Jan 10, 2023 Matthew Hung

Up For Discussion: New Tier 3 Reporting Framework for Not-for-profits

We mentioned before that the option of preparing Special Purpose Financial Statements will be removed under the Australian Accounting Standards. This has already happened for many for-profit organisations, and is now a step closer for not-for-profit organisations. When this happens, all entities preparing financial statements in accordance with the account standards will be required to prepare General Purpose Financial Statements.

Currently General Purpose Financial Statements are either:

  • Tier 1 – compliant with all recognition, measurement and disclosure requirements of the accounting standards.
  • Tier 2 – compliant with all recognition and measurement requirements of the accounting standards but with a simplified set of disclosure requirements.

The Australian Accounting Standards Board (AASB) has recently released a discussion paper about the development of a new General Purpose Tier 3 set of requirements just for Not-for-Profit entities, expected to apply to charities with revenue of $500,000 or more.

The intention is that by making changes to the recognition and measurement requirements, Tier 3 reporting will make it simpler for these smaller not-for-profits to prepare General Purpose Financial Statements.

Suggested changes include:

  • Choice not to prepare consolidated accounts
  • Leases to be recognised on a straight-line basis, not on the balance sheet.
  • Greater ability to match income and expenses
  • Measurement of employee benefits on an undiscounted basis.

The AASB is seeking feedback on the proposals by 31 March 2023. There are more details and the option to give your say at https://www.surveymonkey.com/r/AASBTIER3NFP