Changes to Australian accounting standards

The Australian Accounting Standards Board (AASB) is proposing some changes that may impact not-for-profit organisations.

  1. The definition of ‘not-for-profit’

The current AASB definition of a not-for-profit organisation is ‘an entity whose principal objective is not the generation of profit’. The AASB proposes to change the definition to ‘an entity whose primary objective is to provide goods or services for community or social benefit and where any equity has been provided with a view to supporting that primary objective rather than for a financial return to equity holders’.

If this change occurs, some organisations currently recognised as not-for-profit organisations, may fall outside the new definition. Organisations that no longer fall into the new definition may have to report under Tier 1 of the General Purpose Financial Statements (GPFS) rather than under Tier 2.  This proposed change is still being considered.

  1. Changes to Tier 2 reporting for entities that prepare General Purpose Financial Statements

The AASB proposes to replace the current reporting framework for these Tier 2 entities (Reduced Disclosure Requirements) with Simplified Disclosures. This change:

  • will align the Australian reporting standards under the AASB with the International Financial Reporting Standards (IFRS), and
  • is expected to result in decreased disclosure in a number of areas (for example lease and disclosures and disclosure of interests in other entities).

This change may also result in increased disclosures in other areas, including more general information about the organisation (such as domicile), audit fees and cash flows.

This change is proposed to start from the financial year beginning 1 July 2020, but it may be adopted early.

  1. Move from Special Purpose Financial Statements to General Purpose Financial Statements

The AASB is considering shifting reporting from Special Purpose Financial Statements (SPFS) to General Purpose Financial Statements (GPFS) under Tier 2 for not-for-profit organisations. No details of this potential change have been released.

To view more information on these changes, click here.

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