Big changes proposed for NFP financial reporting The AASB have just released their long anticipated exposure drafts relating to future financial reporting requirements for private sector NFP entities. These changes will mean that certain NFP entities are no longer able to prepare special purpose financial statements and will introduce a third tier of accounting standards which is able to be used by some NFP entities. These proposals are still in exposure draft phase and therefore you have an opportunity to provide feedback – once the final standards are released it will be too late. The comment period is open until 28 February 2025, and we encourage all our potentially affected clients to reach out to your Lowe Lippmann contact to discuss the impact on your financial statements as well as providing direct feedback to the AASB. In summary, these proposals are: NFP private sector entities to prepare general purpose financial statements if they meet one of the following: Are required by legislation to prepare financial statements that comply with either Australian Accounting Standards or accounting standards or Are required by their constituting or other document to prepare financial statements that comply with Australian Accounting Standards or Choose to prepare general purpose financial statements. (ED 334 Limiting the Ability of Not-for-Profit Entities to Prepare Special Purpose Financial Statements). To release a self-contained accounting standard which can be applied to certain NFP private sector entities and will be a general purpose framework (Tier 3). Further information about getting involved and additional resources are available on the AASB website on https://www.aasb.gov.au/news/developing-a-simpler-reporting-framework-for-nfp-entities-in-australia-exposure-drafts-released-for-feedback/

New standards at 31 December 2024  There are three new accounting standards to be considered for the first time for 31 December 2024 reporters. A summary of each of these standards has been considered below as well as potential impacts on our clients. Revised AASB 101 Presentation of Financial Statements provides additional guidance regarding presentation of liabilities as current or non-current. In particular, the standard includes more clarity around the existence of covenants and waivers / periods of grace in the event of a breach. Additional disclosures are required where covenants are tested after the reporting date. This is likely to have impact for many of our clients and we recommend that bank agreements are reviewed as soon as possible as well as identification of potential covenant breaches. AASB 2022-5 Amendments to Australian Accounting Standards – Lease Liability in a Sale and Leaseback clarifies how a seller-lessee should measure lease liabilities arising from a sale and leaseback transaction. It ensures that the leaseback does not lead to the recognition of gains that aren't aligned with the right-of-use asset retained. Expected to have little impact, generally if our clients enter sale and leaseback arrangements, there is a failed sale as control is not transferred from the selling entity. AASB 2023-1 Amendments to Australian Accounting Standards – Supplier Finance Arrangements (2024-1 for Tier 2) introduces new disclosure requirements to enhance transparency about the nature, timing, and amount of liabilities financed by suppliers in relation to the effects of such arrangements on an entity’s liquidity risk and leverage. Little impact expected, however disclosure amendment only.

What Should Be on the Board/Management Committee Agenda for NFP and Smaller Entities? We are fast approaching the end of the calendar year – the second most common reporting date for entities in Australia. Board and Management committees (Boards) of not-for-profits (NFPs) and small entities will be considering their annual reports and the 2025 outlook and as part of this project, it will be time to ensure the Board attention areas are appropriate. Boards should focus on current and emerging risks to ensure their organisations remain resilient and effective – the normal items of financial management, governance, and strategic planning remain relevant, however other key matters which should be included are: Cybersecurity: Ensure your organisation is protected against increasing cyber threats and has robust data protection measures in place, including knowing what data is collected and retained by the organisation. Climate Risk: Evaluate how environmental changes impact operations, funding, and long-term sustainability and whether there is impact from the mandatory climate-reporting risk regime on your suppliers which may impact you. Diversity & Inclusion: Ensuring your governance and decision-making reflect the community your organisation serves, and the appropriate voice is being heard. Digital Transformation: Discuss emerging technologies for operational efficiency and addressing any digital gaps. Ensure appropriate policies for the use of AI are in place. Staffing and Succession Planning: Regularly review staffing levels, development opportunities, and establish succession plans for key roles, such as the Chair of the Board, CEO or General Manager. Geopolitical situation: Consider any likely impacts from the current world uncertainty and overseas elections including supplier and beneficiary locations, changes in exchange rates and interest rates.

Christmas Parties & Gifts 2024 With the well-earned 2024 holiday season on the way, many employers will be planning to reward staff with a celebratory party or event. However, there are important issues to consider, including the possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.

Can staff celebrations attract FBT? With the holiday season coming up, employers may be planning to celebrate with their employees. Before they hire a restaurant or book an event, employers should make sure to work out if the benefits they provide their employees are considered entertainment-related, and therefore subject to fringe benefits tax ('FBT'). This will depend on: the amount they spend on each employee; when and where the celebration is held; who attends — is it just employees, or are partners, clients or suppliers also invited? the value and type of gifts they provide. Employers who do provide entertainment-related fringe benefits should keep records detailing all of this information so they can calculate their taxable value. We will be releasing a full Tax Alert on this topic next week.