Financial Definitions

The financial definitions in this section are to be used by all members in the preparation of their ACFID Code-compliant Financial reports. Treatment must be in accordance with the relevant accounting standard. If you are in doubt, please consult your accountant or auditor for clarification of the appropriate accounting treatment for your organisation. 

 

Income Statement Definitions

The following definitions are to be used by all members in the preparation of their Income Statements in conjunction with the Australian Accounting Standards. For those which are not specified here refer to the definitions found in the National Standard Chart of Accounts (NSCOA).

Income statements – Revenue

Donations and Gifts - Donations and gifts are income received without providing consideration in return, and include all donations and gifts actually received.

Where donations and gifts form the major category of income, members are advised to provide further detail of the composition of these. For example: restricted or unrestricted as to purpose, relating to international or domestic programs, or by major fundraising activity.

Donations and Gifts – Monetary - Donations and gifts received in cash.

Donations and Gifts – Non-monetary - Goods and services received as gifts in kind

Non-monetary donations should be recognized in the accounts when they are reliably measurable, taking into account materiality considerations. Any figure recorded under this heading should match a corresponding expenditure heading named ‘Non-monetary expenditure’.

  • Donated assets (excluding buildings) are recognised as income when the asset is received. The amount recorded should be equivalent to the fair value of the donated asset. The fair value is ‘the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction’ (AASB 116). Both usability and marketability are joint considerations in determining fair value.
  • Donated buildings are not recorded as income and should be recorded directly as an asset in the Balance Sheet (refer definition for Property, Plant and Equipment).
  • If an organisation recognises volunteer services in their Financial Statements, it will depend on their unique circumstances, taking into account their ability to reliably measure the value of volunteer services and materiality considerations.  If agencies choose to disclose the value of volunteer services in their Financial Statements, then they can choose whether to include this value as both Non-Monetary Revenue and Expense items in the Income Statement OR as a disclosure in the Notes to their Accounts.  This decision will be based on whether the item meets accounting standards criteria for recognition.  The Department of Foreign Affairs and Trade (DFAT) publishes job descriptions and relative rates of pay to use as a guide in valuing volunteer services.  These are provided specifically for accredited organisations operating under the Recognised Development Expenditure (RDE) guidelines.  However they may also assist other organisations as a reference. Refer to RDE Worksheet Explanatory Notes.

Bequests and Legacies - Gifts or donations received through wills and memorials.

Grants - Funding received from governments and other institutions to support the objectives of the organisation.  Most grants require the funds to be spent in a specified manner.

Grants – Department of Foreign Affairs and Trade (DFAT) - Grants sourced directly from DFAT (the agency formerly known as AusAID).

Grants - Other Australian - Grants sourced from all other Australian institutions, including other Australian Commonwealth Government departments or agencies other than DFAT, State and Territory Government departments, and other Australian organisations such as philanthropic organisations and corporate entities.

Grants - Other overseas - Grants sourced from non-Australian institutions, including international affiliates, multilateral institutions and other non-Australian organisations.

Commercial Activities Income - Income from activities where there is an exchange of value with an intention to generate a surplus to contribute to the organisation’s aims.  This includes gross income from any retail activities and raffles.

Investment Income - Income from interest, dividends, rent and other income earned on investment assets.

Revenue for International Political or Religious Adherence Promotion Programs -  Income received for the purpose of supporting a political party, promoting a political candidate or organisation affiliated to a political party, or to promote a particular religious adherence.  Refer to the definitions of non-development activity and the relevant section of the Good Practice Toolkit guidance for more detail in this area. If organisations have material amounts of funds in any of these areas, they should itemise them on separate lines to enhance understanding.

Other income – Inflows of economic benefits not included in the other categories.  If any single category income category constitutes more than 10% of total revenue, organisations are encouraged to disclose this separately in the Income Statement.  This may apply for example, to organisations with large Domestic Programs. 

Income Statement – Expenses

International Aid and Development Programs Expenditure - Expenditure incurred to perform international aid and development activities,  i.e. activities undertaken to reduce poverty and address global justice issues via direct engagement through community projects, humanitarian relief and/or community education and public policy campaigns.

International Programs - Funds to international programs - These costs may include (but are not limited to):

  • Salaries of program staff or costs of volunteers working overseas, that are paid from Australia,
  • The cost of acquiring property, plant and equipment in Australia which is then sent overseas, for example the cost of a computer and transportation costs in getting this computer equipment overseas,
  • Costs of programs implemented by international partners,
  • Administration costs of overseas field offices or program partners, and
  • Program expenditure (not management fees) funded via international secretariats.

Funds to international programs must be limited to funds and gifts in kind actually remitted overseas to aid and development projects, plus the cost of remitting those gifts.

Organisations are encouraged to show details of their international programs either by program or by country. These details may be disclosed either in the Income Statement or in notes in the form of a supplementary report or set of graphics.

