Faults found in 20 of 30 reports

Two-thirds of company financial reports recently surveyed by the Securities Commission were found wanting.

The commission, which regularly samples company reports in its continuing surveillance programme, looked at 30 reports with balance dates from December 31, 2006, to April 30, 2007. Of the 30 companies, 20 were informed of problems with their statements.

The commission said satisfactory agreement with the companies was reached in 92 per cent of the matters raised.

During the previous review cycle in October last year, 40 per cent of reports examined were not up to scratch.

In the most recent review, the commission took issue with some companies over their disclosures of substantial shareholder information, director share dealings and non-compliance with NZX listing rules.

Some of the problems relating to the New Zealand equivalents of the International Financial Reporting Standards (NZ IFRS), which were introduced last year, included incorrect disclosures of earnings per share and inadequate disclosures around goodwill.

Problems relating to the previous standards - GAAP (generally accepted accounting practice) - included inaccuracies and non-disclosures in the statement of cash flows, non-disclosure of fees paid to the auditor for other services, non-consolidation of a wholly owned subsidiary and inadequate disclosure of related party transactions.

The commission said there were few problems with the financial statements of first-time users of NZ IFRS.

Of the companies examined, 15 were listed on the NZX or New Zealand Debt Market, seven were listed on the New Zealand Alternative Market, three had shares traded on Unlisted and five were not listed on any exchange.

The aim of the programme is to encourage companies to improve the quality of their financial reporting, which the commission said was "inextricably linked to the fairness, efficiency and transparency of securities markets".

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