Stock in charity shops will have to be valued as soon as it is received if a proposed new accounting standard is given the go-ahead, the Charity Finance Directors’ Group Northern Conference was told yesterday.
Janet Slade, a policy accountant at the Charity Commission, told delegates at the conference in Manchester that the draft financial reporting standard for public benefit entities, which is being consulted on by the Accounting Standards Board, will require charities to record on their balance sheets the value of donated goods that have not yet been sold. Under existing rules, charities do not have to account for the value of unsold stock.
Slade said charity accountants involved in the development of the new standard had objected to the inclusion of the proposal in the draft version, but were overruled by other members of the ASB committee that drew it up.
"You are not alone in considering how donated goods might be valued," she told charity finance directors at the conference. "Others have also raised the difficulties involved."
Charity annual reports ‘inadequate’
Slade also said that almost one in six charity annual reports failed to comply with basic accounting requirements. She said she had carried out research on 536 charity annual reports to find out whether they met the requirements of the commission's Statement of Recommended Practice.
"For a report to be adequate, it had to exist and have appropriate headings," she told the conference.
"It didn’t have to reflect the current year, it didn’t have to be well-written and it could be a set of boilerplate statements. Fifteen per cent still failed."
New Sorp to be introduced next year
Slade told the conference that a new charity Sorp would not be introduced before the publication of the new financial reporting standard for public benefit entities.
Half of the new Sorp had already been written, she said, and a consultation was expected next year. It is expected to apply to charity accounts for financial years starting in July 2013 or later. The new Sorp will be introduced at the same time as those for registered social landlords and universities.
It will reflect a new three-tier system currently being introduced by the ASB, which will classify entities as large (publicly accountable, including deposit-taking), mid-sized (turnover of £6.5m or above) and small (turnover below £6.5m).