International Programs - Program support costs - Direct costs of program management spent in Australia, including project design, monitoring and evaluation and project management. It includes the training and professional development of Australian based staff and volunteers involved in the effective management of international projects. It may also include the salaries of program support staff paid in Australia.

International Programs - Community Education - Costs related to informing and educating the Australian community of, and inviting their active involvement in, global justice, development and humanitarian issues. This includes the cost of producing and distributing materials, the cost of conducting educational and public policy campaigns, and the cost of personnel involved in these activities.

Educational materials and campaigns often include the opportunity for the community to provide financial or other support to the organisation.

If educational and campaign activities include an element of fundraising, the following requirements must be followed:

An amount proportionate to the fundraising elements involved must be charged to Fundraising Costs. For example, a one page fundraising request in a 20-page campaign newsletter will charge 5% of the total newsletter costs to Fundraising Costs.

The method for allocating the proportion of fundraising cost must be documented and be able to be produced to support the decision and is suggested to be included by way of a note to the accounts.

These requirements ensure that all costs associated with fundraising activities are disclosed at the highest level of transparency. 

International Programs Fundraising costs – Public - Costs incurred for the purpose of raising revenue from the public.  These can include (but are not limited to):

  • the production and mailing (physically or electronically) of fundraising materials,
  • the cost of promotional or marketing campaigns,
  • the costs of establishing and maintaining public donor databases,
  • funds paid to third parties to provide fundraising services,
  • donation related bank fees; and
  • the cost of personnel involved in preparing, conducting and evaluating marketing and fundraising campaigns.

International Programs fundraising costs - Government, multilateral and private sector - Costs of personnel and related expenses involved in the preparation of funding submissions for, and reporting against, grants and other contracts from government, multilateral organisations, corporate and philanthropic organisations.

International Programs - Accountability and Administration costs - Costs (not able to be allocated to a program activity) associated with the overall operational capability of the organisation. These costs include (but are not limited to):

  • audit and accounting fees
  • legal fees
  • memberships and subscriptions
  • management costs of international secretariat functions
  • office accommodation expenses (rent, maintenance, depreciation, utilities, etc.)
  • bank charges (not donation related)
  • general staff training.

Non-Monetary Expenditure - Expenditure to offset the value of gifts of goods and services received in kind, as well as any volunteer services (refer to Non-Monetary Income definition for details relating to volunteer services) that are recognised in the financial statements.

International Political or Religious Adherence Promotion Programs Expenditure - Expenditure made for the purpose of supporting a political party, promoting a political candidate or organisation affiliated to a political party, or to promote a particular religious adherence.

Refer to the definitions of non-development activity and the relevant section of the Good Practice Toolkit guidance for more detail in this area.

If members have material amounts of expenditure in any of these areas, they should itemise them on separate lines to enhance understanding.

Domestic Programs Expenditure (including monetary and non-monetary) - Expenditure on programs that are directed towards beneficiaries within Australia.  If this is a material category for members, they are encouraged to add extra detail to report on under this heading and to use headings that are simple and clearly explain their operations.

Commercial Activities Expenditure - Expenditure incurred on activities where there is an exchange of value with an intention to generate a surplus to contribute to the organisation’s aims.  This includes expenditure on retail activities and raffles.

Other Expenditure - Outflows of economic benefits not included in other expenditure categories.

Other Comprehensive Income - Items of income and expense (including reclassification adjustments) that are not recognised in the body of the Income Statement.  Includes items such as:

  • fair value changes in available for sale financial assets, and
  • changes in valuation of fixed assets.

Balance Sheet Definitions

The definitions listed below are to be used by members in the preparation of their Balance Sheets in conjunction with the Australian Accounting Standards. If members decide to disclose other categories in the Balance Sheet, they should ensure that the definitions of these are similarly based on accounting standards. 

Balance Sheet – Assets

Assets - Assets are resources controlled by the member as a result of past events and from which future economic benefits are expected to flow to the entity.

Current Assets - Assets that are expected to be realised within twelve months from the reporting date or within one operating cycle, whichever is the shorter. Current assets include:

Cash and cash equivalents - Cash includes cash at bank and cash on hand e.g. petty cash, cash floats and undeposited funds. Cash equivalents are highly liquid investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

Trade and other receivables - Amount of receivables still owing by customers (debtors) to the organisation at the end of the operating cycle which are expected to be collected in the next twelve months.

Inventories - Items held for sale or expected to be consumed in the process of delivery of services in the next twelve months. Includes fundraising stock, trading stock, publications for sale and emergency response stocks.  Inventories may be purchased or received by way of donation.

Other financial assets - Investments, deposits and bonds, which are expected to be redeemed in the next twelve months.

Non-current assets - Assets that are not expected to be realised within twelve months from the reporting date or within one operating cycle, whichever is the shorter.

Non-current assets include:

Trade and other receivables - Amount of receivables still owing by customers (debtors) to the organisation at the end of the operating cycle which are not expected to be collected in the next twelve months.

Other financial assets - Long-term investments, deposits and bonds which are not expected to be redeemed in the next twelve months.

