Financial reports

The contents and presentation of financial rep​​​orts

How a set of financial accounts are presented and prepared is usually determined by applying the Australian Accounting Standards. The accounting standards set out the rules or standards for accountants to deal with or treat accounting transactions and events. They are largely expressed in the form of general principles and based on accounting concepts and conventions. There are around 50 accounting standards. Without the standards, financial information would lack reliability, completeness and would be difficult to understand.

​Generally, there are two types of financial reports that can be produced by an organisation:

  • general purpose financial report—the report is prepared by applying all accounting standards. They include a balance sheet, income statement, statement of owners equity and statement of cash flows. They generally follow a specified format although there is some ability to vary this.
  • special purpose financial report—the report does not need to apply any of the accounting standards. However, if the financial report is required by an Act, such as the CATSI Act, it is generally accepted that the report must apply the measurement and recognition requirements in the accounting standards with simplified disclosure. Most entities reporting this way produce a simple profit and loss, and a balance sheet. The report can be in any format that the organisation requires or desires them to be in.

How do you kn​​​ow which type of report to prepare?

To determine if an entity needs to a prepare general purpose financial report, the Australian Accounting Standards use the concept of a reporting entity. Unless legislation prescribes an entity as a reporting entity, the accounting standards allow those charged with the governance of the entity to assess whether or not the entity is a reporting entity. 

A reporting entity is any entity where it’s reasonable to expect there are users that depend on the report to understand the financial position and performance of the entity, so they can make decisions. These users could be members, employees, creditors, lenders etc. Reporting entities are required to prepare a general purpose financial report.

A non-reporting entity is where the people responsible for its governance have decided there aren’t any users who depend on having a report prepared in line with the full accounting standards. They may have a limited group of users or only need to report for a specific purpose such as bank reporting, industry reporting or grant acquittal. Non-reporting entities can prepare a special purpose financial report.

Are CATSI corporations reporting or non-reporting entities—and does it ​matter?

Corporations reporting under the CATSI Act must follow the CATSI Act and Regulations. While the Act and Regulations don’t specifically prescribe if CATSI corporations are reporting entities or not, they do say regardless of whether or not a corporation would be regarded as a reporting entity, a financial report under the CATSI Act must be prepared in compliance with the accounting standards to the extent the accounting standards are capable of applying to the corporation (s. 23 CATSI Regulations). 

The effect of section 23 is that CATSI corporations who are required to prepare a financial report must prepare the report in accordance with the accounting standards (to the extent the standards are capable of applying) as if they were a reporting entity.

Section 21 of the CATSI Regulations sets out the contents of a financial report under the CATSI Act: 

  • financial statements for the corporation that are required by the accounting standards—s. 21(2) 
  • notes to the financial statements required by the accounting standards–s. 21(3)
  • directors’ declaration about the statements and the notes—s. 21(5)

These requirements align with the description of a general purpose financial report.

Is there any relief from the full accounti​​ng standards?

The Australian Accounting Standards Board decided to introduce a second tier (tier 2) of requirements to substantially reduce the burden of financial reporting for some entities in both the private and public sectors in their preparation of general purpose financial statements. Tier 2 retains the recognition, measurement and presentation requirements of full standards but requires disclosures (the information in the notes to the financial statements) that are substantially reduced when compared with those required under full standards. It’s known as tier 2 reduced disclosure requirements. 

Almost all CATSI Act corporations can take advantage of the reduced disclosure option when preparing the notes to their financial statements. Here’s the list of types of corporations that can adopt tier 2 financial reporting:

  • for-profit private sector entities that do not have public accountability (this may apply to a small number of CATSI corporations)
  • not-for-profit private sector entities (this may apply to many CATSI corporations), and
  • public sector entities, whether for-profit or not-for-profit, other than the Australian Government and state, territory and local governments (unlikely to apply to CATSI corporations). 

Exemptions from reporti​ng requirements

​As always ORIC will consider any application from a corporation for an exempti​on from reporting requirements, in this case the requirement to prepare a general purpose financial report (the form is available in

Applications must be received before the report is prepared, and must clearly state why the directors believe a general purpose financial report would be inappropriate or cause unreasonable burden for the corporation.

In considering whether or not to grant an exemption, ORIC must consider among other things, the likely users of the financial report, and may specify conditions or requirements of the exemption.

Guidance from ORIC

ORIC recently reviewed 2018–19 financial reports lodged by corporations and identified some common issues with those reports. We have recently contacted corporations where these issues were found to let them know what the problem was and remind them of the reporting requirements under the CATSI Act and regulations for their next report.

Issues identified in corporation financial reports:

  • preparing and lodging special purpose financial reports instead of general purpose financial reports
  • preparing special purpose financial reports because their directors made an assessment under the accounting standards that the corporation is a non-reporting entity
  • not getting the financial report audited or obtain an audit report. If the corporation did, they didn’t lodge it with ORIC.