Going global with RSM - Liz Groenewegen, Lloyd Kirby and Colin Wilson - STH.NZ
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Going global with RSM
Liz Groenewegen, Lloyd Kirby and
Colin Wilson
About RSM International
Who is RSM?
• RSM International is the world’s 7th largest network of audit, tax
and advisory firms and the 6th largest global provider of tax
services.
• Worldwide we have;
– 732 offices
– 112 countries
– 3,279 partners
– 28,172 professional staff
– 5,992 administrative staff
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What does RSM offer?
• A full range of professional services with a focus on audit, tax, risk
advisory, IFRS, restructuring and transaction support.
• Specialist services from forensic accounting and expatriate advice
to human resource consulting.
Who is our client base?
• The core client base ranges from growth-focused entrepreneurial
businesses through to leading multinational organisations across
many sectors and operating nationally and across borders.
Connect to rsmi.com and connect with successRecent worldwide success stories
– Global audit work in 41 countries for a world-leading global agro-
industry giant
– Delivering a joint primary listing between Japan and Hong Kong
raising over $200m
– Firms across 22 countries working with a leading global franchise,
headquartered in the US, on their continuing international expansion
– Seven member firms in Europe advising on international tax
structuring on behalf of two leading US private equity groups
– Australia, China and Taiwan providing services to a large food
manufacturer in Japan
– Seventeen member firms in Latin America and the Caribbean
providing compliance services to one of the world’s pre-eminent
airline and airport services provider
Connect to rsmi.com and connect with successGlobal referral system
• Globally managed through Executive Office based in London
• 3 regional centres to manage worldwide referrals across the
network;
– Asia Pacific
– Europe
– Americas
Connect to rsmi.com and connect with successA new united front
• Effective October 2015, it has been announced that RSM
International will unify all of it’s member firms under one single
name and logo– RSM
• The most significant impact of this change will be to our member
firms in the United States – McGladrey and the United Kingdom –
Baker Tilly
Connect to rsmi.com and connect with successRSM in New Zealand
How is RSM represented in New Zealand?
Connect to rsmi.com and connect with successRSM Hayes Audit
Est. 2015• Licenced auditors and registered audit firm
• 1 central location – Newmarket, Auckland
• 4 partners
• 25+ staff
What is our speciality?
• Not-for-profit and charity sector audits
Connect to rsmi.com and connect with successNot-for-profit / charity sector
• We are recognised as experts in audits of the not-for-profit / charity
sector across New Zealand
• Represent a significant number of charities, incorporated societies
and other not-for-profit organisations, as well as philanthropists
and funders.
• Recognised educators
and thought leaders in
the sector
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Summary How RSM can help?
What we can do for you
• Provide accounting and audit services plus the software options
across the country
• Refer to 111 other countries
• Assist companies thinking of expanding into other countries
through consultation with other member firms
Connect to rsmi.com and connect with successIMPORTANT CHANGE AHEAD!
Changes to financial reporting and audit framework
Update July 2015The next two years will see the greatest degree
of change in the financial reporting for NZ
SME’s in the last 20 years.
Our challenge is to guide our clients to the most
appropriate solution for their needs – present
and future.
Connect to rsmi.com and connect with successWhich companies are required to produce GAAP
financial statements?
Public interest Economic significance Shareholder’s interests
• Debt or equity • Large locally owned • More than 10
instruments are traded in • $30m revenue or shareholders unless opt
a public market (or is in • $60m assets out
the process of issuing
• Large overseas owned • Less than 10
such instruments); shareholders and opt in
• $10m revenue or
• Holds funds in a
fiduciary capacity for • $20m assets
broad range of others
• FMC Reporting Entities /
Issuers
All other companies will have no requirement to follow GAAP for periods
commencing 1 April 2014.
Connect to rsmi.com and connect with successWhich companies are required to produce GAAP
financial statements?
To opt out:
• a resolution approved by not less than 95% of the
votes within the opting period. Shareholder’s interests
To opt in • More than 10
• Written notice by 5% of the shareholders given shareholders unless opt
within the opting period but not later than 5 working out
days before the end of that period • Less than 10
shareholders and opt in
Within in the opting period:
From the start of the accounting period until the
earlier of:
• 6 months after the start of the accounting period or
• the date of the annual meeting; or
• In the case of an accounting period that is shorter
than 6 months - the balance date of the period.
