By ELLEN READ
Small businesses have the opportunity to voice their views on a subject close to most of their hearts - simplifying financial reporting obligations.
A discussion document released this week by the Ministry of Economic Development, as part of a review of the Exempt Companies Regime (of the Financial
Reporting Act), is asking small businesses for comment.
The paper, which follows recommendations by the commerce select committee and Ministerial Panel on Business Compliance Costs, recognises the Financial Reporting Act was written with large companies in mind.
Accordingly, it is looking at the Exempt Companies Regime (ECR), which aims to provide a low-cost system for most small companies by limiting reporting requirements to core information, says Commerce Minister Lianne Dalziel. The key issue is whether the ECR should be retained at all or whether small companies should be truly exempt from statutory financial reporting requirements.
An "exempt company" is generally a company that: has no more than $450,000 in assets; has no more than $1 million in annual turnover; and does not form part of a group of companies.
The main argument for retaining the regime is that it fosters financial discipline, management and planning, the paper says.
The alternative view is that the information required under the ECR is of little, if any, use to anyone and imposes unnecessary compliance costs on small businesses compared with the perceived benefits.
"I am excited by this phase of work, because of the potential to resolve a source of irritation and frustration among small businesses for a long time," Dalziel said.
Questions being asked include:
* Do you consider that the exempt company regime should be retained but subject to a process of occasional review to identify technical amendments to improve its effectiveness; or removed so that exempt companies become truly exempt from the requirements of the Financial Reporting Act 1993?
* If the exempt companies regime were to be retained, what changes should be made to improve its effectiveness?
For example: Should the current exemption thresholds (assets of no more $400,000 and turnover of no more than $1 million) be changed? Are there other changes that would make the financial reporting obligations of exempt companies more efficient or effective?
Ministry of Economic Development
