Document ID: chunk:federal_register_of_legislation:F2022C01110:reg:20:p15
Version: federal_register_of_legislation:F2022C01110
Segment Type: reg
Provision Reference: reg 20 (pt 15/40)
Character Range: 78658–81575

BC58            The Board decided that there should not be subclassifications of different types of entities in the NFP sector other than between private and public sector entities, for differential reporting purposes.  In arriving at this decision, the Board noted that:
(a)                    in a transaction-neutral reporting environment, subclassifications should not make a reporting difference as far as the recognition and measurement of transactions are concerned; and
(b)                   a choice between Tier 1 and Tier 2 requirements would provide different levels of disclosures appropriate for entities with different levels of activities.
BC59            The Board noted that its conclusion on this matter does not rule out specific projects directed at particular types of NFP entities and decided that its separate project on Disclosures by Private Sector Not-for-Profit Entities should be the vehicle through which it determines whether disclosures in addition to those required by full IFRSs as adopted in Australia should be required of Tier 1 or Tier 2 NFP entities.  The Board also noted that much of the information relating to the extent to which a NFP entity has achieved its purpose set out in its mission statement may not be of a financial nature.

Entities Eligible for Tier 2 Requirements can Elect to Adopt Tier 1 Requirements
BC60            The Board concluded that a NFP entity that is eligible to adopt Tier 2 requirements should be permitted to adopt Tier 1 requirements.  This is on the basis that, as noted in relation to the for-profit sector in paragraph BC39, in some jurisdictions, a relevant regulator may decide that in certain circumstances it is more beneficial to the users of financial statements, including the public at large, to include more comprehensive information in the general purpose financial statements.  A NFP entity may also find it beneficial to choose to apply Tier 1 requirements in order to claim compliance with full IFRSs as adopted in Australia with a view to enhancing its credibility internationally, in particular in relation to major users of financial statements such as donors and governments.

The Role of Other Regulators
BC61            The Board acknowledges that, although AASB 1053 allows the vast majority of entities in the NFP sector to adopt Tier 2 requirements, other regulators may decide that some of those entities should adopt Tier 1 requirements.
BC62            Some respondents to ED 192 particularly commented that, while they welcome the choice that the Board has provided to public sector regulators in determining which of the Tiers should be followed by entities other than those required by the Board to apply Tier 1 requirements, the Board should develop non-mandatory guidance, in the form of qualitative criteria, to help public sector regulators consistently identify entities falling under each of the two Tiers