#CPACONGRESS D2: Not-for-profit sector – status update Ram Subramanian CPA Policy Adviser – Reporting and Auditing CPA Australia Friday 21 November :30AM - 11:20AM

Overview of the session -The regulatory landscape -What’s happening with the ACNC? -Local issues -Financial reporting -The reporting entity concept -AASB 10, 13 and 15 -Innovations in financial reporting for NFPs -Audit/assurance considerations

Australian Charities and Not-for-profits Commission -What’s happening with the ACNC? -Impact on entities incorporated under Commonwealth and State/Territory laws -Unincorporated entities -Your statutory obligations -Where to now? -Public register -One stop shop -Red tape reduction -Good governance

Regulation of NFPs in your State/Territory Incorporated associations Unincorporated and Commonwealth regulated entities Fundraising and grants Cooperatives and others

Reporting entity concept The AASB research project and findings Large proprietary companies and companies limited by guarantee Incorporated associations and others What does it all mean for NFPs? Do accounting standards apply? Review of thresholds set in legislation Are we going to get consistency across Australia? AASB – some options for change

AASB 10 Consolidated Financial Statements Applies to annual reporting periods beginning on or after 1 January 2014 Concept of CONTROL is now more specific Three step approach to determine if control exists: Power over investee Exposure, or rights, to variable returns Ability to use power to affect return Consequences of AASB 10 for not-for-profits Some examples when AASB 10 may apply

AASB 13 Fair Value Measurement Applies to annual reporting periods beginning on or after 1 January 2013 Issues to consider by NFPs Fair valuing non-financial assets? Yes Highest and best use Physically possible, legally permissible and financially feasible

AASB 13 measurement considerations Valuation techniques Market approach Cost approach Income approach Fair value hierarchy Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 inputs are unobservable inputs for the asset or liability

AASB 13 Examples Park land controlled by a Heritage Trust Residential property providing low cost housing in a CBD location

AASB 15 Revenue from Contracts with Customers Applies to annual reporting periods beginning on or after 1 January 2017? Change in focus from “transfer of risks and rewards”, to “transfer of control” NFP specific issues need to be addressed, these include: Assets received without obligations (donations etc.) Application of revenue standard to unique NFP situations

AASB 15 overview RECOGNISE REVENUE ALLOCATE TRANSACTION PRICE TRANSACTION PRICE PEFORMANCE OBLIGATIONS IDENTIFY CONTRACT

AASB 15 NFP specific issues to be addressed Identifying the “customer” Enforceable rights and obligations Donation component of a revenue contract

Audit/review developments for NFPs Grant acquittals and other similar engagements Guidance from AUASB expected next year Review engagements as an alternative to audit Becoming more prevalent under legislation as an alternative to audits Does not have to be conducted by RCAs or in some cases by public practitioners Competency requirements and Professional Indemnity Insurance

The road ahead for financial reporting and beyond for NFPs Integrated reporting Service performance reporting National Standard Chart of Accounts

QUESTIONS