Connect to rsmi.com and connect with successWhat other entities have to follow GAAP?
Large Large limited Retirement
partnerships partnerships villages
Registered
Maori Gaming machine
Charities (from 1
Incorporations societies
April 2015)
Certain Friendly,
Building and
Provident
Societies
Connect to rsmi.com and connect with successWhat other entities now don’t have to follow GAAP?
Trusts Incorporated Societies
(except those that are (except those that are
registered charities) registered charities)
Small Companies
Sole Traders
Small Partnerships
Connect to rsmi.com and connect with successFor periods commencing after 1 April 2014
No GAAP No GAAP GAAP
requirement – requirement – requirements
“company” not a “company” • Must comply with
• Must comply with • No legislative the minimum
TAA94, and Tax requirements. requirements for
Administration GAAP that apply to
(Financial that entity.
Statements) order.
e.g. an overseas
Unless [“very!”] e.g. a Family owned company
small or inactive Trust with revenue of
$11m.
Connect to rsmi.com and connect with successExempt “companies”
“small”
• not part of a group of companies
AND
No GAAP
• not derived income in excess of $30,000
requirement – AND
“company” • has not incurred expenditure in excess of
• Must comply with $30,000
TAA94, and Tax
Administration “inactive”
(Financial
Statements) order. • if the company is not required to furnish an
income tax return
Unless [“very!”]
small or inactive
Connect to rsmi.com and connect with successSo if not required to follow GAAP, what to use?
NZICA’s Optional
IRD Minimum GAAP is still Other special
Special Purpose
Requirements permissible in 2015 purpose framework
Framework
• New requirements • Special Purpose • And for 2015 this • Is it properly
introduced for the Financial Reporting may be a viable defined?
2015 year via the Framework for For- option. • Is it a reasonable
amendment Tax Profit Entities basis given the
Administration Act • Single standard intended users
and a related order. • Designed for the
• Further larger to be a
requirements robust alternative
added to these for • Not that
2016 onwards straightforward
though.
Connect to rsmi.com and connect with successWhich entities need to file with Companies Office?
Large subsidiaries of Large overseas companies
overseas companies with a branch in NZ ($10m
($10m Rev, $20m assets) Rev, $20m assets)
Only a 5
month
timeframe.
Large branches of overseas Large companies that are
companies ($10m Rev, $20m 25% or more owned by
assets) overseas shareholders
Connect to rsmi.com and connect with successNew Companies Act Requirements for Directors
• Apply from 1 May 2015
• Compliance with resident director requirements within 180 days
– At least one director living in NZ OR
– At least one director living in an enforcement country (initially just
Australia)
• All directors to provide place and date of birth
• Ultimate holding company details need to be supplied.
Connect to rsmi.com and connect with successInfluencers on framework choices
• Who are key users of the financials?
• Client intentions & objectives
– Cost minimisation
– Comparability and credibility
• Are agreements linked to GAAP?
– Banking
– Earn-out, Royalty
• Are there specific constitutional requirements?
Connect to rsmi.com and connect with successAn important distinction: For profit or public benefit?
• Public benefit entities (PBEs) are reporting entities whose:
– primary objective is to provide goods or services for community or
social benefit
– and
– where any equity has been provided with a view to supporting that
primary objective rather than for a financial return to equity holders.
• For-profit entities are reporting entities that are not public benefit
entities.
• Not always as straight forward as it may seem!
Connect to rsmi.com and connect with successNot for profits – periods commencing 1 April 2015
Public sector – periods commencing 1 July 2014
Tier 1 Tier 2 Tier 3 Tier 4
PBE IPSAS
Simple Format Simple Format
Reduced
Reporting – Reporting –
disclosure
PBE IPSAS Accrual basis Cash basis
regime
< $125,000
> $2m ≤ $2m
operating
expenditure expenditure
payments
Large:
>$30m Single Very simple
Simplifies
operating standard, standard,
disclosure
expenditure template template
requirements
reports reports
Connect to rsmi.com and connect with successWhat are the changes in audit requirements?
Large subsidiaries of
overseas companies Large companies that
Large companies are 25% or more owned
($10m Rev, $20m
Unless opt out by overseas
assets)
shareholders
More than 10 Less than 10 Registered Charities
shareholders shareholders where 5% (from 1 April 2015)
Unless opt out request opt in Over $1m expenditure
Connect to rsmi.com and connect with successSupporting documentation and recommended reading
Change is inevitable and to evolve we must embrace change. The
Belgium's are cautious about change as can be seen in this
short video
Connect to rsmi.com and connect with successYour questions….
