In June 2010 the Government approved the Corporate Reporting Reform Act which aims to cut red-tape and improve Australia’s corporate reporting framework. The financial statement relief applies to 30 June 2010 financial statements.
The key reforms include:
The Corporate Reporting Reform Act contains a new streamlined directors’ report (S300 B) for those limited by guarantee companies that are required to prepare financial statements as from 30 June 2010. This replaces the general corporate directors’ report (S299 and S300). Small limited by guarantee companies (revenues of less than $250,000 and do not have deductible gift recipient status) of course are exempted from the requirement to prepare a financial report.
The intention of the changed legislation was to exclude the large number of provisions that are not relevant for typical not-for-profit limited by guarantee companies. These include disclosures relating to the payment of dividends and options issued to directors as remuneration. Given that not-for-profit companies are generally purpose or objective driven, the Government argued that stakeholders in not-for-profit companies are likely to be particularly interested in the objectives of the organisation and how the activities conducted during the period contributed to achieving those objectives.
Section 300 B of the Corporations Act sets out the requirements for the annual directors’ report of companies limited by guarantee which are as follows:
S 300 B: Annual directors’ report—companies limited by guarantee
In June 2010 the AASB issued new standards (AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements) on a reduced disclosure regime for non-publicly accountable for-profit private sector entities and certain entities in the not-for profit private sector and public sector. These were available for early adoption for 30 June 2010 financial statements.
The new standards introduce a second tier of reporting requirements into the Australian financial reporting framework. This substantially reduced the burden of financial reporting for certain entities in both the private and public sectors in preparing their general purpose financial statements. The new standards introduce a regime which requires disclosures that are substantially reduced when compared with those required under the full IFRSs as adopted in Australia.
With the introduction of the reduced disclosure regime, the Australian Accounting Standards now consist of two tiers of reporting requirements that apply to general purpose financial statements:
The AASB acknowledges that whilst Tier 2 requirements would be available to all not-for-profit private sector entities and most public sector entities, regulators might exercise a power to require the application of Tier 1 requirements by the entities they regulate. Accordingly it will be interesting to monitor reporting trends in the coming year and any response from regulators.
For further information on any of these financial reporting reforms please contact your local Grant Thornton advisor or Keith Reilly. National Head of Professional Standards at firstname.lastname@example.org.
To download a PDF copy of the October 2010 edition of our Not-For-Profit Industry Insider, click here.