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WHY FINANCIAL REPORTING OF AUSTRALIAN NOT FOR PROFITS DOES NOT NEED TO MEET GPFRs REQUIREMENTS
Bruce Gurd
University of South Australia
Australia
Philip Palmer
Flinders University of South Australia
Australia
Kent Wilson
University of South Australia
Australia
Abstract:
The current sector neutral approach adopted by the AASB does not appear to be meeting the requirements of NFPs.The release of Invitation to Comment (ITC) 14, Proposed Definition and Guidance for Not-for-Profit Entities acknowledges this fact. Currently Australian NFPs are not required to produce General Purpose Financial Reports (GPFRs), and they do not appear to be reporting in conformity with GPFRs. However, depending on the outcome of ITC 14, proposed changes detailed in Exposure Draft 148 and current IASB developments, many small NFPs may be required to produce GPFRS. This research identifies two sets of issues which impact on the production of GPFRs. First there are issues which impact on the ability to supply GPFRs. Smaller NFPs and those without accounting expertise are unlikely to be able to provide such reports. In addition, there are a range of stakeholders who have differing requirements for financial reports..The issue of accountability to a diverse stakeholder group is an important consideration for NFPs. Drawing upon an agency theory based accountability model, we develop six hypotheses. These hypotheses are tested through an analysis of a sample of annual returns lodged with the Corporate Affairs Commission (SA). Our results suggest that the level of gross revenue of an NFP provides a significant indicator to the quality of financial reports. Interestingly, we find no evidence to support the argument that requiring NFPs to produce GPFRs would increase the level of accountability to the various stakeholder groups. This suggests that research should be undertaken to determine stakeholder requirements. We contend that incorporated NFPs are currently producing sound financial reports and the more onerous requirements of GPFRs are not required for such entities.