Rule changes to save time, money
Small businesses will save time and money when new accounting standards come into effect.
From next month businesses with less than $30 million in turnover or less than $60m in assets will not have to produce annual accounts that follow the new External Reporting Board (XRB) standards, also known as Generally Accepted Accounting Practice.
However, under the new legislation, most small-to-medium sized businesses will still have to produce accounts for governance purposes, for the Inland Revenue Department and their bank.
XRB chairman Graeme Mitchell said the new accounting requirements would affect 95 per cent of small businesses. The changes would mean SMEs' annual accounts could be simpler and more relevant to the running of their business.
It was difficult to quantify the amount of time and money different SMEs would save as a result of the new standards but there would be savings, he said.
"The Government has been trying to reduce compliance costs for the SME sector for a number of years and this is one of the clear demonstrations of an attempt to do that."
Full reporting standards were essential for larger organisations with high revenues, or for those that issued shares or borrowed, but could be seen as "arduous" and "overly complicated" for SMEs, he said. "The new standards recognise that businesses have different needs."
The feedback from companies that were aware of the changes was that it was a "sensible thing", Mitchell said. However, XRB found 64 per cent of 500 SMEs surveyed were not aware of the changes and 83 per cent did not know what the changes would mean for them.
It was natural that businesses would be unaware of the changes, Mitchell said.
"They typically only focus on reporting when they need to, but it is time for them to get professional advice to understand how the changes will impact them."
XRB, Inland Revenue and the Institute of Chartered Accountants have been educating businesses on what was changing and how it would affect them, he said. There was always a chance things could slip through the cracks if companies started paying less attention to their accounts, Mitchell said.
The change gave SMEs options and if they wanted to continue to produce full annual accounts they could do so, Mitchell said. He suspected the change to the new standard would be a "gradual process" as SMEs understood how the changes would affect them and what their options were.