Proposals by the Accounting Standards Board to change financial reporting guidelines could result in some charities inadvertently breaching loan agreements with their banks, according to the financial services firm PricewaterhouseCoopers.
The existing guidelines allow public benefit entities, which include charities, housing associations and universities, to revise the value of their tangible assets on their balance sheets, such as land and buildings, to reflect their present value.
Some charities have pledged to keep the value of their assets up to date under loan agreements they have with their banks.
However, the Accounting Standards Board is consulting on proposals to introduce a new framework that would mean that some PBEs would no longer be allowed to revalue assets and could only list their value at the original price.
This would mean those charities would need to renegotiate their contracts with lenders.
"[Against] the backdrop of this warning, alongside public sector spending cuts, PwC is now urging PBEs who believe they might be affected to clarify their position to avoid potentially onerous talks with their lenders," the firm said.
The ASB’s consultation concerns the introduction of a new three-tier approach to UK financial reporting, as part of a move to bring regulations more in line with international standards.
Caron Bradshaw, chief executive of the Charity Finance Directors’ Group, said the CFDG was likely to raise the issue of the revaluation of assets with the ASB in its consultation response.
"It is likely that the new three-tier system will be put in place, but its contents are still under discussion," she said. "We would therefore urge others to also raise any problems they foresee."
The consultation ends on 30 April and the ASB has proposed that the new framework is introduced from July 2013.