International accounting standards for charities are a long way off

They are not a priority for the International Accounting Standards Board, says Ray Jones, policy accountant at the Charity Commission

There has been much uncertainty about what UK charity accounting will look like after the convergence with International Financial Reporting Standards, but the future direction is now looking a little more certain.

A new Statement Of Recommended Practice for charities, likely to be based on the IFRS for small and medium-sized entities, and a proposed standard for public benefit entities are expected some time in 2012.

This is welcome, but it does highlight another problem - the lack of clear international accounting standards for charities and other public benefit entities.

The Accounting Standards Board - the UK's standard-setter - does not and cannot extend its agenda beyond the UK. Its work, and the Charities Sorp, might well prompt other national standard-setters to follow suit. But a global standard for charities looks a long way off.

Last week, I received an email from the finance director of a leading aid charity. He estimates that about 40,000 non-governmental organisations now operate internationally.

But because they work according to differing national frameworks, their accounts are often difficult to compare. This lack of consistency in reporting is not just a problem for accountants - it's a concern for donors, governments and beneficiaries.

For this reason, more and more international charities are asking whether it's time for a global standard for public benefit entities.

But who should take on that role? Standard-setters do not appear overnight. They need political commitment. Without buy-in from national governments and local standard-setters, international bodies can't assert authority. That in turn takes time; and it takes funding.

The International Accounting Standards Board has worked tirelessly to develop high-quality global accounting standards for the commercial world - the IFRS, which it says more than 100 countries have adopted or allowed. But with an annual budget of nearly £20m, they don't come cheap.

Not-for-profit accounting is on the IASB's agenda - that's a start. But it doesn't appear to be very near the top of that agenda. Plans announced in 2006 for a not-for-profit framework still seem well down its to-do list. However, as things stand, the IASB remains the best bet to deliver a global standard for the sector.

Let's hope it finds a role model in the UK. The successful delivery of a new charity accounting framework here in 2012 might go some way towards jolting the IASB into action.

Ray Jones is policy accountant at the Charity Commission

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