Document why non-GAAP financial information is considered useful to the investors and how it facilitates their understanding of the entity’s financial performance, position and/or cash flows and decision-making. This should be well-documented in the policy, and clearly reflected in any investor communications.
  • Use precise and simple language when explaining non-GAAP financial information clearly and completely. Consider asking someone in the organisation outside of the finance team to read non-GAAP financial information disclosures. If they don’t understand the purpose and why they are useful to the investor, you may need to consider making them clearer.

You could also consider making your organisation’s policy on the use and disclosure of non-GAAP financial information available on your website.

Financial reporting exemptions

If appropriate, we can exempt you from your financial reporting obligations. Please refer to our exemptions section for more information on qualifying for an exemption and how to apply.

Auditors and auditing

Who can audit my financial statements?

Generally, only licensed auditors or registered audit firms can audit financial statements of FMC reporting entities. However, the Auditor-General can audit FMC reporting entities that are public entities. Where appropriate, we can grant an exemption to enable you to use another auditor. Please refer to our policies for granting exemptions.

The register of licensed auditors and registered audit firms is maintained by the Ministry of Business, Innovation and Employment.

Not all qualified audit reports indicate that you have breached your financial reporting obligations. However, if your auditor's report indicates that you have breached your obligations, your auditor must notify us, and we will take appropriate action.

Who should the audit report specify as having responsibility for preparing the financial statements?

Audit reports should state that “the directors’ are responsible on behalf of the entity for the preparation of the financial statements and fair presentation of these financial statements in accordance with New Zealand Equivalents to International Financial Reporting Standards and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.” Although FMC reporting entities, rather than their directors, have the primary responsibility for preparation, audit and lodgment of financial statements, the directors are also treated as being liable for contraventions of any financial reporting obligations. Directors are responsible for the governance of the FMC reporting entity, including preparation of compliant financial statements.

Lodging your financial statements

When do I have to lodge my financial statements?

You have 4 months after your balance date to lodge your financial statements with the Companies Office.

How do I lodge my financial statements?

Please lodge your financial statements using the Companies Office online services.

Do I have to lodge my financial statements with the FMA?

Generally, no. Exceptions include:

  • financial statements to FMA that are prepared as part of a winding-up report for a managed investment scheme
  • if the auditor’s report indicates that you have not complied with the FMC financial reporting requirements then the auditor is required to send us a copy of their report, with the financial statements.
  • if you hold a market service licence and we  include a special condition that requires you to give us these documents

What happens if I am late lodging?

  • how you have communicated this situation  to your investors
  • why you are late
  • when you intend to file
  • how you will avoid late filing in the future. 


What enforcement powers does the FMA have for financial reporting?

Under the FMC Act, we may issue infringement notices for failure to:

  • keep accounting records in English (infringement fee: $7,500)

  • allow directors, supervisors, ourselves or any other person permitted by an enactment to inspect of accounting records (infringement fee: $12,500)

  • lodge financial statements within 4 months of the balance date (infringement fee: $7,500)
  • direct you to comply with requirements to keep and retain accounting records and prepare, have audited and lodge financial statements. Failure to comply with a direction order could result in civil or criminal proceedings
  • apply to the High Court for civil remedies for failure to keep and retain accounting records; prepare, have audited and lodge financial statements; and for failing to complying with an FMA direction order
  • take criminal proceedings against you and your directors if they knowingly fail to comply with financial reporting standards.

Winding Up

If you cease to be a FMC reporting entity during an accounting period (for example when you repay outstanding financial products or your license expires), you will still need to prepare and lodge financial statements for the period up until your next balance date. For example, if you are an issuer with a 31 March balance date and you repay all outstanding debt products on 1 January 2017, you will still need to comply for the period ending 31 March 2017. 

Additional guidance for market service licence holders

I am considering applying for a market service licence. Do I need to provide audited financial statements by an FMA approved auditor in my licence application?

No. Essentially, there are no specific requirements to have previously used or engaged an NZ licensed auditor or registered audit firm prior to holding a licence. However, if you are granted a license, to meet the conditions of that licence you will need to engage a NZ licensed/qualified auditor. In the licensing process, we look for evidence that you have engaged, or in the process of engaging a NZ licensed or qualified auditor so we know, you will be able to comply with your conditions.

DIMS providers

I manage a DIMS book of less than $250 million. Do I still need to provide audited financial statements and lodge these with the Registrar?

Managers of Managed Investment Schemes

I am a fund manager and have a different balance date to my schemes. Do I really have to prepare my scheme’s financial statements within 4 months of my balance date?

Managers of registered schemes must prepare financial statements for those schemes within 4 months of their balance date. Where a manager’s balance date is different to its scheme’s balance date this make compliance difficult or impossible to comply. Because of this, we’ve granted an exemption that allows managers to prepare financial statements within  4 months of the balance date of their schemes – see our exemption notice that permits this.

My managed investment scheme has subsidiaries. Do I need to prepare both parent and group financial statements for my scheme?

Under section 461A of the Act managers are required to prepare financial statements for their schemes that comply with GAAP. In practice many schemes will meet the definition of an investment entity under NZ IFRS 10:  Consolidated Financial Statements are required not to consolidate its subsidiaries. However, if your scheme doesn’t meet that definition we do not expect you to produce both parent and group financial statements. We consider that GAAP for the purpose of section 461A means group financial statements.

New IFRS accounting standards from 1 January 2018

Is your business prepared? 

The date for implementation of new accounting standards – NZ IFRS 9 Financial Instruments and NZ IFRS 15 Revenue from Contracts with Customers – is fast approaching. Many FMC reporting entities could be impacted significantly in a number of ways by the new standards - including financial statements, processes, controls, existing contracts and arrangements, and other associated systems. This means it’s crucial they allow time to assess how they may be affected, and if not already, put in place adequate implementation plans.

Earlier this year, we stressed the importance of the implementation process and the full, accurate and timely disclosure of any possible impact to entities of adopting the new standards. However we are concerned- as our reviews and recent industry engagement show many still haven’t started a proper assessment of the potential impact, or thought about an implementation process. We urge directors and management of FMC Reporting Entities to actively engage with each other – and with their auditors – to ensure readiness for the new standards from 1 January 2018. We will continue to review disclosures of known or reasonably estimable information about the possible impact on FMC reporting entities’ financial statements, as required under the relevant standard.  Where necessary, we will engage with FMC reporting entities about their assessment implementation processes.

In December 2016, the International Organisation of Securities Commissions (IOSCO) published a Statement on Implementation of New Accounting Standards. This reinforced the same messages about the incoming accounting standards.

As a member of IOSCO, we are represented on their Issuer, Accounting, Audit and Disclosure Committee.