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New Zealand financial reporting surveys reveal disclosure increase, widespread use of additional profit measures

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05 Jul 2011

Deloitte (New Zealand) has released two new publications in its Financial Reporting Survey series.

Financial statements

Issue 5 in the series, Into the detail... Surveying financial statements in annual reports – 2010 (PDF 3,519k), is focused on the 2010 annual reports of a sample of 100 New Zealand companies complying with NZ IFRS and IFRS, with a separate sample of 30 companies taking advantage of New Zealand's differential reporting concessions.

Some of the highlights of the survey include:

  • Financial statements are on average 42 pages long, up from 39 pages in 2009
  • Accounting policies take up on average 14% of the financial statements (many of these policies repeat the requirements of accounting standards)
  • The most commonly used market price sensitivity variations used is 100 basis points (1%) for interest rate exposures and 10% for foreign exchange exposures
  • 326 major sources of estimation uncertainty were disclosed by 99 companies, although only 18% of the uncertainties disclosed included the impact of reasonably possible changes in assumptions
  • The introduction of the new segment reporting standard, which requires disclosure on the same basis as internal management reporting, led to 18 companies changing their segments in 2010.

The report discusses the difficulties of keeping track of the increasing volume of disclosures and notes the Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) project to review IFRS in order to determine where disclosures could be reduced (see our earlier story) and the 'Cutting clutter' report issued by the United Kingdom Accounting Standards Board (ASB) (see our earlier story). The report from the ICAS/NZICA project is expected to be discussed at the July IASB meeting (see the meeting agenda).

Underlying profit

Issue 6 in the series, Underlying profit revisited (PDF 1,080k), considers the practice of reporting underlying profit based on a sample of one hundred 2010 annual reports (finding 87 of which provided alternative earnings or profit measures), makes reference to guidance released in this area and considers what entities should think about when using underlying profit measures. The disclosure of alternate profit measures is contentious and is gaining increasing regulator interest in both New Zealand and Australia.

Earlier editions of the Financial Reporting Survey are available Deloitte (New Zealand) website.

 

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