"This is most important challenge in charity accounting since 1993"

Ray Jones, the Charity Commission's policy accountant, on the coming consultation by the Accounting Standards Board

Ray Jones
Ray Jones

In 2004, the Accounting Standards Board said it planned to converge UK accounting standards with International Financial Reporting Standards over a three to four-year period. Since then, the plan appears to have changed several times: for example, there was a proposal in 2006 for a 'Big Bang' introduction of new standards in 2009. In the meantime, the sector has waited patiently to see how a set of accounting standards designed for global capital markets would affect its own financial reporting. An ASB consultation is finally looking likely this summer, and it is of vital importance to the voluntary sector. The IFRSs, which run to more than 2,500 pages, are not designed to apply to us. Convergence will bring an urgent need to adapt and interpret them in much the same way as the current Statement of Recommended Practice does currently for the UK's Generally Accepted Accounting Principles.

But every challenge offers an opportunity, and this consultation is a huge one - if we can grab it. One possible prize is a not-for-profit standard based directly on the IFRS. The Charity Commission first mooted a sector standard nearly 20 years ago - and we got a Sorp, which, like it or loathe it, has helped to transform the quality of sector reporting.

We now need to ask whether the time is right for a not-for-profit standard - and, indeed, one that might have global relevance.

The structure of any future standard will be of vital importance. The sector will need to be clear about what it needs, rather than allowing easy-option approaches to be developed by standard-setters.

In my view, the worst-case scenario would be to tag a paragraph or two on to each separate IFRS and pretend that this meets sector needs. Similarly, a standard that avoided narrative reporting would be fatally flawed. In third sector accounting, it is the narrative and the explanation of performance that give meaning to the numbers in the accounts.

At the very least, any future not-for-profit standard or series of standards needs to address exactly what is different about charities. Indeed, some might favour a comprehensive, standalone not-for-profit standard - in effect, a one-stop shop standard for charity accounting. To get accounting standard-setters to move in that direction would, I suspect, need some very concerted lobbying.

What is clear is that we are now awaiting the most important consultation on sector accounting and reporting since the 1993 Charities Act. It's an opportunity we must not waste.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus