Register / AASB 18 Presentation and Disclosure in Financial Statements / AASB 18 paragraph Aus78.2
Choose nature or function for public sector expenses, and say so
The entity may present expenses by nature or by function. It must weigh which basis is dependable and gives the more useful picture. An entity that elects this basis does not apply paragraph 78 or the guidance in paragraphs B80 to B82.
Why the paragraph exists
The relief is narrower than a free choice: the basis has to be both reliable and more relevant, and the election has to be documented.
In practice
Compare the nature and function options against the users' information needs and the reliability of the allocation. Write the comparison down, because the test is reliable and more relevant and a conclusion without the comparison is not evidence.
The election is separate from the category relief. An entity can take one, both or neither, and the combination should be visible in the policy note.
The mistake to avoid
The common mistake is to treat the relief as a default because the entity is in the public sector.
Who it binds
A not-for-profit public sector entity that is not a higher education provider.
What to do before the date
- Confirm the entity falls in this group: NFP public sector.
- Put the requirement into the financial statements preparation plan: choose nature or function for public sector expenses, and say so.
- Open a workpaper for the first evidence item: The expense classification paper that compares the nature and function options and records the reason for the chosen basis.
Evidence an auditor will ask for
Dates
| Date | What it means | Applies to |
|---|---|---|
| 2027-12-31 | The instrument commences for this paragraph | NFP public sector |
| 2028-01-01 | First annual periods beginning on or after this date apply the Standard | NFP public sector |
Commencement and application are separate tests.
Cross-references
- AASB 18 paragraphs 78 and B80 to B85
- AASB 18 paragraph AusB80.1
Record note
The election is separate from the paragraph Aus47.2 category relief. An entity can take one without the other.
Questions
What does AASB 18 paragraph Aus78.2 require in practice?
Compare the nature and function options against the users' information needs and the reliability of the allocation. Write the comparison down, because the test is reliable and more relevant and a conclusion without the comparison is not evidence.
What is the common mistake under AASB 18 paragraph Aus78.2?
The common mistake is to treat the relief as a default because the entity is in the public sector.
What evidence should be kept?
At least: The expense classification paper that compares the nature and function options and records the reason for the chosen basis.; The expense note showing the chosen basis and the line items. The kit carries each one as a row with an owner column to complete.
Source
This page is our statement of the paragraph, cited so you can check it. Read F2026L01162 on legislation.gov.au.
Source pointer: AASB 18 paragraph Aus78.2. Record retrieved 2026-10-20.