Annual Financial Report : General and special purpose statements
All charities must submit an Annual Information Statement each year. Medium and large charities need to submit an annual financial report as well as the Annual Information Statement.
What is included in a financial report
Medium and large charities with no transitional reporting arrangement must submit:
- financial statements for the reporting period, including:
- statement of profit or loss and other comprehensive income
- statement of financial position
- statement of changes in equity
- statement of cash flows
- notes to the financial statements
- a signed and dated responsible persons’ declaration about the statements and notes (www.acnc.gov.au/templates)
- (for medium charities) a signed and dated reviewer's report/auditor's report
- (for large charities) a signed and dated auditor's report.
Types of financial statements
The ACNC Regulations state that your charity’s financial statements and notes must:
- meet applicable Australian Accounting Standards, and
- provide a true and fair view of your charity’s financial position and performance.
Australian Accounting Standards stipulate three types of financial statements:
- Full General Purpose Financial Statements
- Reduced Disclosure Regime (RDR) General Purpose Financial Statements.
- Special Purpose Financial Statements.
Which type of financial statements should my charity submit?
To decide which type of financial statements your charity needs to prepare under the Australian Accounting Standards, your charity must first establish whether it is a ‘reporting entity’.
Is my charity a reporting entity?
The Australian accounting standard AASB 1053 defines a reporting entity as:
'an entity in respect of which it is reasonable to expect the existence of users who rely on the entity's general purpose financial statements for information that will be useful to them for making and evaluating decisions about the allocation of resources. A reporting entity can be a single entity or a group comprising a parent and all of its subsidiaries'.
If people use and rely on your charity's financial statements to help them make decisions (for example, about how to spend money) then your charity is most likely a reporting entity.
Ultimately, whether your charity is a reporting entity will depend on a number of factors and the particular circumstances of your charity. Consideration of these factors will help determine whether there are likely users of your charity’s financial statements. Where it is not apparent that people use and rely on your charity’s financial statements, the primary factors to be considered are:
- Is there a spread of ownership/membership or a level of separation between management and owners/ members/ others that have an economic interest in your charity? The greater the separation of membership from management, the more likely members will use and rely on your charity’s financial statements.
- Does your charity have economic or political importance/influence? The more economic or political importance/influence your charity has, the more likely people will use and rely on your charity’s financial statements.
- Is your charity large in size, or have a high level of sales/ assets/ debt/ funding from governments or other parties, or a high number of employees? The larger your charity is, the higher its level of sales/assets/debt/funding, or the higher its number of employees, the more likely people will use and rely on your charity’s financial statements.
Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity contains further details about the definition of a reporting entity and the factors listed above. Your reviewer or auditor may also assist to determine whether your charity is a reporting entity.
General purpose financial statement
If your charity is a reporting entity it must submit to the ACNC a general purpose financial statement that complies with all applicable Australian Accounting Standards. The standards are issued by the Australian Accounting Standards Board (AASB) and provide ways of accounting for and presenting the financial information of your charity.
Your charity can also choose whether to report under a reduced disclosure regime (RDR), which allows significantly less disclosure in the notes to the financial statements.
Special purpose financial statement
If your charity is not a reporting entity, it can submit a special purpose financial statement to the ACNC. This means you must apply as a minimum the following six accounting standards to the extent they are relevant:
- AASB 101, Presentation of Financial Statements
- AASB 107, Statement of Cash Flows
- AASB 108, Accounting Policies, Changes in Accounting Estimates and Errors
- AASB 1031, Materiality
- AASB 1048, Interpretation of Standards
- AASB 1054, Australian Additional Disclosures.
Even if your charity is not a reporting entity, you may choose to report using general purpose financial statements (or RDR general purpose financial statements).
To help you decide, you may want to consider the following points.*
- More financial information is disclosed. This encourages transparency and accountability, and will help your charity to meet Governance Standard 2.
- Intended to meet the needs of users who depend on the information.
- May be quicker and cheaper to prepare than general purpose
- May take more time and cost more than special purpose to prepare.
- Less financial information is disclosed which reduces the level of transparency and accountability.
- May not satisfy the needs of users who depend on the information.
* These points are only suggestions and not intended to capture all circumstances. Make a decision based on your charity’s situation and get professional advice if you are unsure.