Accounting Records now formally (back) under the microscope

Accounting Records now formally (back) under the microscope

In October 2022 the Financial Markets Authority (FMA) announced that it planned to issue guidance and expectations for keeping proper “accounting records” (see our November 2022 Accounting Alert article).

In February 2023 the FMA issued their Guidance document, which is little changed from the initial Consultation Paper that was open for public feedback and comment.

According, as noted in our previous article, all entities that have a legal requirement to keep “accounting records” should take notice of the Guidance document as it will undoubtably be referred to as the required “best practice” for compliance with this pre-existing legal requirement.

An area of particular note is where the Guidance document 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).

In addition, the FMA also note that:

  • Accounting treatments that lack support in subjective and complex accounting areas can materially impact the financial statements, both quantitatively and qualitatively, as well as also potentially impacting the audit process and opinion.
  • The onus for the preparation of Technical accounting papers (and other forms of “accounting records”) rests solely with an entity and its Board of Directors, although they may require the engagement of external technical experts for assistance.

While the Guidance document does not define or expand on what is considered a “complex transaction”, typically these would include transactions that:

  • Are subject to long, protracted, and complicated financial reporting standards and associated publicly issued guidance, and/or
  • Have different facts and circumstances transaction-to-transaction, and/or
  • Occur infrequently and/or irregularly, and/or
  • Have consequential accounting outcomes (initially, and/or subsequently).

In practice, “complex transactions” would likely include (but are not limited to):

  • The transition to a new financial reporting framework (i.e., a “step-up” to NZ IFRS and/or PBE Standards)
  • Employee Share Option Plans (ESOPs) and Employee Share Purchase Plans (ESPPs)
  • Acquisitions, Mergers, Amalgamations, and/or Restructures (of entire entities, and/or the trade and net assets of an entity or entities)
  • Loans with option to convert into equity instruments of the issuer (Convertible Loans, Notes etc.)
  • Determining whether an investment in an investee is a subsidiary, joint arrangement, associate, or a “passive” investment – and if a joint arrangement whether it is classified as a joint operation or joint venture
  • Software procured via Software-as-a-Service (SaaS) arrangements, and other cloud-based arrangements
  • Revenue recognition
  • Lease accounting
  • Determining discontinued operations and/or assets held for sale.

These are consistent with the types of engagement requests that BDO’s IFRS Advisory department received in the weeks immediately following the issue of the Consultation Paper, as Boards of Directors look to ensure that their entity’s legal requirements are being complied with.

Now that the final guidance has been issued, all entities may be receiving additional communications from their external Auditors (re)emphasising the need for Technical accounting papers prepared by the entity to be provided as part of the audit evidence for the upcoming audit.

Need assistance?

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.

This publication has been carefully prepared, but is general commentary only. This publication is not legal or financial advice and should not be relied upon as such. The information in this publication is subject to change at any time and therefore we give no assurance or warranty that the information is current when read. The publication cannot be relied upon to cover any specific situation and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in New Zealand to discuss these matters in the context of your particular circumstances.
BDO New Zealand and each BDO member firm in New Zealand, their partners and/or directors, employees and agents do not give any warranty as to the accuracy, reliability or completeness of information contained in this article nor do they accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it, except in so far as any liability under statute cannot be excluded. Read full Disclaimer.