Connect to rsmi.com and connect with successThank you for your time today
Reading Material
• We have included associated reading material behind this slide.
Due to time constraints we wont have time to cover this. This is
probably more interesting for the accountants in the room.
Connect to rsmi.com and connect with successIRD requirements – periods commencing 1 April 2014
• The financial statements must consist of:
– a balance sheet setting out the assets, liabilities, and net assets of
the company as at the end of the income year.
– a profit and loss statement showing income derived, and
expenditure incurred, by the company during the income year.
– a statement of accounting policies setting out:
– the policies and assumptions that have been applied or changed, and
– a description of the effect of any material changes in accounting policies
used since the previous income year.
Connect to rsmi.com and connect with successIRD requirements – periods commencing 1 April 2014
• The statements must comply with the following accounting
principles:
– double-entry method of recording transactions, and
– accrual accounting.
• The financial statements may disclose amounts using the following
valuation principles:
– tax values, when they are consistent with double-entry and accrual
accounting
– historical cost, when tax values are not consistent with the
accounting principles used or when historical cost provides a better
basis of valuation, or
– market value, when they provide a better basis of valuation than tax
values and historical cost. Connect to rsmi.com and connect with successThe financial reports must show:
• comparable figures for the previous income year.
• whether they have been prepared on a GST inclusive or exclusive
basis.
• reconciliation of the company's financial statements and taxable
income for the income year.
• taxation-based schedule of fixed assets and depreciable property.
• reconciliation of movements in shareholders' equity for the income
year.
• all amounts from the IR10 form relevant to the company.
• sufficient notes to support amounts required to be disclosed as an
exceptional item on the IR10.
Connect to rsmi.com and connect with successIRD requirements – periods commencing 1 April 2015
• Associated person transactions, where associate is not
– a company; or
– a NZ tax resident
• Disclosure required:
– interest expense on loans from associates
– loans or other advances to associates
– expenses for services provided by associates including wages,
salaries, management fees, and payments for other services
provided to the company
– expenses to associates for rent and leases
– expenses to associates to acquire intangibles or for their use -
including royalty payments
Connect to rsmi.com and connect with successOptional SPFR Framework – Compared to Old GAAP
Element Key features
Overall presentation requirements More detailed requirements around policies and
notes
Statement of changes in equity could be in notes
Prior period errors Comparatives required to be restated
Revenue More explicit guidance in some areas than old
GAAP (but less detail round construction
contracts)
Connect to rsmi.com and connect with successOptional SPFR Framework – Compared to Old GAAP
Element Key features
Expenditure Requirement to disclose detail of expenditure.
(Old GAAP strictly only required very minimal)
Additional explicit guidance around employee
benefits, including need to accrue certain long
term benefits.
Inventories Very similar to existing GAAP
PP&E Allows revaluation to council valuations and
suitably qualified internal valuations
Allows IRD rates for depreciation (including
buildings)
Connect to rsmi.com and connect with successOptional SPFR Framework – Compared to Old GAAP
Element Key features
Expenditure Requirement to disclose detail of expenditure.
(Old GAAP strictly only required very minimal)
Additional explicit guidance around employee
benefits, including need to accrue certain long
term benefits.
Inventories Very similar to existing GAAP
PP&E Allows revaluation to council valuations and
suitably qualified internal valuations
Allows IRD rates for depreciation (including
buildings)
Connect to rsmi.com and connect with successOptional SPFR Framework – Compared to Old GAAP
Element Key features
Intangible assets except goodwill Should be amortised over useful life. 10 year useful
life if no reliable estimate.
JV’s Include share of revenue/expenses/assets &
liabilities
Financial instruments IFRS “light” rules
Debtor provisioning rules similar to current IFRS
Investments in shares – cost or fair value
Derivatives – measured at fair value
Connect to rsmi.com and connect with successOptional SPFR Framework – Compared to Old GAAP
Element Key features
Impairment testing Again – a “light” version of IFRS rules
Equity Compound instruments – all debt
Share based payments – don’t recognise, more
detailed disclosure
The question is whether the resulting framework is simple enough to justify
movement to this rather then NZ IFRS Reduced Disclosure Regime?
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