New NFP definition and guidance proposed

The Australian Accounting Standards Board has issued exposure draft Not-for-Profit Entity Definition and Guidance that proposes to replace the existing NFP definition.

This draft proposes to:

  • Retain the term ‘not-for-profit entity’
  • Revise the definition to align with the definition of a Public Benefit Entity in NZ accounting standards
  • Remove the NFP-entity definition from AASB 102 Inventories, AASB 116 Property, Plant and Equipment and AASB 136 Impairment of Assets and include both the revised definition and the guidance in AASB 1057 Application of Australian Accounting Standards, and
  • Include it in AASB 1057 Appendix B Implementation guidance: When is an entity a not-for-profit entity: Implementation guidance to support the revised definition.


Existing definition Proposed definition
‘An entity whose principal objective is not the generation of profit.  A not-for-profit entity can be a single entity or a group of entities comprising the parent entity and each of the entities that it controls.’ ‘An entity whose primary objective is to provide goods or services for community or social benefit and where any equity has been provided with a view to supporting that primary objective rather than for a financial return to equity holders.’


The proposed appendix B to AASB 1057 addresses the following:

  • Purpose
  • Definition of an NFP entity
  • Indicators (stated objectives, nature of the benefits, including the quantum of expected financial benefits, primary beneficiaries of the benefits, nature of equity interest, purpose and use of assets, and nature of funding)
  • Conflicting indicators, and
  • Changing classification.


The classifications ‘for-profit’ and ‘not-for-profit’ are important as the application of the Australian accounting standards can differ.  Different recognition, measurement, presentation and disclosure requirements may also apply.

The distinction might become even more significant if the AASB develops a separate NFP-entity financial-reporting framework with simplified recognition and measurement requirements and several NFP reporting tiers.


Submit your comments to the AASB by 9 September.