Managing IFRS reporting for your business

If you’re running an overseas company doing business in New Zealand, or you’re a larger New Zealand company, you might need to deal with International Financial Reporting Standards (IFRS) reporting. It sounds complicated, but it doesn’t have to be a nightmare if you know what you’re doing.

What exactly is IFRS reporting?

Think of IFRS reporting like following a recipe that everyone around the world uses to make their financial reports look the same. In New Zealand, companies that meet certain criteria must prepare their financial reports using New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

Here’s what you’ll need to do. First, you’ll need to prepare financial reports that follow these standards. Then you’ll need an auditor to review everything and give their tick of approval. Finally, you must file these audited reports with the New Zealand Companies Office within five months of your balance date.

This process involves hiring two different professional firms. One prepares your reports, and another audits them. You’re looking at costs between $50,000 and $150,000, and that five-month deadline comes around faster than you’d think.

Who actually needs to file these reports?

The rules are different depending on what type of company you are.

For overseas subsidiaries operating in New Zealand, you’ll need IFRS reporting if your consolidated assets exceed NZ$22 million or your consolidated turnover is more than NZ$11 million for two consecutive financial years.

Other companies hit the threshold when their consolidated assets exceed NZ$66 million or consolidated turnover tops NZ$33 million for two consecutive years.

New Zealand companies with 10 or more shareholders also need to comply, regardless of their size. Some companies choose to opt in voluntarily, though this is less common.

Getting around the requirements

Nobody enjoys unnecessary compliance work, so let’s talk about legitimate ways to avoid these requirements.

If you’re a New Zealand company, you might be able to opt out of filing requirements if 95% of your shareholders vote to do so. However, you’ll still need to prepare the reports according to NZ IFRS standards. The key here is timing. You must pass the resolution to opt out within the required timeframe, or you’re stuck with the full compliance burden.

Overseas companies don’t have an opt-out option, but there are still ways to avoid getting caught by the requirements. You might consider adopting a sister company structure instead of a holding company structure to avoid consolidating assets and turnover. Careful planning of your corporate finance can help you avoid accidentally crossing the thresholds. Regular monitoring of where you sit against these thresholds is essential.

Managing the reporting process efficiently

If you can’t avoid the requirements, don’t panic. With proper planning, you can handle this efficiently.

Start by engaging an accounting firm that actually knows how to prepare IFRS standard reports. Many New Zealand firms work primarily with smaller businesses that don’t need IFRS reporting, so don’t assume every firm can handle this work. Check their experience well before your financial year ends. If this is your first year under IFRS, you’ll need conversion work, which means preparing comparable numbers for the previous year. This takes extra time and costs more money.

Next, you’ll need to find an auditor. If someone tells you they can prepare your reports and audit them, walk away. There’s an obvious conflict of interest when auditors review their own work. Finding a competent and efficient auditor isn’t always easy, so start your search early.

Before anyone starts working, arrange planning meetings with both your accountant and auditor. Work out a clear timeline and establish who’s responsible for what. You’ll need to be organised on your end too. Get information to your professionals promptly and keep everyone on schedule.

If you’re running behind and might miss the filing deadline, stay in communication with the Companies Office. They won’t grant formal extensions, but they’re reasonable about delays as long as you keep them informed before each promised date passes.

The penalties for missing deadlines start at $7,000 per director and can escalate to $50,000 for the company plus $50,000 for each director. These aren’t amounts you want to mess around with.

Getting the right help

IFRS reporting doesn’t have to be overwhelming if you approach it smartly. The key is understanding your obligations, planning ahead, and working with people who know what they’re doing.

If you’d like assistance navigating IFRS reporting requirements for your business, the team at Gilligan Sheppard can help you work through your specific situation.