INTHEBLACK February 2023 - Magazine - Page 23
“This is recognition from the AASB that the
reporting needs of the not-for-profit sector are
different from the for-profit private sector and
the public sector.”
RAM SUBRAMANIAN, CPA AUSTRALIA
that is simpler to apply and an accounting
policy choice to prepare consolidated financial
statements or separate financial statements
with additional disclosures.
The AASB’s discussion paper proposes that
Tier 3 NFPs would still be able to “opt-up” to
an accounting policy permitted or required by
Tier 1 or Tier 2 AAS for certain transactions.
Also, if a smaller NFP private sector entity
chooses to present either full general purpose
financial statements (GPFS) in accordance
with all AAS, or GPFS accompanied by
simplified financial disclosures in accordance
with AASB 1060, it will not be restricted from
doing so.
RIGHT DIRECTION,
BUT CHALLENGES AHEAD
Ram Subramanian, senior manager reporting
and audit policy at CPA Australia, says the
AASB’s proposal to simplify accounting for
smaller NFPs is a step in the right direction.
“We support what the AASB is doing. We
think this is a great initiative from the AASB
to create a fit-for-purpose standard for the
smaller not-for-profits,” Subramanian says.
“This is recognition from the AASB that the
reporting needs of the not-for-profit sector are
different from the for-profit private sector and
the public sector.”
Subramanian says the significant effort the
AASB has put into developing the proposed
simplified accounting framework for smaller
NFPs is commendable, and its approach is
reasonable.
However, he notes that the AASB’s
proposed framework would require regulatory
changes across Australia for it to work
properly.
“The AASB’s new Tier 3 standard is one
piece in the NFP regulatory puzzle.
“The requirements for preparing NFP
financial reports are mostly set out in state
What about
smaller for-profits?
There is a clear need for a simplified reporting
requirement or standard for smaller for-profit
entities, says Ram Subramanian, senior manager
reporting and audit policy at CPA Australia.
One example is licensees
under the Queensland
Building and Construction
Commission (QBCC), which
requires financial reporting
under its Minimum Financial
Requirements Regulation that
affects small licensees with
relatively low annual revenue
of A$800,000 and above.
Small licensees are not able
to lodge special purpose
financials and are required to
prepare general purpose
financial statements based on
the same Australian
Accounting Standards (AAS)
as large companies.
“We’re advocating with the
QBCC, and will be advocating
with the AASB [Australian
Accounting Standards Board],
that we need to think about a
simpler solution for these
licensees,” says Subramanian.
“Why not think about
tweaking what they’re
creating for the not-for-profit
space and make it available
for some smaller for-profits?”
Accounting expert David
Hardidge FCPA has been
advocating for a simplified
accounting approach for
small-to-medium enterprises
(SMEs) for more than 15 years.
He agrees that extending
what evolves for smaller NFPs
to small private companies
makes a lot of sense.
The International
Accounting Standards Board
introduced the International
Financial Reporting Standards
(IFRS) for the SMEs
Accounting Standard in 2009
to simplify reporting
requirements for small
enterprises. This standard was
never adopted in Australia.
“Why can’t we apply a
similar system using what
the AASB calls a ‘transaction
neutral approach’, which
essentially means broadly
the same standards for both
public sector, private sector,
not-for-profits and forprofits?” Hardidge says.
“There is a broader question
that, if you’re doing a simpler
system for not-for-profits,
how different is this to IFRS
for SMEs? Would it be simpler
to not go down this path of
Australia writing their own
standard – why not adopt
IFRS for SMEs in Australia?”
intheblack.cpaaustralia.com.au 23