The Consultation Paper

In January 2021 the IFR4NPO Consultation Paper was launched with a request for NPOs and their stakeholders to shape the future by sharing their voices.

Over 200 individuals and organisations from across the world took the opportunity to respond in writing, and almost 1000 people also engaged with us through outreach events.

You are contributing to the development of international financial reporting guidance for the sector.

We'd like to let you know...

The Broad Characteristics

We asked – do you agree with the broad characteristics proposed for describing NPOs?

You said – using broad characteristics was a good way of describing NPOs but you weren’t sure that the ones we had proposed were quite right.

We are going to – change the broad characteristics to make sure we are capturing the right kinds of organisations, and introduce other indicators to help if it is not clear if these characteristics have been met.

 

Stakeholders

We asked – do you agree with our views on NPO stakeholders and accountability?

You said – we should also recognise the importance of internal stakeholders and focus more on the outcomes achieved by an NPO.

We are going to – Look at how the needs of internal stakeholders can be reflected and ensure that issues like reporting on the achievement of outcomes are included as part of the objectives of NPO financial reporting.

Accrual-based Financial Reporting

We asked – what challenges guidance that was accrual-based would bring?

You said – that cash based reporting was adequate for some organisations and that some donors would still want cash reports. You also said that some NPOs would not have the resources, capacity or expertise to implement accruals.

We are going to – aim to develop the accrual based guidance so that it is proportionate to the needs of users and preparers, can be applied by a wide range of NPOs, and that greater consistency in requirements will assist in reducing reporting burdens.

Non-financial Information Reporting

We asked – what challenges guidance that include non-financial information reporting would bring?

You said – it was important to include non-financial information reporting but scope would be a key challenge due to sector diversity, different international frameworks, and a need to balance principles with prescription. You also said that NPOs may have difficulties in collecting, verifying and reporting data.

We are going to – develop proposals that reflect the diversity of the sector, the capacity and capability of NPOs, and the sector preference for principles-based approach.

Using International Guidance

We asked – if international frameworks were the best start point for developing the guidance

You said – this was a pragmatic response to project resource and time constraints but that an entirely new framework or the use of IPSAS might be preferable

We are going to – develop guidance that is based on international frameworks to ensure it can be provided as quickly as possible, and use IPSAS where is provides the most appropriate reporting solutions for NPOs.

A Model For NPOs

We asked – if you supported a guidance model that has the IFRS for SMEs Standard as its foundational framework and uses other international and jurisdictional-level frameworks.

You said – you had some concerns with the use of a for-profit framework, and that additional clarity was needed on how other frameworks would be used and what the guidance would comprise and cover.

We are going to – engage further with you on the concerns raised to ensure that with the IFRS for SMEs Standard as the foundational framework we will provide a standalone set of Guidance with an NPO appropriate conceptual basis that makes use of all the frameworks to provide NPO-specific reporting solutions. We will also ensure that it is clear which organisations we have in mind when developing the guidance.

Accounting Topics

We asked – whether you agreed with the NPO-specific financial reporting issues identified and the prioritisation of issues.

You said – that a number of additional topics might be included, but foreign currency transactions was noted in particular as an area that needed to be prioritised.

We are going to – include foreign currency transactions in the short-list of topics that will be covered in the first set of guidance due to its importance to the sector.


Next Steps

The Exposure Draft will be released in 3 tranches.

Each release will be followed by a 4 month consultation period in which responses and events will be held.

Further information can be found on the button below, alternatively you can contact us with any other queries.

We will be presenting our findings in a free online event February 2 2022, Find out more here.

Shape the future, share your voice

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