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REVIEW OF FINANCIAL REPORTING BY ISSUERS
CYCLE 9

EXECUTIVE SUMMARY

The Securities Commission of New Zealand has completed Cycle 9 of its Financial Reporting Surveillance Programme (FRSP). This report presents our findings.

The Commission reviewed the annual reports of 24 issuers, with balance dates from 30 June 2008 to 31 December 2008.

The overall quality of financial reporting by issuers in Cycle 9 was satisfactory. Notwithstanding that financial reporting was generally good in many areas, in Cycle 9 the Commission continued to find inadequacies in matters that were previously alerted to issuers in our news releases and in previous public reports.

The Commission wrote to 17 of the 24 issuers mainly about:

• financial instrument disclosures;
• related party information and key management personnel compensation;
• impairment of assets; and
• disclosure of management judgements and estimates.

Thirty-two percent of all matters raised with issuers in Cycle 9 were resolved through further information and clarification. In 65% of matters raised issuers agreed to revise or enhance disclosures in their future financial statements (change agreed). In the remaining case subsequent correspondence was entered into with the issuer to close the matter off by reiterating the Commission's comments (second letter).

The Commission will follow up and review the next annual reports of those issuers who have agreed to make the necessary changes to ensure that those matters raised have been taken into account.

None of the matters identified, and already dealt with, warranted the Commission taking any enforcement action or making any referrals to any other appropriate body.

Concluding comments

Comprehensive, transparent and timely financial reporting is essential to restore investor and market confidence in the securities market. In this respect our reviews indicate there is still scope for improvement. In particular the Commission urges issuers to pay specific attention to their disclosures relating to financial instruments, impairment of non financial assets and valuation assumptions ensuring that these disclosures are comprehensive and transparent.