General Purpose - Simplified Disclosures for KMP balances of Not-for-Profits

Wicus Wessels

There has been a lot of changes – and by default, confusion – on General Purpose - Simplified Disclosures for the Not-For-Profit (NFP) industry, since the introduction of AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities.

One of the areas that created the most discussion was around disclosures of key management personnel (KMP) balances. To help bring some clarity, we’ve put together five key KMP disclosure matters NFP entities and external audit teams need to consider when compiling financial statements.

KMP disclosures under General Purpose - Simplified Disclosures

1. Which entities need to disclose?

The first step in determining whether KMP disclosure is required, is to determine the size of the entity.

 Size of the entity  New revenue thresholds - 30 June 2022 onwards KMP Disclosure requirements 
 Small  Less than $500,000  Not required
 Medium  $500,000 - $3 million  If you are preparing Special Purpose Financial Statements (SPFS) - optional
If you are preparing General Purpose Financial Statements (GPFS) - Mandatory
 Large  Greater than $3 million  Mandatory (unless exemption applies for SPFS)

2. What exemptions are available under General Purpose - Simplified Disclosures?

Exemptions to KMP disclosures are available to:

  • Basic religious charities, regardless of size.

  • Entities that only have one KMP.

All large entities that prepare SPFS are required to disclose their aggregate KMP remuneration if they have two or more KMPs. However, large entities that prepare General Purpose Financial Statements (GPFS) are also required to disclose sub-categories. For example, long and short-term benefits, post employee benefits, etc.

3. Who are considered to be KMPs?

The definition of ‘key management personnel’ per AASB 124 Related Party Disclosures (paragraph 9) and AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-profit and Not-for-profit Tier 2 Entities (paragraph 193) is, “the people with authority and responsibility for planning, directing and controlling the activities of an entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.”

Examples of KMPs are responsible people like Board, committee members and trustees or senior staff such as the Chief Executive Officer, Chief Financial Officer (CFO) and Chief Operating Officer. These are senior decision makers, not team leaders or operational managers.

Entities that use an external party or separate management entity (e.g. an accounting firm providing a CFO) are also required to disclose this fee in the KMP disclosure.

4. What is included in remuneration?

The following are examples of what is considered to be remuneration:

  • Wages, salaries and employer superannuation contributions, paid annual leave and paid sick leave and bonuses.

  • Non-monetary or fringe benefits such as medical care, housing, cars and free or subsidised goods or services.

  • Post-employment benefits such as pensions, other retirement benefits, post-employment life insurance and post-employment medical care.

  • Long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits.

  • Termination benefits.

5. What about comparative figures?

The Australian Charities and Not-for-profits Commission (ACNC) has advised that the Commissioner has exercised discretion to grant relief for charities preparing SPFS in accordance with the amended regulations for the first time regarding comparative information for any KMP disclosures. These entities will only need to provide the disclosures for the reporting period from the first year of adoption.

Final thoughts on General Purpose - Simplified Disclosures for Not-For-Profits

Whether Simplified Disclosures are really simpler depends on what you are comparing it to. Regardless, NFP entities need to be aware of the changes in order to apply them to their next financial report.

Financial statement preparation for NFPs is a complex area so it’s important to seek advice to help ensure you are complying with the relevant rules and legislation. Please speak to your adviser for assistance or get in touch with the Crowe External Audit team.