The not for-profit sector has no equivalent of the International Public Sector Accounting Standards Board (IPSASB) or the International Accounting Standards Board (IASB), and interest in developing international standards for this sector is growing. Not-for-profit reporting in various countries was discussed, and participants considered whether an international not-for-profit reporting framework could improve reporting in that sector globally.
The event was chaired by Ian Carruthers, executive director for policy and standards at CIPFA and incoming IPSASB chair.
Delegates included standard setters and accounting institutes as well as accountants, researchers and not-for-profit support organisations.
The seminar developed in part from a Consultative Committee of Accountancy Bodies (CCAB) study last year on financial reporting for not-for-profit bodies and a steering group set up to support work in this area.
An overview of the CCAB research findings was presented, which included how the not- for-profit sector differed from other areas and related accounting issues. The findings also showed support for an international standard, with 72% of respondents to the study survey agreeing it would be useful.
Seminar participants gave several reasons to develop an international reporting framework. These included: difficulties in operating internationally and reporting to multiple jurisdictions with differing reporting requirements; the growth in international and cross- border donations and activity; and the desire to improve the quality and consistency of not-for-profit reporting globally, including in countries without a standard approach for this.
Accounting issues for not-for-profit organisations were discussed, including accounting for non-exchange transactions, fund accounting, valuation of heritage assets, income recognition, gifts in kind, mergers, treatment of branches and reporting on reserves.
There was interest in the role of narrative reporting in explaining and accounting for activities and performance in line with not- for-profit purposes. However, views differed on whether it could or should be addressed in financial reporting standards and guidance.
CIPFA and steering group members recently conducted a survey to identify countries where standards or guidance exist and some of their features. The results, presented at the seminar, indicate a variety of approaches where not-for profit standards are in place, as well as those in many countries without such standards.
The seminar included presentations on approaches in the UK, the US, New Zealand and Sierra Leone, each of which has its own standards with their own characteristics. While these differ to varying degrees, common threads include similar types of accounting issues addressed and the recognition of some key differences between not-for-profits and other bodies in how they present information in financial statements.
So what next for international not-for-profit accounting? While some of those at the seminar expressed reservations about a standard, most indicated they were in favour of further work.
The IFRS Foundation, as part of its review of structure and effectiveness, is asking for views on whether the IASB should extend its remit to develop standards for the not-for-profit sector. Another approach would be to draw on the work done by IPSASB, as New Zealand has done. It really is early days but the journey might just have started.
