The proposals in the newly released and eagerly awaited Ministry of Economic Development and ASRB discussion documents cut to the heart of financial reporting in New Zealand, impacting on every incorporated entity.

In general, the documents are very positive, addressing the issue of who has to report and what they are required to report at the macro level, as opposed to tinkering at the edges or looking only at a subset of entities.

However, important issues remain unaddressed, the current documents failing to be all inclusive and leaving gaps surrounding mid-market entities which need to be filled.

Who will this affect?

Essentially, every entity that can be and has been created through an Act of Parliament will be affected, including companies, partnerships, issuers, charities, incorporated societies, clubs and societies, Maori governance and Government entities

Only unincorporated entities, such as sole traders and family trusts, will be unaffected.

What is being proposed?

Some of the most significant changes include:

* Moving all financial reporting requirements to the Financial Reporting Act 1993, so that all incorporated entities can refer to one place to determine their financial reporting obligations.

* Establishing a new body, the External Reporting Board (XRB), which will be responsible for New Zealand's financial reporting strategy and the preparation and approval of accounting, auditing and assurance standards.

* Creating tiers of financial reporting using indicators such as public accountability, economic significance and separation of ownership and management.

* A move to create sector-specific not sector-neutral standards.

* Requirement for large New Zealand-owned private entities to prepare, audit and file financial statements (a grandfathering scheme for existing companies is proposed).

* Requirement for New Zealand-owned companies with diverse shareholding (more than 10 shareholders) to prepare, audit and file financial statements unless the vast majority of the shareholders agree not to.

* An assurance regime that includes a requirement for reviews as well as audits.