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28 Nov. 2019

New disclosure requirements for Not-for-Profit (NFP) Private Sector Entities preparing Special Purpose Financial Statements (SPFS)

New disclosure requirements for Not-for-Profit (NFP) Private Sector Entities preparing Special Purpose Financial Statements (SPFS) on compliance with recognition and measurement requirements effective for annual reporting periods ending on or after 30 June 2020.

What are we proposing for not-for-profit (NFP) entities?

  • New disclosures in special purpose financial statements (SPFS) which will provide clarity regarding compliance with the recognition and measurement (R&M) requirements in Australian Accounting Standards (AAS).

  • Implementation guidance and illustrative examples to help preparers understand the new disclosures, which are not expected to be onerous.

  • No change is required to existing accounting policies.

When will the new disclosures apply?

The new disclosures will apply to annual reporting periods ending on or after 30 June 2020.

Why are we proposing this?

The quality of disclosures in a significant number of SPFS is not sufficient to enable a user to determine what additional information they might need.

  • Research indicates that for 44% of medium and large charities lodging SPFS with the Australian Charities and Not-for-Profits Commission (ACNC) it was unclear whether or not they complied with the R&M requirements in AAS.

The new disclosures will provide more transparency for SPFS available on public record.

Who is affected?

  • Medium and large charities registered with the Australian Charities and Not-for-Profits Commission (ACNC) preparing special purpose financial statements (SPFS); and
  • NFP entities that are lodging SPFS with ASIC under the Corporations Act 2001 (e.g. companies limited by guarantee).

Who is not affected?

  • Small charities registered with the ACNC;
  • Medium and large charities registered with the ACNC that are not required to comply with ACNC reporting requirements due to ACNC transitional reporting arrangements; 
  • NFP entities required by Federal or State/Territory legislation to prepare financial statements in accordance with AAS or accounting standards (e.g. Incorporated associations, co-operatives and charitable fundraising organisations), that are preparing SPFS and not specifically required to comply with AASB 1054;
  • Not-for-profit public sector entities; and 
  • For-profit private and for-profit public sector entities.

What will they need to disclose?

The basis on which the decision to prepare SPFS was made.

Compliance with the R&M requirements in AAS (except for consolidation and equity accounting)

  • For each material accounting policy applied and disclosed in the SPFS that does not comply with the R&M requirements in AAS (except for consolidation and equity accounting), disclose an indication of where it does not comply, or disclose that an assessment of compliance has not been made; and
  • Whether or not, the SPFS overall comply with the R&M requirements in AAS (except for consolidation and equity accounting), or state that such an assessment has not been made.

Application of the consolidation and equity accounting requirements

  • If the NFP entity has determined that its interests in other entities give rise to interests in subsidiaries, associates or joint ventures it shall disclose whether or not it has consolidated or equity accounted for those interests in a manner consistent with the requirements in AASB 10 Consolidated Financial statements and AASB 128 Investments in Associates and Joint Ventures.  If it has not, it shall disclose that fact and the reasons why; or
  • If the NFP entity has not made this assessment and was not required by legislation to do so, it shall instead disclose that no assessment has been made.

AASB staff have prepared a high level summary to assist with understanding these new disclosure requirements required by AASB 2019-4