Date posted: 14/10/2022

Simplifying NFP reporting

Time for CAs to have their say

In brief:

  • The AASB has issued proposals for a standalone Tier 3 reporting standard for NFPs. 
  • The proposals offer simplified recognition and measurement – a key outcome members have been seeking.  
  • Have your say to support the progress of these important reforms. 

For many years, Chartered Accountants in the Australian NFP sector have been expressing concern about the suitability of IFRS standards as the basis for their financial reporting. Over 80% of respondents to CA ANZ’s 2019 survey on the AASB’s planned special purpose reporting reforms believed that simplified recognition and measurement requirements should be available for use by the NFP sector.

In response, we’ve been intensively gathering input from CAs on this issue, and engaging with the AASB, and so it’s pleasing to report that those member desires are rapidly becoming a reality. In late September, the AASB issued a discussion paper setting out the framework for a stand-alone Tier 3 accounting standard. By genuinely simplifying the accounting requirements for smaller not-for-profit private sector entities, this proposed Tier 3 standard has the potential to both improve the comparability and quality of financial reporting and reduce the costs of preparing a general purpose financial report (GPFR). It offers those NFPs a far more appropriate and workable solution than what is currently available in the Tier 1 or 2 standards. 

Key simplifications include keeping leases off balance sheet, an income recognition model that better reflects how NFPs obtain and use their funds, optional consolidation requirements, and the measurement of donated assets at either cost or fair value. There are also simplified financial instruments and impairment requirements, all of which go to the heart of the concerns with IFRS recognition and measurement requirements that members conveyed in our 2019 survey. 

The AASB has listened to member feedback and responded so it is now our turn to review that response and let them know if they have got it right. The AASB discussion paper is open until the end of March 2023 and over that period the AASB is hosting a series of online and face to face discussion roundtables that anyone can attend. While formal submissions are welcome, a survey option is also available to capture views. 

To help understand the proposals, the discussion paper is supported by a one hour webinar and a 12-page snapshot document that summarises its key proposals and identifies the feedback the AASB needs. Links to all these resources can be accessed on the AASB’s ‘Hot Topic’ webpage.

Like the for-profit reforms that have preceded them, it will be important to ensure that the cost/ benefit balance is right so that user needs are met without wasting limited NFP resources. Therefore, I encourage all members with an interest in NFP reporting to read the AASB’s discussion paper (or the snapshot document) and have your say (via the AASB survey, attending a roundtable or by contacting us and contributing to our submission. Smaller NFPs all over the country, and their key stakeholders,  will be the beneficiaries if we implement a simple comparable cost-effective reporting framework for them all. 

Simplified accounting requirements for NFPs 

Proposals for a standalone Tier 3 reporting standard for NFPs .

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