Regulator

N.Z. regulator seeks greater disclosure on asset values, debts

New Zealand's securities regulator is urging companies to be more transparent with investors about how they are valuing assets and borrowing risks they face.

Falling property values and tighter lending markets have increased the importance of proper reporting of assets including financial instruments, the Securities Commission said in a statement. Those measures will be the focus of a review of 2008 financial year reports the commission will start shortly.

“The key here is not mere compliance with the standard, but issuers telling the full story about the risks they face and how they manage them,” said Alastair Boult, the commission's chief accountant. “If disclosures beg a further question, the commission considers that transparency has not been achieved.”

More than 20 New Zealand non-bank lenders have failed the past two years as the collapse of the U.S. subprime mortgage market increased credit costs and made it harder for clients to refinance and repay loans.

New Zealand's financial reporting is generally good and the latest review wasn't driven by concerns about the adequacy of recent company reports, Boult said in a telephone interview.

“Challenging” markets and the adoption of international financial reporting standards by most companies made now a good time to focus on the issue, he said.

Companies should focus on the way they determine fair market values and disclose key assumptions and risks that may trigger writedowns. Debts also need to be classified accurately and triggers within loan covenants clearly disclosed, the commission said.

(Published by Bloomberg - September 4, 2008)