For financial years ending on or after 30 June 2020 not-for-profit (NFP) entities preparing special purpose financial statements (SPFS) that are either:
will need to include new disclosures in their financial statements regarding their compliance with the recognition and measurement (R&M) requirements of Australian Accounting Standards (AAS). Other NFP entities preparing SPFS are not affected by these changes.
The changes, contained in AASB 2019-4, require disclosure of:
1. The basis on which the decision to prepare SPFS was made. For example, if there are no users of the financial statements who are not in a position to require the preparation of reports tailored to their information needs.
2. Compliance with the R&M requirements in AAS (other than in relation to consolidation and equity accounting):
If there is one instance of a material accounting policy applied by a NFP entity which does not comply with the applicable R&M requirements in AAS or compliance has not been assessed, the NFP entity cannot claim that its financial statements overall comply with all the R&M requirements in AAS. However, non-compliance with the R&M requirements of AAS for an accounting policy that is not material to the entity could still claim that its financial statements overall complied with the R&M requirements in AAS.
For the purpose of these disclosures, R&M requirements exclude consolidation and the equity method of accounting as the application of AASB 10 and AASB 128 are the subject of the following separate disclosure.
3. The application of the consolidation and equity accounting requirements. In addition to the above, where the NFP entity has interests in other entities it is required to disclose either:
NFP entities do not have to provide quantitative information or reconciliations where their accounting policies do not comply with all the R&M requirements in AAS. More information and illustrative examples are included in AASB 2019-4.
The new disclosures are required for annual reporting periods ending on or after 30 June 2020.
If you are affected, you should familiarise yourself with the new requirements so you can consider how to make the disclosures in light of your current accounting policies and treatment of interests in other entities. You should also discuss the new disclosures with your auditors in advance of year-end to understand what analysis and supporting documentation they may need.
The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.