On 30 March 2023, the AICD made a submission to the Australian Accounting Standards Board (AASB) consultation on the Development of Simplified Accounting Requirements (Tier 3 Not-for-Profit Private Sector Entities). The AASB Discussion Paper is the first step in revising the not-for-profit (NFP) financial reporting framework. The AASB sought stakeholder views on whether it has struck the right balance between simplifying the accounting requirements for smaller NFPs and ensuring their financial statements remain useful.
The AICD submission strongly supported the development of a Tier 3 Accounting Standard that is simple, proportionate, consistent, and transparent for application by smaller NFPs. The key points of our submission were:
- The AICD supports the removal of the ability to prepare special purpose financial statements (SPFS) of NFPs captured under a Tier 3 Accounting Standard. This is consistent with our previous submission supporting the removal of SPFS for for-profit private sector entities.
- The AICD supports NFPs having the option of not presenting a statement of changes in equity as part of a Tier 3 Accounting Standard.
- The AICD supports further work to ensure proportionality of reporting thresholds as this would be determined by the relevant regulatory requirements.
- The AICD does not support the introduction of a further reporting tier that would introduce additional complexity for NFPs when determining regulatory reporting obligations.
- The AICD supports permitting Tier 3 NFPs to change accounting policies voluntarily if the change results in financial statements providing more reliable and relevant information to users about the effects of transactions on the entity’s financial position, financial performance, or cash flows.
- The AICD supports transitional relief to allow NFPs time to adapt to the new Tier 3 Accounting Standard for the first time and those moving between tiers.
- The AICD encourages the AASB and ACNC to undertake a broad awareness raising campaign through factsheets, free webinars, and other complementary channels to educate NFPs of their reporting obligations under new Tier 3 Accounting Standard. The AICD encourages the AASB to consider increasing in-person engagement for smaller NFPs in regional, rural and remote communities.
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