At Humentum, we are proud to be playing a leading role on the IFR4NPO project because it speaks to the very heart of our mission of helping the non-profit sector become more equitable, accountable, and resilient. In partnership with the Chartered Institute of Public Finance and Accountancy we are developing the first internationally applicable financial reporting Guidance for the non-profit organisations (NPOs).
The Guidance will certainly shape the future of financial statements (also known as the ‘annual audited accounts’) of NPOs. But, with many voices and forces coming in to influence its development, whose interests will be represented?
In our recent series of webinars, participants were asked to rank their reasons for preferring different accounting alternatives proposed for the Guidance. Based on the average results from about 150 people, it was encouraging to see that ‘No change from what I currently do’ was ranked last! The most common response was ‘Better and more transparent information’, which had strong consensus.
But it’s the middle ranking poll results where we see the beginnings of a real dilemma emerging. The second and third ranking priorities related to the technical aspects of conceptual integrity, and fit with the accounting framework proposed for the Guidance. The subsequent places related to the ease of use and implementation costs of new standards. As the Guidance is drafted, many of the choices could involve a trade-off between ease of use (which is related to cost) and consistency with the for-profit accounting convention. When these priorities come head-to-head, which should prevail?
Here are my personal hopes for the Guidance, and the priorities that will be shaping my responses to the consultation, currently open for responses until 24 September 2021.