CA ANZ and CPA Australia have lodged a joint submission to the AASB’s Discussion Paper – Development of Simplified Accounting Requirements (Tier 3 Not-for-Profit Private Sector Entities). This consultation begins the development of a third tier of general purpose financial reporting for private sector NFP entities that is intended to replace special purpose financial reporting where compliance with accounting standards is required.

The submission provides broad support for the proposed recognition, measurement and disclosure simplifications, which particularly target areas of member concern including revenue, leases, financial instruments and consolidation. However, we believe that to stand alone the standard needs to be as comprehensive as possible, therefore more work is needed to ensure it covers all the common transactions.

The submission also recognises that it is vital that the new Tier 3 standard is implemented in a timely manner. Waiting for the necessary legislative reform is not a viable option given the number of regulators, the complexities of various legislation, and the immediate reporting needs of the sector. Therefore, we recommend that the AASB include a temporary transitional threshold of up to an annual revenue of between $5m–$10m, thereby allowing any NFP entity with revenue below that to apply the Tier 3 accounting standard while legislative reforms progress.

In addition, the joint submission also calls for:

1. The establishment of a formal transition resource group to support the complex transition and education processes.
2. A reconsideration of the proposed approach to developing Tier 3 disclosures to ensure the resulting level of disclosure is not onerous.
3. A longer-term project to consider developing a Tier 3 standard for the for-profit sector.