Foss Craig: Financial Reporting Bill Financial Reporting (Amendments to Other Enactments) Bill — Third ReadingsText is incorporated into the Bound VolumeFoss Craig: Financial Reporting Bill Financial Reporting (Amendments to Other Enactments) Bill — Third Readings[Sitting date: 19 November 2013. Volume:695;Page:14999. Text is incorporated into the Bound Volume.]Hon CRAIG FOSS (Minister of Commerce): I moveThat the Financial Reporting Bill and the Financial Reporting (Amendments to Other Enactments) Bill be now read a third time. It is important to consider the two bills within the broader context of the Government’s package of financial reporting reforms. Parliament passed two Government-sponsored bills in 2011 that have improved the financial reporting system. The main change in the Financial Reporting Amendment Act 2011 was to consolidate all accounting and auditing standards and set them in the External ReportingBoard or XRB so that standards are set by a body that is and is seen to be independent of the interests of the accounting profession. The second major reform was the enactment of the Auditor Regulation Act 2011 which came into force on 1 July 2012. The Act ensures that only top members of the auditing profession can carry out financial sector and issuer audits. It also requires independent oversight of professional accounting bodies—the auditor regulatory system—by the Financial Markets Authority. These audit reforms were driven by concerns about finance company audits being carried out by practitioners who did not have the necessary skills and experience. The changes are fully consistent with international auditor regulation developments in recent years.However the financial reporting picture is not yet complete. The Financial Reporting Bill and the Financial Reporting (Amendments to Other Enactments) Bill implement four more important changes. First they reduce the compliance burden on many non-issuer companies. Companies with annual revenue of between $2 million and $30 million will no longer be required to prepare financial statements in accordance with generally accepted accounting practice. Small overseas companies will no longer be required to file audited financial statements with the Registrar of Companies. It is expected that these changes will come into force in 2014.Second the legislation will strengthen public confidence in charities by increasing charities’ accountability to the donating and taxpaying public. Registered charities are required to attach financial statements to their annual reports. The current situation might be described as “do it yourself” reporting because there are no accounting standards to govern what is prepared. This problem is being rectified by these bills. It is expected that the accounting standards will come into force in 2015.Third the Financial Reporting (Amendments to Other Enactments) Bill includes a century of tidy-ups by making amendments to more than 80 other Acts. Those changes will make financial reporting requirements fully consistent with the goals of financial reporting and replace archaic language. Fourth the two bills make financial reporting legislation more user-friendly by placing provisions where most users would expect to find them.The Financial Reporting Bill also repeals the Financial Reporting Act 1993. This means that the provisions in the 1993 Act that constitute the External Reporting Board and describe its powers and obligations are being included in the Financial Reporting Bill largely unchanged. Core accounting definitions are consolidated within the Financial Reporting Bill. This includes retaining existing provisions in the 1993 Act and moving other definitions from the Companies Act 1993. The Financial Reporting (Amendments to Other Enactments) Bill places all substantive reporting obligations in sector industry and entity-specific Acts. Those Acts cross-refer as necessary to the standard definitions in the Financial Reporting Bill.The Financial Reporting (Amendments to Other Enactments) Bill changes the Financial Markets Conduct Act 2013 by consolidating the reporting requirements for all Financial Markets Conduct Act reporting entities. Most of those obligations currently appear in the Financial Reporting Act 1993 but they also appear elsewhere such as in the Building Societies Act 1965. Splitting the bill into two bills will mean that there will be a short Financial Reporting Act of about 35 pages comprising the provisions that will be referred to for decades to come. The Financial Reporting (Amendments to Other Enactments) Act will be about 150 pages. It is likely to be of little interest beyond 2016.I would like to thank the External Reporting Board for its significant contributions to these reforms. These bills deal with the “who” question—who is a reporting entity? It is for the External Reporting Board to answer the “what” question—what accounting standards each class of reporting entity must comply with. These questions are likely tobe linked and the External Reporting Board has been working very effectively with the Government. The External Reporting Board submitted a reporting strategy to me in March 2012 and I approved it in April 2012. The strategy is fully consistent with the policy of the two bills. The External Reporting Board has been implementing its strategy to the extent that it can under the Financial Reporting Act 1993. It has also issued exposure drafts for not-for-profit entity accounting standards that will apply to registered charities. Those standards are being finalised and will be issued once the two bills have been passed.To conclude the Financial Reporting Bill and the Financial Reporting (Amendments to Other Enactments) Bill will make major contributions to strengthening the financial reporting system in New Zealand. I commend these bills to the House.