Foss Craig: Financial Reporting Bill — Second ReadingText is incorporated into the Bound VolumeFoss Craig: Financial Reporting Bill — Second Reading[Sitting date: 02 July 2013. Volume:691;Page:11504. Text is incorporated into the Bound Volume.]Hon CRAIG FOSS (Minister of Commerce):I moveThat the Financial Reporting Bill be now read a second time . The overall objective of the bill is to make financial reporting in all primary legislation consistent with the accountability and transparency goals associated with general purpose financial reporting. It makes three major changes. First it removes the requirements for small and medium companies to prepare general purpose financial reports. This change will reduce compliance costs for many companies with revenue between $2 million and $30 million per annum. The Commerce Committee has not recommended any major changes to those provisions. Second it will empower the External Reporting Board or XRB to make accounting standards for registered charities. Registered charities are already required to file financial statements but there is no consistency due to the lack of standards. Having standards will benefit registered charities because it will remove uncertainty about whatis expected. It will also increase the quality of reporting and make it easier for users to analyse the financial statements and to compare charities.The Commerce Committee made one significant change relating to charities. It has changed the definition of “specified not-for-profit entity” by increasing the threshold from $40000 annual operating expenditure to $125000. The main impact will be to reduce the percentage of registered charities that must report on an accrual basis from 45 percent to 25 percent. It will mean that an extra 5000 charities will benefit because they will be able to meet their reporting obligations by using the External Reporting Board’s proposed cash reporting standard. In total about 18500 of the 25000 registered charities will be able to report on a cash basis. I agree with this change.The third major reform implemented by the bill is to generally tidy up the financial reporting across the statute base. Many different approaches have been taken to financial reporting over the decades and there are numerous inconsistencies. The Financial Reporting Bill amends more than 80 other Acts. Taken as a whole these amendments to other Acts represent a significant improvement to financial reporting settings in ways that are fully consistent with the accountability and transparency goals of general purpose financial reporting. For example there are many different financial reporting deadlines in legislation at present. The bill as introduced proposed these deadlines be standardised at 3 months after balance date for preparation plus 20 working days for filing what is required. Several submitters stated that these deadlines would be impractical for some classes of reporting entities.The committee made two main changes relating to deadlines. First for reporting entities to have filing obligations the intermediate deadline for preparation serves no purpose and has been removed. For example the deadline for entities that will eventually become financial markets conduct reporting entities will be 4 months to file without there being any mention of a preparation deadline. This will provide those entities with more flexibility to allocate time between preparation audit and filing. Again I think that is a sensible change.The other main deadline-related change is to require other classes of reporting entity to discharge all their reporting obligations within 5 months of balance date. This change will for example benefit large companies that are not issuers by providing 1 more month than was originally proposed by the bill. This is a 1-month reduction in the deadline compared with the current requirements for companies under the Financial Reporting Act 1993. All told the position that the committee has reached on the deadline issue represents a good balance between the benefits of timely reporting and the need to provide a realistic amount of time for the work to be completed.The last major change considered by the committee relates to the proposals to consolidate financial reporting obligations for all financial markets conduct reporting entities. These changes were not included in the Financial Reporting Bill because the Financial Markets Conduct Bill has not yet been enacted. Instead they appear in Supplementary Order Paper 93 which was tabled on the same date that the Financial Reporting Bill was introduced on 28 November 2012. The committee has not recommended any changes to the Supplementary Order Paper. The Commerce Committee has made a number of other amendments to improve the bill—for example removing an audit requirement for a large company that is a subsidiary of another company that is required to have its consolidated statements audited.To sum up the bill makes changes that will both reduce compliance costs and strengthen accountability and transparency. There are some very important and useful improvements although I note that there are no fundamental changes to the bill. I would like to conclude by thanking the members of the Commerce Committee for their work in considering the bill and the related Supplementary Order Paper and byacknowledging the contributions of those who provided submissions on the bill. I commend this bill to the House.