Are strata managers required to prepare annual financial statements?

In Australia, an owners corporation (OC), including a 4-unit OC in Victoria, is generally not required to prepare financial statements in accordance with Australian Accounting Standards, unless certain conditions apply.

1. Special Purpose vs General Purpose Reporting

• Special Purpose Financial Reports (SPFRs): Used when the entity is not publicly accountable and financial reports are intended only for a limited group of users (like the lot owners). (Think small four-unit blocks)
   
• General Purpose Financial Reports (GPFRs): Required when the entity is publicly accountable or there are users dependent on general purpose reports to make decisions. (Think Telstra or BHP Billiton)

2. Owners Corporation Context

• Most OCs prepare SPFRs, because:
  • They are not publicly accountable.
     
  • The users of the financial statements (e.g. lot owners) can request additional information if needed.
     
  • The financials are usually prepared for internal use, AGM presentation, and compliance with the Owners Corporations Act 2006 (Vic).
     

3. Minimum Legal Requirements

• Under the Owners Corporations Act 2006 (Vic), financial statements must be:
  • Presented at the AGM.
     
  • Include an income and expenditure statement.
     
  • Include a statement of financial position (assets and liabilities).
     

4. As the peak body in Australia and New Zealand for the Strata Industry and Stakeholders, what does the Strata Community Association (SCA) say:

SCA Best practise: The OC must resolve that it is a non-reporting entity to support the preparation and use of special purpose financials reports to meet the information needs of members/ lot owners.