Not-for-profit 2021 financial reporting update
Clarity in financial reporting
The June 2021 reporting season is expected to be a challenging period for many not-for-profit (NFP) entities as they continue to navigate through the post-implementation issues of income and lease accounting in addition to more recent developments set out in this update.
The key matters to consider for this current reporting season are:
- Post-implementation issues in respect of:
- Income recognition – The application of AASB 1058 Income of Not-for-Profit Entities and AASB 15 Revenue from Contracts with Customers continues to prove challenging with key areas considered by the Australian Accounting Standard Board (AASB) including termination for convenience clauses, concessionary loans and determining whether the entity is able to recognise the right to receive an asset in cases where the related asset has not yet been received.
- Leases – The accounting for lease modifications is a complicated area, amplified by the economic impacts of COVID-19 on the property leasing market.
- Software-as-a-Service (SaaS) arrangements – In April 2021 the IFRS Interpretations Committee (IFRIC®) published an agenda decision concluding that the majority of configuration and customisation costs incurred in implementing SaaS arrangements should be expensed with only limited scope for capitalisation in certain circumstances.
- Early adoption of AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities – The AASB issued AASB 2021-1 Transition to Tier 2: Simplified Disclosures for Not-for-Profit Entities which provides optional comparative information relief for NFP entities adopting AASB 1060 earlier than the 1 July 2021 effective date.
- ACNC ‘best practice’ guidance – The Australian Charities and Not-for-profits Commission (ACNC) has released ‘best practice’ guidance to encourage charities to provide better information for users of their financial reports to understand the source and amounts of government revenue.
In addition it is important to be aware that the Treasury announced revised ACNC financial reporting thresholds which are effective for the 2021-2022 financial year and new disclosure obligations for charities in relation to key management personnel compensation and related party transactions which are required for the 2021-2022 and 2022-2023 financial years respectively.
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