Proposed reporting changes from the AASB

In good news for the sector, the Australian Accounting Standards Board (AASB) recently closed consultation on two exposure drafts, proposing changes to simplify Special vs General Purpose Reporting requirements.

In a nutshell, the proposal removes the option for entities to submit ‘Special Purpose’ reporting, with all reporting moving to the ‘General Purpose’ format.

The proposal also sets out tiered reporting requirements, and key exemptions, depending on the organisation’s turnover and type:

• Tier 1: for private & government entities (doesn’t include NFP orgs) – General Purpose, full disclosures
  
• Tier 2: for non-profits over $3mil turnover – General Purpose, with simplified disclosures
  
• Tier 3: for non-profits with $500k to $3m turnover – General Purpose, with proportionate exemptions applying for the application of some accounting standards. These include:
  
  • the choice to present consolidated financial statements or separate financial statements (where there are multiple entities in a group)
  • the ability to defer revenue if there is an evidenced common understanding, between the funder and the entity, on how the funding is to be used. This will make ‘rolling over’ funding to a future year easy/practical.
  • no requirement to recognise lease assets or lease liabilities, with lease payments or income being recognised on a straight-line basis over the lease term
  • no requirement to measure short-term and long-term employee benefits on an discounted basis

In our view, the proposals are a win for the non-profit sector. The General Purpose format is more comprehensive, and less open to deviations from the accounting standards, compared with Special Purpose. This will ensure the necessary levels of transparency.

The proposed exemptions, for tier 3 orgs up to $3m turnover, take a common-sense approach and will reduce the complexity of accounting, in a proportionate way.

While we’re really pleased to see the Board reconsidering its position on this matter, we won’t hold our breath on how long it may take to implement – the expectation is at least 2 years (!) Watch this space though, it’s certainly a positive step forward for the sector.