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Draft minimum requirements 'give taxpayers more certainty'

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Fuseworks Media
Fuseworks Media

Inland Revenue (IR) today released its draft minimum requirements for special purpose financial statements.

Legislative changes currently before Parliament to amend the Tax Administration Act, will allow IR to specify the information it requires taxpayers to include in their financial statements.

New Zealand Institute of Chartered Accountants Director - Tax Policy, Jolayne Trim, says the draft minimum requirements for special purpose financial statements will give taxpayers and their advisers more certainty about what IR will wish to see in their financial statements.

"The amendments proposed by the Financial Reporting Bill will eliminate the need for many small-to-medium companies to prepare general purpose financial reports (GPFR). Inland Revenue is a significant user of financial statements and has had to give careful consideration to the level of information it needs now that the requirement for companies to prepare GPFR is being removed," says Ms Trim.

Companies will be required to prepare a balance sheet, profit and loss statement, statement of accounting policies, tax reconciliation, schedule of related party transactions and certain other information. The draft requirements allow tax values to be used where possible.

"NZICA is pleased to see people will now have more clarity as to what IR is thinking," says Ms Trim.

The draft requirements propose a requirement for companies to provide a schedule of related party transactions that will impose an additional compliance cost. "In this instance, NZICA would prefer IR to ask specific, targeted questions rather than the fuller form of disclosure currently being proposed," says Ms Trim.

For non-companies, the indicative threshold for preparing special purpose financial statements is $60,000 of turnover. This will cover some entities that do not currently prepare financial statements. Ms Trim says the current turnover threshold is too low and that Government should give serious consideration to raising it. She notes that Inland Revenue has asked for feedback in this area and NZICA will submit for the threshold to be raised.

Inland Revenue is seeking feedback on the draft requirements with submissions due 20 December 2013.

Further to the IR minimum requirements, NZICA is drafting special purpose financial reporting (SPFR) guidelines that will meet the more extensive needs of the users of financial statements which is due for release later this year.

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