Charity accounts likely to change in the wake of Accounting Standards Board consultation

Charities could have more freedom to set their own rules, say experts

Radical changes to charity accounting could result from a consultation on the future of the body of regulation that covers the preparation of company accounts, according to finance experts.

The Accounting Standards Board is consulting on the future of the UK Generally Accepted Accounting Principles in the light of the International Financial Reporting Standards, which it intends to introduce here in 2012.

Because there is little emphasis on not-for-profit organisations in the IFRS, charities will have more freedom to set their own rules, according to Alan O'Connor, head of the Committee on Accounting for Public-Benefit Entities, part of the ASB.

"Public benefit accounting isn't well served by the IFRS," he said. "The standards are based on their usefulness to shareholders and investors. That doesn't apply to charities."

Richard Bray, financial accountant at Cancer Research UK and a member of the committee, said the sector should look into whether the Charity Commission's Statement of Financial Activities served its needs properly.

"Why do charity Sofas have income as their top line and surplus as their bottom line?" he said. "These figures tell you very little about a charity.

"Perhaps the most important thing is whether you have a positive balance in unrestricted funds, but you can't find that anywhere on a Sofa."

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