New Zealand: Commission finds lack of transparency in financial statements

Issue 49 (October 2009) of the quarterly newsletter of the New Zealand Securities Commission has been published: see here (html). This contains, inter alia, a brief summary of the Commission's analysis of the financial statements of 20 companies. The Commission found what it described as a "widespread lack of transparency", particularly with regard to the disclosure of related party transactions and the underlying assumptions used to value assets. The chairman of the Commission, Jane Diplock, observed:

... all directors should remember that ensuring financial statements comply with the law is a primary duty of company directors. NZ IFRS have been mandatory in New Zealand since 2007. New Zealand companies have had long enough to comply with NZ IFRS. The standards demand greater transparency and if their financial statements are not fully compliant, then company directors should be concerned that they are failing one of their basic duties to shareholders. Company directors are personally responsible to ensure that financial statements tell an entity's story completely and transparently. They should remember that they can be prosecuted under the Financial Reporting Act if their company publishes non-compliant financial statements. If misleading financial information is published in a prospectus, directors can also face prosecution under the Securities Act".