Development of simplified accounting requirements for smaller not-for-profit private sector entities

Tuesday, September 27, 2022

The AASB has published its Discussion Paper – Development of Simplified Accounting Requirements (Tier 3 Not-for-Profit Private Sector Entities) being the first step in revising the not-for-profit private sector financial reporting framework. Comments are open until 31 March 2023.

The Discussion Paper proposes developing a stand-alone accounting standard on the accounting requirements for smaller not-for-profit private sector entities. While the standard will not include any reporting thresholds, the proposals were developed based on the expected common transactions of not-for-profit private sector entities with revenue ranging from $500,000 to $3 million. These proposals are expected to provide simpler accounting while improving the comparability and quality of financial reporting, and reducing costs for smaller not-for-profit private sector entities. Some of the key proposals include:

• a new income recognition model that is simpler to apply;
• accounting policy choice in preparing consolidated financial statements, or separate financial statements with disclosures about the entity’s significant relationships;
• leased assets to remain off the balance sheet for lessees supplemented by disclosures;
• accounting policy choice to record non-financial assets acquired at significantly less than fair value (such as donated assets) at cost or fair value; and
• fair value gains and losses of financial assets (such as managed investment schemes) to be recognised at fair value through other comprehensive income.

During the consultation, the Board will also consider removing the ability of not-for-profit private sector entities to prepare special purpose financial statements in the future.

The current proposals are expected to impact not-for-profit private sector entities that currently:

(a)     prepare special purpose financial statements to satisfy a direction to prepare financial statements in accordance with Australian Accounting Standards;

(b)     comply with a regulatory direction, gather financial information or prepare various financial statements in accordance with the recognition and measurement criteria specified by Australian Accounting Standards; or

(c)      prepare Tier 1 or Tier 2 general purpose financial statements but could qualify for simpler accounting.

The consultation provides an opportunity for interested stakeholders to help shape the financial reporting framework, contribute to developing simpler accounting requirements and reduce preparation costs for smaller not-for-profit private sector entities.

We encourage all not-for-profit stakeholders to get involved by:

• completing the online survey (https://www.surveymonkey.com/r/AASBTIER3NFP);
• making a written submission by lodging online via aasb.gov.au/current-projects/open-for-comment/;
• participate in a virtual outreach or a face to face outreach event; or
• by reaching out to the AASB directly.

Read more here for the dates and how to register for the outreach events