Financial reporting for NFPs
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What at first appeared to be simplifications to reporting requirements for not-for-profits now appear to impose further disclosure in coming years.
Early in 2010 the Federal Government and the Australian Accounting Standards Board (AASB) introduced new financial reporting standards.
The good news for companies limited by guarantee - which encompasses many not-for-profit (NFP) associations – applies for the financial year ending 30 June 2010. Late changes to the Corporations Act abolish all financial reporting requirements including audits for small NFPs that do not have deductible gift status and have annual revenues less than $250,000. For those that have revenues less than $1 million, there is now a choice between a traditional audit and an audit review, so potential savings of, say 50 %, compared to the costs of an audit. Even for the larger limited by guarantees there is a much simplified director's report.
The AASB has also adopted the International Accounting Standards Board’s IFRS for SMEs accounting standard, but, sadly, only the reduced disclosures and not the simplified real accounting recognition and measurement rules.
Still the AASB’s Reduced Disclosure Regime (RDR) accounting standard is claimed to reduce note disclosures by up to 50% compared to full AASB/IFRS accounting standards, and it can be 'sort of' applied now. However, it is unlikely to be attractive to entities that are already on the AASB’s much more current simplified disclosure standards.
More not-so-good news is the AASB’s decision to require all companies and probably non-corporate entities to adopt either full IFRS/AASBs or the abolition of the AASB’s non-reporting rules which have limited disclosures and a free choice on recognition and measurement requirements from 2013. Yet, the IASB states that it is generally designed for listed companies only, compared to IFRS for SMEs which is the IASB’s preferred model for non-listed reporting entities. However, 2013 is a further election away so expect much more public debate on this ‘proposal’!
Additionally, the AASB is working on specific disclosure rules for NFPs, along with the Productivity Commission’s recommendation of a separate accounting standard for NFPs.
Keith Reilly is Grant Thornton’s National Head of Professional Standards and is a passionate supporter of realistic financial reporting and an advocate for IFRS for SMEs. His email is firstname.lastname@example.org
This article first appeared in Associations – Edition 27, November 2010