Property, plant and equipment - Tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and are expected to have a life beyond the next twelve months. Includes freehold and leasehold land (the land is shown at either cost or at its re-valued amount), buildings and building improvements.  These are also known as fixed assets. Donated fixed assets, are recorded at the time of acquisition at fair value.

Investment property - Land and/or buildings held for purposes of economic benefit via rental returns and capital appreciation, instead of for direct use in the organisation’s operations.

Intangibles - Intangible assets purchased, e.g. goodwill, distribution rights, intellectual property, licenses, patents, trademarks, as well as those internally generated, eg computer software development.

Other non-current assets - Non-current assets not specifically included in other categories.

Balance Sheet – Liabilities

Liabilities - A liability is a present obligation of the member arising from past events, the settlement of which is expected to result in an outflow of resources.

Current liabilities - Liabilities that are due to be settled within twelve months from the reporting date, or within one operating cycle, whichever is the shorter. Current liabilities include:

Trade and other payables - The total owing to creditors (not including bank loans) at the end of the operating cycle and payable within the next twelve months.

Borrowings - Balance of loans owed by the organisation to banks and other lenders that are payable within the next twelve months.

Current tax liabilities - Amount of taxes payable to taxation authorities for local taxes including Goods and Services Tax, Pay As You Go tax, Income Tax, Fringe Benefits Tax and Australian Business Number withholding tax.

Other financial liabilities - Other amounts payable to external parties due and payable within the next twelve months, such as lease liabilities.

Provisions - Liabilities of uncertain timing or amount. Can include provisions for employee entitlements like annual leave and provisions for maintenance.

Other - Current liabilities not specifically included in other categories.

Non-current liabilities - Liabilities not expected to be settled within 12 months or one operating cycle, and therefore not classified as current.   Non-current liabilities include:

Borrowings - Loan amounts owed by the organisation to banks and other lenders that are not payable within the next twelve months.

Other financial liabilities - Other amounts payable to external parties that are not payable within the next twelve months, such as long term leases.

Provisions - Liabilities of uncertain timing or amount that are not payable within the next twelve months. Can include provisions for employee entitlements like long-service leave.

Other - Non-current liabilities that are not specifically included in other categories.

Balance Sheet – Equity

Equity - The residual interest in the assets of the member after deducting all of its liabilities.

Reserves - Any reserve established by the organisation (such as the capital profits reserve, building maintenance reserve, IT reserve etc.). Reserves can include amounts of money specifically set aside by the governing body for future purposes, as well as those prescribed by accounting standards (for example an Asset Revaluation Reserve).  An asset revaluation reserve is generated when an organisation decides to revalue certain non-current assets, such as land and buildings. Reserves are split into Restricted and Unrestricted categories.

Restricted Reserves - Reserves allocated for a specific purpose within the organisation’s objectives.  The specific purpose is usually defined by the donor or by law, ie it is an external restriction.  This may include funds held for future distribution from a bequest or other type of specific donation.

Unrestricted Reserves - Reserves that can be spent at the discretion of the organisation within its charitable objectives, but are not otherwise restricted as to their use.

Retained Earnings - The accumulated surpluses or deficits of the organisation over the years it has been operating.

 

 

Balance Sheet – Liabilities

Liabilities - A liability is a present obligation of the member arising from past events, the settlement of which is expected to result in an outflow of resources.

Current liabilities - Liabilities that are due to be settled within twelve months from the reporting date, or within one operating cycle, whichever is the shorter. Current liabilities include:

Trade and other payables - The total owing to creditors (not including bank loans) at the end of the operating cycle and payable within the next twelve months.

Borrowings - Balance of loans owed by the organisation to banks and other lenders that are payable within the next twelve months.

Current tax liabilities - Amount of taxes payable to taxation authorities for local taxes including Goods and Services Tax, Pay As You Go tax, Income Tax, Fringe Benefits Tax and Australian Business Number withholding tax.

Other financial liabilities - Other amounts payable to external parties due and payable within the next twelve months, such as lease liabilities.

Provisions - Liabilities of uncertain timing or amount. Can include provisions for employee entitlements like annual leave and provisions for maintenance.

Other - Current liabilities not specifically included in other categories.

Non-current liabilities - Liabilities not expected to be settled within 12 months or one operating cycle, and therefore not classified as current.   Non-current liabilities include:

Borrowings - Loan amounts owed by the organisation to banks and other lenders that are not payable within the next twelve months.

Other financial liabilities - Other amounts payable to external parties that are not payable within the next twelve months, such as long term leases.

Provisions - Liabilities of uncertain timing or amount that are not payable within the next twelve months. Can include provisions for employee entitlements like long-service leave.

Other - Non-current liabilities that are not specifically included in other categories.

Financial Reporting Formats

Option 1 format: International Aid and Development Short Form Income Statement template

Option 1 format: International Aid and Development Short Form Income Statement template

 

Option 2 format: Income Statement template 

 

 

Option 2 format: Income Statement template