Charities seek help with interpretation of accounting rule

Charities are calling for more guidance on the application of a new accounting regulation, which could leave many organisations with negative reserves.

The proposed change affects organisations with final-salary pension schemes but there is concern that the framework will distort accounts and make reserves appear either too high or too low.

Shirley Scott, director of the Charity Finance Directors' Group, said: "We need to make sure the pension fund is distinguishable in the accounts from general reserves so that funders and others do not think the charity has more money than it really does."

Ian Theodoresen, finance director at Barnardo's, is concerned that charity accounts will begin to look "crazy

when the regulation is adopted. "If a charity has a significant deficit on its pension scheme, that could put the whole reserves in the red, although it will only be a theoretical deficit."

The regulation FRS17 comes into effect in two years and changes how employers report occupational pension funds.

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