Accounting Records (back) under the microscope
The Financial Markets Authority (FMA) has announced that it plans to issue guidance and expectations for keeping proper “accounting records” and issued a Consultation Paper on the topic.
While the FMA’s mandate is limited to oversight over entities who are subject to the Financial Markets Conduct Act 2013 (“FMCA”), the legal requirement for an entity to keep proper “accounting records” captures a much broader range of entities (for example, including, but not limited to: section 194 of the Companies Act 1993; section 74 of the Limited Partnerships Act 2008, section 101 of the Incorporated Societies Act 2022 etc.)
That is, all entities that have a legal requirement to keep “accounting records” should take note, as the Guidance that will ultimately be issued by the FMA will likely be pointed to as a minimum best practice threshold.
In explaining why the FMA has felt compelled to issue such guidance, the Consultation Paper notes the following:
- While various Acts refer to the requirement to keep appropriate accounting records, they do not provide any further regulations on the content of these records.
- As accounting requirements have become more complex over time, accounting records are no longer limited simply to only bank statements and invoices, but include documentation that supports accounting considerations, decision-making and conclusions.
- The FMA has identified an increase in the number of instances where there was a lack of sufficient records supporting the accounting treatment.
In particular, the Consultation Paper specifically notes that “Technical accounting papers” should be prepared in instances where an entity must address:
(a) A complex technical accounting issue, or
(b) Complex, or new, accounting standards and requirements (including accounting standards that have been issued but are not yet effective).
Also, as part of this process of compiling such technical accounting papers, the FMA Consultation Paper highlighted that entities should consider engaging technical experts.
Regular readers of BDO’s Cheat Sheet series issued by BDO’s IFRS Advisory may recall that this very issue of the need to compile technical accounting papers, and engage technical experts where necessary, was the topic of a covered in detail in a Cheat Sheet issued in April 2021.
It provides additional useful background on the “Accounting Records” issue, as well as a more expansive list of potential transactions where technical accounting papers may be necessary.
For more information and to view the FMA’s Consultation Paper, please refer to the FMA’s website here.
For entities needing to engage technical experts to assist with the compilation of technical accounting papers, please contact BDO’s IFRS Advisory department to discuss how BDO can assist you further.
For more on the above, please contact your local BDO representative.
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