Financial reporting exemptions

On this page:

• Exemption policies
• Class FMC Act exemptions in place
• FMC public accountability designations

Exemptions policies

We have regulatory powers to grant financial reporting exemptions and vary public accountability designations.

Our aim is to find a balance between ensuring businesses provide appropriate financial information for those who need it and minimising costs for those providing it.

The FMA grants 2 types of exemptions:

• individual exemptions for a specific business and related parties
• class exemptions that cover a broad type of businesses.

Below is an overview of our key policies.

Exemptions for overseas FMC reporting entities

Preparation and audit exemptions

We may grant you an exemption from the requirement to prepare financial statements under NZ generally accepted accounting practice and the requirement to use a NZ qualified auditor if:

• you prepare financial statements using high quality accounting standards 
• you are subject to appropriate financial reporting and audit regulation. This is more likely if you are listed and have an independent regulator 
• we can obtain co-operation from your regulator if we need it. This is more likely if your regulator is a signatory to the International Organisation of Securities Commissions’ Multilateral Memorandum of Understanding on Consultation and Cooperation.

We may also provide relief to those that have NZ operations and who are required to prepare NZ business financial statements. These are sometimes referred to as branch financial statements. These financial statements are used by Inland Revenue and the Reserve Bank for their monitoring purposes therefore, we are unlikely to provide exemptions from these requirements. However, in some cases we may allow you to prepare financial statements under overseas GAAP or use an overseas auditor.

The Financial Markets Conduct (Overseas FMC reporting entities) Exemption Notice 2016 is an example of this policy in practice.

The table below details the overseas GAAP we consider provide high quality information to investors and the jurisdictions with appropriate financial reporting and audit regulation.

We will periodically review and amend this list as necessary.

Other exemptions for New Zealand and overseas businesses

Recipients of funds from conduit issuers

Sometimes regulated offers are made through special purpose vehicles or finance subsidiaries known as ‘conduit issuers'. These issuers loan most of the funds to related-parties.

In these situations, the related-parties are considered ‘recipients of funds from a conduit issuer’ and become FMC reporting entities in their own right. The cost of complying with the reporting requirements for all the related-parties can be extensive and unnecessary, when more relevant information for investors can be provided or is already available.

For example, a finance subsidiary raises debt and on-lends the funds to its parent and other subsidiaries. All the companies provide unconditional unlimited cross-guarantees and the group financial statements are audited and publicly available.

In this case, the group financial statements are likely to be a good representation of the group’s ability to meet the interest and principal payments. Therefore we may exempt the other subsidiaries from having to each prepare, have audited and lodge financial statements. Applications for exemptions in this situation are usually considered on a case-by-case basis.

Lodgement exemptions

Full exemption

Generally, if you are required to prepare financial statements under the FMC Act, you will have to lodge them in NZ. However, we may grant overseas businesses an exemption from lodgement if they have made offers where NZers are not the primary audience. The Financial Markets Conduct (Incidental offers) Exemption Notice 2016 is an example of this policy in practice.

Exemptions to extending lodgement deadlines

We may extend the deadline for lodging financial statements. However, thresholds are high and exemptions are rare. You need to have a compelling reason why you can’t comply with the 4 month period, or specific circumstances that make it inappropriate. Overseas businesses may have longer timeframes to prepare financial statements under overseas law, however, we don’t consider this sufficient on its own to grant exemptions.
 
Partial and technical exemptions

We may consider exemptions from the requirements if there are:

• technical difficulties complying, or
• difficulties with specific aspects.

Applications usually arise from specific circumstances. 

Class FMC Act exemptions in place

Below is an overview of selected class exemptions already in place. Before relying on any exemption, you should carefully read the notice and ensure you can meet all the conditions.

If you wish to apply for an individual exemption you will need to include a draft exemption notice with your application. We recommend reviewing other financial reporting exemptions as a starting point. These exemptions reflect our approach and can be adapted to your individual circumstances.

Exemptions for overseas FMC reporting entities

Financial Markets Conduct (Overseas FMC Reporting Entities) Exemption Notice 2016

Effective from: 4/11/2016 – 3/11/2021

This exemption allows businesses listed in certain jurisdictions to use their overseas GAAP financial statements that have been audited by an overseas auditor to meet their main financial reporting requirements in NZ.

It also allows you to prepare your NZ business financial statements using overseas GAAP and you can have them audited by one of the following:

• a NZ qualified auditor 
• an auditor allowed or permitted in the overseas jurisdiction 
• an auditor qualified under the laws of Australia.

Financial Markets Conduct (Overseas Registered Banks and Licensed Insurers) Exemption Notice 2016

Effective from 28/10/2016 - 28/05/2020

It allows overseas banks registered in NZ, and overseas insurers licensed in NZ, to use their overseas financial statements to meet the main requirements of the FMC Act. The notice does not remove any requirement to prepare, and have audited, separate branch financial statements for their NZ business, and these must be in NZ GAAP.  The auditor for these branch financial statements may be a NZ auditor or certain overseas auditors. 

Financial Markets Conduct (Incidental Offers) Exemption Notice 2016

Effective from: 18/11/2016 – 17/11/2021

Where an overseas listed issuer makes an offer to existing holders of securities ,eg, a rights offer, NZ investors may incidentally receive that offer. Without an exemption, the standard requirements of the FMC Act would apply. This exemption relieves issuers listed in certain jurisdictions from the disclosure, governance, and financial reporting of the FMC Act for that offer. 

Other exemptions for New Zealand and overseas FMC reporting entities

Financial Markets Conduct (Financial Reporting – DIMS licensees) Exemption 2015

This exemption relieves small and medium-sized providers of DIMS from certain financial reporting obligations. The extent of the exemptions depends on the size of the licensees’ business based on the retail funds under management (FUM). It does not apply if a DIMS licensee is a FMC reporting entity for any other reason, doesn’t have an independent custodian, or the licensee has more than $250 million in retail FUM.

FMC Act public accountability designations

All FMC reporting entities have a designated level of public accountability. This impacts which tier of the External Reporting Board Accounting Standards Framework the FMC reporting entity must report under. The tier determines whether the reporting entity must use full accounting standards (eg, NZ IFRS) or reduced disclosure standards (eg, NZ reduced disclosure regime) when preparing its financial statements.

The FMC Act identifies classes of FMC reporting entities it deems to have higher public accountability.  All other classes of FMC reporting entities have lower public accountability. The FMC Act also allows us to vary designations for either individual or classes of FMC reporting entities. Generally speaking FMC reporting entities which investors have a direct investment in, have higher public accountability than other FMC reporting entities.  See the table below that summarises this.

Public accountability at a glance

 *The FMA has issued a notice to re-designate recipients of funds from conduit issuers and licensed derivative issuers to having higher public accountability. 

Find out more about:

• Current exemption notices
• How to apply for an exemption