An Annual Financial Report provides the public with extra information and an additional level of assurance about a charity's operations and financial affairs throughout a reporting period.

From a charity's perspective it serves to meet its legislative requirements under the ACNC Act, and is also an indicator of good governance.

As a minimum, medium and large charities must provide the ACNC with the following information when submitting their financial report:

• a statement of profit or loss and other comprehensive income
• a statement of financial position
• a statement of changes in equity
• a statement of cash flows
• notes to the financial statements
• a signed and dated Responsible Persons’ declaration about the statements and notes (templates for these reports are available from our Templates section)
• for medium sized charities, a signed and dated reviewer's report or auditor's report. For large charities a signed and dated auditor's report (templates for these reports are available from our Templates section).

A charity's financial statements must be either General Purpose Financial Statements or Special Purpose Financial Statements.

If your charity is a 'reporting entity' it must submit to the ACNC General Purpose Financial Statements (GPFS) that comply with all applicable Australian Accounting Standards. All private sector not-for-profit entities (which includes charities) are permitted to apply either Tier 1 or Tier 2 requirements when preparing GPFS*. If your charity is not a 'reporting entity', it can submit either GPFS  or Special Purpose Financial Statements.

*Some charities may be required to prepare full GPFS (Tier 1) under other legislation or regulation.

Generally speaking, if

• people use and rely on your charity's financial statements to help them make decisions about how to allocate resources, and
• people cannot have their information needs satisfied if your charity prepared Special Purpose Financial Statements

then your charity is most likely 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'.

Ultimately, whether your charity is a reporting entity will depend on a number of factors, as well as your charity’s particular circumstances.

Consideration of these factors will help determine whether there are likely to be 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:

• If there is 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.
• Whether your charity has economic or political importance or influence? The more economic or political importance or influence your charity has, the more likely it is that people will use and rely on your charity’s financial statements.
• If your charity is large, if it has a high level of sales/assets/debt/funding from governments or other parties, or if it has 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.

For more information you can refer to the Definition of the Reporting Entity (Statement of Accounting Concepts SAC 1) on the AASB website.

Your reviewer or auditor may also help you determine whether your charity is a reporting entity. If in doubt please speak to an auditor, reviewer or financial expert for guidance.

If your charity is a reporting entity, it must submit General Purpose Financial Statements that comply with all applicable Australian Accounting Standards.

The standards are issued by the Australian Accounting Standards Board (AASB), and provide guidance for the presentation, measurement and disclosure of financial information for your charity.

The ACNC also provides general guidance on the new Australian Accounting Standards that impact charities.

Your charity can choose to prepare full General Purpose Financial Statements (Tier 1), or General Purpose Financial Statements under a simplified disclosure framework (Tier 2). When applying a simplified disclosure framework, the statements are still considered to be General Purpose Financial Statements.

Reduced Disclosure Requirements (RDR)

If applying RDR, charities are allowed significantly reduced disclosures in the notes to their financial statements in comparison to full General Purpose Financial Statements (Tier 1).

Charities should note that RDR is set to be replaced from 1 July 2021.

Simplified Disclosures (SDR)

The AASB has introduced AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities which will replace the RDR framework, where all relevant disclosure requirements are now contained in a single standard.

The changes will apply to all Tier 2 entities (same as RDR) and does not affect which entities are permitted to apply Tier 2. The recognition and measurement requirements of Tier 2 also remain unchanged and the same as Tier 1.

For more information about the changes and the new disclosures that will be required, refer to AASB 1060 on the AASB website.

Refer also to the AASB Staff FAQs on new Standards for Not-For-Profit entities.

If your charity is not a reporting entity, it can submit Special Purpose Financial Statements to the ACNC.

This means you must apply, as a minimum, the following six accounting standards:

• 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 (This is now superseded by AASB 108, Accounting Policies, Changes in Accounting Estimates and Errors)
• AASB 1048, Interpretation of Standards
• AASB 1054, Australian Additional Disclosures.

Charities that are not designated as 'reporting entities' may report using General Purpose Financial Statements if they want to.

The ACNC also provides general guidance on the new Australian Accounting Standards that impact charities, including AASB 1058 Income for Not-for-Profit Entities. The ACNC has been working closely with the AASB to provide further guidance, see the AASB Staff FAQs on new Standards for Not-For-Profit entities.

Our checklist covers key issues for you to consider and includes helpful hints for preparing your charity’s annual financial report. Note that this checklist does not cover every possible scenario and some requirements may not apply depending on the type of financial report and a charity’s individual circumstances.

Medium and large-sized charities must include an annual financial report when submitting their Annual Information Statement (AIS). For small charities, providing an annual financial report is optional but encouraged.

Your charity’s financial report needs to meet ACNC requirements, except in cases where the ACNC accepts the financial reports that a charity submits to another regulator as part of our transitional reporting arrangements.

Your charity’s financial statements and notes must comply with Australian Accounting Standards set by the Australian Accounting Standards Board (AASB) and give a true and fair view of the financial position and performance of the registered entity. We have included references to the specific accounting standards in the checklist where relevant.

Does your charity's financial report include a complete set of financial statements?

• statement of profit or loss and other comprehensive income
• statement of financial position
• statement of changes in equity
• statement of cash flows

AASB reference: AASB 101.10.

Does your charity's financial report include notes required by all relevant Australian Accounting Standards to explain the financial statements?

Charities that are not ‘reporting entities’ and prepare ‘special purpose financial statements’ must ensure they include any disclosures required by the following standards:

• AASB 101, Presentation of Financial Statements
• AASB 107, Statement of Cash Flows
• AASB 108, Accounting Policies, Changes in Accounting Estimates and Errors
• AASB 1048, Interpretation of Standards
• AASB 1054, Australian Additional Disclosures.

AASB reference: AASB 101.10.

Does your charity's financial report include comparative figures for the current and previous reporting periods?

AASB reference: AASB 101.38.

Does your charity's financial report have appropriate line items presented in the statements of profit or loss and financial position (including consistent presentation of classes of material items)?

AASB reference: AASB 101.82, AASB 101.82A.

Does your charity's financial report disclose the charity's significant accounting policies?

AASB reference: AASB 101.117.

Does your charity's financial report have appropriate disclosures about accounting estimates, judgements and errors?

AASB reference: AASB 101.122, AASB 101.125, AASB 108.

Has the cash flow statement been classified between operating, investing and financing activities?

AASB reference: AASB 107.10

Does your charity's financial report have the required additional disclosure notes?

Your charity's financial report should have disclosure notes regarding:

• compliance with all relevant Australian Accounting Standards (reporting entities only)
• the legislative reporting framework that underpins the financial statement preparation (e.g. ACNC Act)
• not-for-profit entity statement
• disclosure of audit/review fees (optional for RDR)

AASB reference: AASB 1054.

​​​​​ Does your charity's financial report disclose the depreciation method and other required information for each class of property, plant and equipment?

This is optional for 'non-reporting entities'.

AASB reference: AASB 116.

Has your charity assessed whether there is any indication that certain assets may be impaired at the end of the reporting period?

This is optional for 'non-reporting entities'.

AASB reference: AASB 136.

Does your charity's financial report include disclosure notes about key management personnel compensation and the nature of all related party transactions?

This is optional for 'non-reporting entities'.

AASB reference: AASB 124.17, AASB 124.18

Does your charity's financial report include a signed and dated Responsible Persons’ declaration?

Does your charity's financial report include an auditor’s report (or reviewer’s report for medium charities) signed by an appropriate auditor or reviewer?

Does the auditor’s or reviewer’s report state the financial report meets the requirements of the ACNC Act?