Proposed New Financial Reporting Requirements For Not-for-Profit Entities

The long-awaited AASB project to simplify reporting for NFP entities has progressed with the issue of two exposure drafts.

ED 334: Limiting the Ability of NFP entities to Prepare Special Purpose Financial Statements

The AASB is proposing that general purpose financial statements be prepared if a private sector not-for-profit entity meets either of the following criteria:

• Required by legislation to prepare financial statements in accordance with Australian Accounting Standards or accounting standards OR
• Required by a constituting or other document to prepare financial statements in accordance with Australian Accounting Standards. Note that existing documents will be grandfathered, and it will only be new or amended documents that will affect this requirement

This proposal means that more NFP entities will have to prepare general purpose financial statements, including all ACNC medium and large charities.

 ED 335: General Purpose Financial Statements – Not-for-Profit Private Sector Tier 3 entities

This proposes a simplified recognition, measurement, and disclosure regime for NFP entities and will be a stand-alone standard. Application of this standard will result in different numbers being recorded compared to existing accounting standards and the regulators, including ACNC, are yet to announce which entities will be eligible to apply the standard.

We expect a number of our clients to be affected by the proposals included in ED334 and ED335 and encourage all of our NFP stakeholders to review the proposals and engage with the AASB through one of their outreach events or the completion of the feedback survey. Further information can be found on the AASB website (https://www.aasb.gov.au/news/developing-a-simpler-reporting-framework-for-nfp-entities-in-australia-exposure-drafts-released-for-feedback/)

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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.