FMA reminds NZ directors of duties on financial reporting

The Financial Markets Authority – Te Mana Tātai Hokohoko (FMA) is calling on New Zealand directors, preparers, and auditors to review and, where necessary, strengthen financial reporting practices after a three‑year monitoring cycle found recurring issues in disclosures, climate‑related information, and filing timeliness across FMC reporting entities, including insurers. The findings are set out in the Financial Statements Monitoring Insights 2022-2025 report, released alongside updated commentary from the regulator.

The report draws on the FMA’s review of 60 sets of audited financial statements and its monitoring of lodgement behaviour for the wider population of FMC reporting entities between July 2022 and June 2025. Jacco Moison, head of audit, financial reporting, and climate‑related disclosures at the FMA, said the operating environment is affecting how investors interpret financial statements. “Investors need to be able to understand how relevant market conditions were considered at the time the financial statements were prepared. This becomes even more important when economic instability, global tensions, and rapid market shifts are creating greater uncertainty. High-quality reporting enables investors to assess resilience, understand emerging risks, and make well informed decisions with confidence,” Moison said.

Review focuses on judgement‑heavy areas

The FMA used a risk‑based approach to select entities and disclosures for review, focusing on sectors and balances where financial reporting risk is higher or newer standards apply. For insurers and other financial institutions, this included items that rely heavily on models and management judgement. The regulator reported that most entities complied with New Zealand equivalents to IFRS and maintained documentation to support key estimates and judgements. Within that overall picture, it identified recurring issues in several core areas:

• Revenue recognition, where some entities did not sufficiently document the basis for recognising revenue and accrued income, did not break down material revenue streams in enough detail, or did not clearly describe performance obligations and payment terms.
• Impairment of non‑financial assets, particularly goodwill, where some disclosures did not adequately explain key assumptions, the identification of cash‑generating units, or the results of sensitivity analyses, and board involvement in approving major assumptions was not always evident in records.
• Going concern assessments, where targeted reviews of entities showing indicators of financial stress generally supported the going concern basis, but at least one entity was asked to improve disclosures about significant judgements, estimation uncertainty, and the nature of going concern risks.
• Expected credit losses, where banks and other entities exposed to credit risk usually provided disclosures consistent with NZ IFRS 7 and NZ IFRS 9, but one entity was advised to clarify how it assessed credit risk and derecognition for transferred financial assets.

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NZ IFRS 17 implementation shows uneven disclosure quality

The report includes a specific section on NZ IFRS 17, now the central standard for insurance contract accounting in New Zealand. The FMA found that insurers had generally implemented the standard, but that the quality and specificity of public disclosures differed across the market.

Common gaps identified by the regulator included:

• Limited quantitative detail or explanation of insurance risk exposures and concentrations.
• Sensitivity analyses that were incomplete or not clearly explained, including where market‑risk sensitivities or net‑of‑reinsurance impacts were missing.
• Claims development information for some non‑life insurers that was unclear, incomplete, or omitted without supporting explanation.
• Accounting policy disclosures that relied on generic wording instead of describing entity‑specific judgements, such as how insurance service expenses and finance income or expense are allocated.
• Inconsistent disclosure of acquisition cash flow assets, including release patterns and impairment assessments.
• Missing quantitative information for some life insurers about the expected pattern of contractual service margin (CSM) release.

The FMA said NZ IFRS 17 will remain a focus of its monitoring work. Boards and audit committees are expected to consider how NZ IFRS 17‑related disclosures help explain performance drivers, risk transfer, and capital use to users of financial statements, rather than treating the standard solely as a compliance requirement.

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Climate‑related reporting alignment remains under scrutiny

The report also assesses how climate‑related risks are reflected in financial statements, particularly for climate reporting entities (CREs) that are required to produce separate climate statements. According to the FMA, CREs are increasingly incorporating climate‑related assumptions into financial reporting, including in fair value measurements for investment properties and biological assets, valuation of energy‑linked instruments, and expected credit loss models. However, the review found examples where climate‑related information disclosed in financial statements did not align with the content of the climate statements.

Instances included climate‑related contingencies described in the financial statements but not addressed in the climate report, and an impairment of goodwill linked to a climate‑related event with no equivalent reference in the climate statements. The regulator said such discrepancies may affect users’ confidence in both sets of disclosures and indicated it would continue to examine consistency between financial and climate‑related reporting. The findings point to the need to ensure that climate‑related assumptions informing pricing, reserving, asset valuation, and capital management are reflected consistently across financial statements and climate reports.

Lodgement trends and causes of delay

Alongside disclosure content, the FMA monitored whether FMC reporting entities lodged audited financial statements with the Registrar within the statutory four‑month timeframe. The regulator reported a decline in late filings over the review period. For December balance dates, the proportion of entities missing the deadline decreased from 20.6% in December 2022 to 4.4% in December 2024. For June balance dates, non‑compliance fell from 6.4% in June 2023 to 2.1% in June 2025. Non‑compliance for March balance dates, which include a large number of investment schemes, remained around 3%.

The FMA said delays in filing can indicate governance or process weaknesses and delay the release of information to the market. It cited common drivers of late lodgement, including incomplete accounting records, delays in complex asset valuations, difficulty finalising going concern assessments, submission deficiencies to the registrar, and auditor resourcing constraints. In some cases, entities postponed issuing financial statements while attempting to resolve funding questions rather than disclosing material going concern uncertainties within the mandated timeframes. The regulator reiterated that going concern uncertainties should be addressed through appropriate disclosure in the financial statements rather than by postponing audited reporting.

Regulatory responses and implications for boards

The report outlines the range of responses the FMA applied where it identified issues, from feedback letters and expectations for enhanced future disclosures to infringement notices, licence cancellation, and civil proceedings. During the review period, the FMA revoked the licence of one crowdfunding service provider where late financial reporting formed part of a broader pattern of non‑compliance, and it commenced civil proceedings against another entity and its director for failing to prepare financial statements over multiple years.

Moison said responsibility for financial reporting quality ultimately rests with boards. “High‑quality financial reporting is a fundamental accountability to investors. We encourage all reporting entities to reflect on these insights, strengthen their internal controls, and maintain the transparency needed to support confidence in New Zealand’s financial markets,” Moison said. For insurers and other FMC reporting entities, the FMA indicated that upcoming monitoring cycles will continue to focus on areas involving significant judgement – including impairment, expected credit losses, fair value measurement, related party disclosures, NZ IFRS 17, and climate‑related matters – as well as ongoing oversight of timely lodgement and the effectiveness of governance over financial reporting processes.