Not-for-profit financial reporting framework developments

ED 334 Limiting the ability of Not-for-Profit entities to prepare Special Purpose Financial Statements proposes:

• extending the application of the Conceptual Framework, including adding 'Aus' paragraphs to ensure its contents are relevant to NFP entities
• extending the application of Australian Accounting Standards (AAS) to NFP private and public sector entities
• superseding SAC 1 Definition of the Reporting Entity and thereby removing the ability of NFP entities to prepare SPFS on the basis that the entity is not a reporting entity (as defined by SAC 1).

Under the proposal, NFP entities that are required by legislation to comply with either AAS or accounting standards, or are required by their constituting document or another document to prepare financial statements that comply with AAS will be required to prepare GPFS. An exemption to prepare GPFS is provided as long as the constituting or other document was created or amended before the effective date of the amending standards. Certain transition reliefs are also proposed for entities that early adopt the proposed standards.

ED 334 also proposes additional disclosure requirements covering information about the compliance with the recognition and measurement requirements in AAS in the financial statements of NFP private sector entities applying the exemption and still preparing SPFS.

ED 335 General Purpose Financial Statements - Not-for-Profit private sector Tier 3 entities proposes:

• a single new accounting standard for the GPFS-Tier 3 that is suitable for use by smaller NFP private sector entities
• the forms and contents of the proposed accounting standard that contains simplified recognition, measurement, presentation and disclosure requirements
• to provide relief from restating and presenting comparative information in the year of transition for entities transitioning to preparing Tier 3 GPFS.

The proposed GPFS-Tier 3 will be available only to NFP private sector entities that do not have public accountability and are not prohibited from applying GPFS-Tier 3 by the relevant legislation, constituting document or other document. The proposed standard does not specify which NFP private sector entities will be permitted to apply the GPFS-Tier 3 reporting requirement. This will be determined by the relevant regulatory authorities.

Some of the key simplifications include:

• simpler revenue recognition requirements
• choice whether to consolidate controlled entities
• simplified measurement and disclosure on investments where the entity has at least significant influence when presenting separate financial statements
• book value accounting for 'entity combinations'
• choice of whether to record donated assets at cost or fair value

The AASB intends to provide at least three years of lead time between the issue and the effective date of any final standard.

Comments on the Exposure Drafts are open until 28 February 2025.

Read more in our Reporting Update.