New Zealand Flags Weak Spots in Financial Reporting as Uncertainty Builds

Key Takeaways

• Disclosure Gaps Remain: Some companies still fall short in clearly explaining key judgments, assumptions, and risks.
• Fewer Late Filings: Reporting timeliness has improved, though delays remain a warning sign for governance issues.
• Climate and Financial Reporting Misalignment: Inconsistencies between disclosures risk confusing investors.
• Regulatory Action Continues: The FMA has taken action ranging from feedback letters to civil proceedings.

Deep Dive

New Zealand’s Financial Markets Authority has flagged ongoing weaknesses in financial reporting disclosures, even as overall standards remain high and filing timeliness shows signs of improvement.

The regulator’s Financial Statements Monitoring Insights 2022–2025 report, based on reviews of 60 audited financial statements and a broader assessment of FMC-reporting entities, paints a relatively steady picture on the surface. Many entities are meeting expectations. Reports are, in more cases than before, being filed on time. But the underlying detail tells a more uneven story.

The FMA found that disclosures do not always give investors a clear view into how numbers are arrived at. In particular, there are still gaps in explaining key judgments, assumptions, and risks, along with inconsistencies in how significant balances are measured and described. In more complex areas, especially those involving estimates, the basis for those decisions is not always communicated clearly.

Those issues are not new, but they take on more weight in the current environment. As the FMA noted, economic instability, global tensions, and rapid market shifts are making it more important for investors to understand how companies are interpreting conditions at the time financial statements are prepared. High-quality reporting, the regulator said, allows investors to assess resilience, identify emerging risks, and make informed decisions with confidence.

The review also pointed to ongoing challenges in applying newer or more judgment-heavy standards, alongside inconsistencies between financial statements and climate-related disclosures. That misalignment, the FMA warned, has the potential to undermine user confidence if different parts of a company’s reporting are not telling a coherent story.

There are, however, signs of progress. Late filings declined over the three-year period, which the regulator described as a positive indicator of stronger processes and greater awareness of reporting obligations. Even so, delays have not disappeared, and the FMA cautioned that late reporting can still signal deeper governance issues while limiting the timely flow of information to investors.

Regulatory action over the period reflected a mix of supervision and enforcement. The FMA issued feedback letters in some cases, while more serious or repeated failures led to infringement notices, licence cancellations, and civil proceedings.

Jacco Moison, the FMA’s Head of Audit, Financial Reporting & Climate Related Disclosures, said the findings should serve as a prompt for boards and management to revisit how their reporting holds up under scrutiny. Investors, he said, need to be able to see how market conditions have been factored into financial statements, particularly in periods of heightened uncertainty.

The FMA also reiterated that responsibility ultimately sits with directors, emphasizing that financial reporting is a core accountability to investors. Entities, the regulator said, should use the insights from the review to strengthen internal controls, reinforce governance, and improve transparency in areas that rely on significant judgment.

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