SMELLIE ON SME's: annual accounts are changing

By Pattrick Smellie

Jan. 7 (BusinessDesk) - Happy New Year business owners. Hopefully those of you who don't make your greatest sales through the summer holiday period have had a chance for a rest and to reflect on the year ahead.

There are any number of predictions out there for what 2013 holds, but I reckon it's fairly simple: expect more of the same.

The economy will continue to grow, but it will be tepid and the promised kick-along from the Christchurch rebuild will be less pronounced and more long-acting than most expected to start with.

That means tight margins will continue to combine with picky customers to keep us all on our toes.

It also means finding time to make some clear plans for the next 18 months so that you don't get to June and realise you forgot what you meant to achieve this year.

And being January, we are now also just three months away from the end of the tax year and the apparently endless rigmarole of preparing the annual accounts.

While this year's accounts preparation will be the same as in the past, new legislation introduced just before Christmas will mean big changes for more than half the country's companies in years ahead.

For those who don't employ an accountant to do your accounts - something I've always done to save on heartache, lost evenings and to make sure they have a good chance of being accurate - there will be a mixture of new processes, some unwelcome changes, but hopefully also some simplification in the long run.

The Financial Reporting Bill 2012 had its first reading in Parliament just before Christmas, and Mark Hucklesby, a partner at accounting firm Grant Thornton, reckons something like 450,000 of the 700,000-odd entities filing annual accounts will be affected.

He says the old 1993 law, which is being updated, was useful for threatening significant penalties for faulty reporting. But it's now out of date compared with reporting requirements in Australia, it fails to recognise the particular needs of public sector and not-for-profit entities, and it doesn't capture large partnerships.

However, it's not all bad news.

"Many businesses, particularly small and medium sized companies with annual revenues of less than $30 million or total assets less that $60 million, will be able to substantially reduce their accounting compliance costs," says Hucklesby. Many may not have to complete annual audits either.

However, with more than 450,000 companies soon to be able to use special purposes financial statements, currently used in Australia, well entrenched accounting processes that have been in place for the last 20 years will almost certainly have to change, he warns.

For example, you will only have three months rather than five months after balance date to prepare annual accounts, with fines of up to $7,000 for late filing.

New Zealand’s 28,000 registered charities are also affected.

Unfortunately, the deadline for submissions on the new law is January 18 - hardly conducive to spurring a high number of thoughtful submissions, although you can be sure that accounting firms around the country will have beavered away over Christmas to make sense of it and highlight any really serious drafting errors.

In the meantime, while these changes won't affect the preparation of the most recent year's accounts for most companies, the writing is on the wall for the way things have been done up till now.

Better to get prepared than to have it spring as a nasty surprise once the new law is in place.

(BusinessDesk)

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