CA ANZ and CPA Australia have lodged a joint submission to the second of three Exposure Drafts (ED) by the IFR4NPO project that will produce a global reporting guidance for Not-for -profits. The guidance, known as International Non-Profit Accounting Guidance (INPAG), is being developed in response to a globally recognised need for comprehensive, consistent, and appropriate reporting requirements for this sector.

ED 2 covers the essential recognition and measurement requirements to be applied. They have been based on the principles included in the IASB’s IFRS for SME’s standard and modified further where necessary for application to NFPs. Our submission is of the view that most of the proposed requirements are fit for purpose and will result in the production of consistent and meaningful financial information. However, it expressed the view that the revenue recognition requirements, while conceptually sound, will need further simplification to be workable in practice and produce outcomes stakeholders can understand. This is based on the experience from Australian and New Zealand NFPs who have struggled with similar concepts applied in these jurisdictions, leading to the development and implementation of simpler proposals for Tier 3 entities.

The submission also emphasised the need for quality additional guidance, other educational materials and ongoing support if the guidance is to be successfully implemented globally. It also welcomed IFR4NPO’s work with donor groups to improve the quality of the grant documentation that will support the revenue recognition model.

The third and final ED, due for release in April 2024 will cover financial statement presentation issues and should be followed by competed guidance in mid-2025.