New reporting requirements for Tier 3 and 4 NFPs

In brief

• The new standards are applicable for many registered charities and incorporated societies

• The new Tier 4 Standard no longer requires a Statement of Resources and Commitments

• In the new Tier 3 Standard, revenue is recognised over time as a “documented expectation” is satisfied

In May 2023 the External Reporting Board (XRB) issued updated Tier 3 and Tier 4 not-for-profit reporting standards. The new standards must be applied for accounting periods beginning on or after 1 April 2024. However, they may be early adopted for any accounting period that ends after 15 June 2023. These standards are applicable for registered charities, and incorporated societies that have reregistered under the new Incorporated Societies Act 2022 and are not “small” (as defined).

Tier 4

The new Tier 4 Standard is now less complex, including no longer requiring a Statement of Resources and Commitments. The XRB has also created a dedicated web page for small NFPs which includes:

• a simplified reporting template, 

• a short animation that explains how to complete the template, and

• guidance that will be developed and added to over time.

Charities Services has also published new forms and Tier 4 charities now have the option to complete a new ‘Combined Tier 4 Annual Return’ which includes all the information which would normally be provided in a Performance Report. Charities that choose this option no longer need to prepare and file a separate Performance Report with Charities Services.

Tier 3

The new Tier 3 Standard changes some existing requirements and adds some new requirements. Again, there is a reporting template to assist entities prepare their Performance Report. Plus, an at-a-glance document outlines what has changed in the new Tier 3 Standard as follows:

• The terms “outcomes” and “outputs” for service performance reporting have been removed and replaced with terms that are more aligned with the Tier 2 Standard.

• Property, plant and equipment, investment property, and financial investments that are publicly traded can now be revalued without opting up to the Tier 2 Standards.

• There is a new requirement to provide a description of the purpose of each reserve, the entity’s plans for applying the reserve, and when the entity expects the reserve will be applied to advance the entity’s objectives.

• The “use or return” condition has been removed, and revenue can now be recognised over time as a “documented expectation” is satisfied.

• The categories for classifying revenue and expenses have been clarified.