Special Purpose Disclosures for NFP Financial Statements. AASB 2019-4 requirements summary relating to AASB 1054.

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Financials template expert content provider & AASB member Carmen Ridley summaries the latest information regarding the recently released update to AASB 2019-4 and how to decide on the disclosures required.

AASB 2019-4  Amendments to Australian Accounting Standards – Disclosure in Special Purpose Financial Statements of Not-for-Profit Private Sector Entities on Compliance with Recognition and Measurement Requirements will affect all not-for-profit (NFP) entities preparing special purpose financial statements (SPFS) that are required to comply with AASB 1054 Australian Additional Disclosures from 30 June 2020.

This includes:

  • Each NFP entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act 2001; and
  • Each NFP entity, that has annual revenue of $250,000 or more, lodging SPFS with the Australian Charities Not-for-profits Commission in accordance with the Australian Charities and Not-for-profits Commission Act 2012.

The amendments were issued in November 2019 and will apply to annual reporting periods ending on or after 30 June 2020. Early application is permitted.  The new disclosures are intended to be a pragmatic interim means of improving the quality of information provided to users of SPFS.

Due to the timing of the issues of the standard and the short transition period, the 2020 CaseWare model financial statements nor the 2020 financials release doesn’t include the new disclosures, however outlined below are three key steps to assist NFP entities with making the new disclosures

Step 1.     Is the NFP preparing special purpose financial statements and are they required to comply with AASB 1054 Additional Australian Disclosures?

If yes, continue through the steps below

If no, no impact from this standard

Step 2.     Does the NFP entity have interests in other entities?

If the NFP entity has subsidiaries, associates or joint ventures, the SPFS need to disclose either:

    • that they have been consolidated or equity accounted for in accordance with Australian Accounting Standards (AAS); or
    • that they have not been consolidated or equity accounted for in accordance with AAS and the reasons why.

It the NFP entity has not determined whether or not it has subsidiaries, associates or joint ventures, it must instead disclose this fact.

Step 3.     Do the NFP entity’s material accounting policies (and financial statements) comply with the recognition and measurement (R&M) requirements in AAS (except for consolidation and equity accounting)?

If they do, the NFP entity shall disclose that fact.

If they don’t comply, the NFP entity shall disclose this fact, along with an indication of where their policies do not comply.

Alternatively, if the NFP entity has not assessed whether or not their policies comply, they should instead disclose this fact.

NFP entities are also required to disclose the basis on which the decision to prepare SPFS was made.

These new disclosure requirements do not require NFP entities to make any changes to their existing accounting policies.  NFP entities are also not expected to undertake a detailed assessment of each material accounting policy in order to make the disclosures.  The disclosures should be based on information that is currently known to the NFP entity, and it is important to note that quantification of the extent of any non-compliance is also not required.

AASB 2019-4 includes a number of illustrative examples and other guidance which to help NFP entities with making these disclosures.

If you have any questions or require clarification please contact Carmen on cridley@afrs.com.au