The ACNC and right and wrong ways to decide between general purpose and special purpose financial reports
If you are a non-accountant charity CEO or board/committee member (and maybe even if you are an accountant), it would be reasonable for you to turn to your regulator’s website for help with deciding whether general purpose or special purpose financial statements were required for your charity. But at the moment you need to take care: there’s conflicting advice there.
In the third section of this advice, they state very clearly and correctly that the answer depends on whether you are something called a ‘reporting entity’. They then point you to the Australian Accounting Standards Board’s latest definition of ‘reporting entity’, and its guidance for how to decide whether or not you are a reporting entity. All good so far.
But then in the second last section they go and ruin this good advice. Under a heading ‘Deciding between general purpose or (sic) special purpose’, they list the main ‘Positives’ and ‘Negatives’ of each. These may well be the pros and cons, but they should play no part in the decision. It is not a matter of which type of statement gives you the better result, but a question of complying with the law. The law that their Governance Standard 3 requires. The law that was correctly stated in the third section of their advice. Are you a ‘reporting entity’? If so, you have no choice – you must prepare general purpose financial statements.
The bottom line? I wouldn’t do what the ACNC suggests in their footnote to the table: ‘Make a decision…and get professional advice if you are unsure.’ No, don’t use the table, and if you think you may be eligible for the statements that are ‘quicker and cheaper to prepare’ (one of their ‘Positives’), then I’d jump straight to professional advice. And given that many professionals have got this wrong – see AASB Research Report No. 1 – be careful how you choose.