NFP Financial reporting insights

New SPFS disclosures take effect  

Under AASB 2019-4 Amendments to Australian Accounting Standards – Disclosure in Special Purpose Financial Statements of Not-for-Profit Private Sector Entities on Compliance with Recognition and Measurement Requirements, new disclosure requirements take effect for financial years ending on or after 30 June.   

You will need to make new disclosures about your compliance with recognition and measurement requirements in Australian accounting standards’ .

They apply to: 

  • Charities registered with the ACNC with an annual revenue of $250,000 or more preparing special-purpose financial statements, and  
  • NFPs lodging SPFSs with the Australian Securities & Investments Commission under the Corporations Act 2001 (for example, companies limited by guarantee). 

Your SPFS’s will need to disclose: 

  • Why the decision was made to prepare an SPFS 
  • For each material accounting policy that does not comply with the recognition and measurement requirements, an indication of where it does not comply or that the assessment has not been made 
  • The overall compliance of your SPFS with the recognition and measurement requirements of accounting standards (except for consolidation and equity accounting), or whether this assessment has not been made, and 
  • How the consolidation-and-equity accounting requirements have been applied. 

AASB 2019-4 makes amendments to AASB 1054 Australian Additional Disclosures. 

New disclosure standard for Tier 2 

Disclosures relevant to Tier 2 entities have been detailed in a new standard – shading will no longer be used to show which disclosures in other standards may be omitted. 

AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities will apply for financial years beginning on or after 1 July next year. 

It aims to reduce the reporting ‘burden’ of for-profit and not-for-profit entities using current Tier 2 reporting requirements for preparing general-purpose financial statements.  Some existing disclosures have been removed and new disclosures required.  

AASB 1060 does not change which entities are permitted to apply Tier 2 reporting requirements nor Tier 2’s recognition and measurement requirements, which are the same as for Tier 1 entities. 

If you have to step up from special-purpose to general-purpose financial reports you will see an overall increase in disclosures (for example, in related parties, tax and financial instruments), but you will also be able to remove some disclosures as a result of not having to comply fully with: 

  • AASB 101 Presentation of Financial Statements 
  • AASB 107 Statement of Cash Flows 
  • AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors 
  • AASB 1048 Interpretation of Standards, and  
  • AASB 1054 Australian Additional Disclosures. 

Early adoption of AASB 1060 is encouraged via special transitional relief (provided in AASB 2020-2) from disclosing certain comparative information in the first year. 

FAQs on research grants updated 

The AASB staff FAQs for not-for-profit entities on accounting for research grants have been updated. 

The updates include: 

  • More Q&A’s 
  • Clarifying Scenario 1B on grants payable in instalments subject to agreed research activities being carried out, and 
  • Removing Scenario 2A, which has been included in the illustrative examples accompanying AASB 15. 

New research reviews NFPs’ service-performance reporting 

Under the Australian reporting framework, disclosure of service-performance information is mostly unregulated for NFPs.   

Due to a general lack of emphasis on non-financial information in both national and state legislations, efficiency information being reported by NFPs is insufficient to meet users’ need. 

For charities, stakeholders compare their overall objectives with service-performance information disclosures.   

Appropriate guidance is required on mandatory disclosures about linking efficiency information to mission-related objectives and long-term goals. 

AASB research report 14 Literature Review: Service Performance Reporting for Not-for-Profits reviews both Australian and international literatures on the topic.  It suggests that the introduction of a tiered service-performance reporting framework could assist in alleviating operational and cost pressures on smaller NFPs. 

The report supports the AASB’s Management Commentary and Service Performance Reporting project to determine whether the International Accounting Standards Board’s practice statement 1: Management Commentary being updated by the IASB can be adequately adapted to become mandatory.