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CCAB study highlights demand for international standards for financial reporting in the not-for-profit sector

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26 Feb 2014

The Consultative Committee of Accountancy Bodies (CCAB) has published the results of a study to establish whether there is a demand for the development of an international financial reporting framework, guidance or standards for use by not-for-profit organisations (NPO) in the not-for-profit-sector. Results indicate that there is a demand for an international standard for financial reporting in the not-for-profit sector.

The “comprehensive international study” which was launched in November 2013, is the first of its kind and was based upon a literature review (to “identify specific financial reporting issues in the not-for-profit sector internationally) and an online survey of 605 people involved with not-for-profit financial reporting in over 179 countries. 

It was conducted on behalf of the CCAB, which comprises The Institute of Chartered Accountants in England and Wales (ICAEW), The Institute of Chartered Accountants of Scotland (ICAS), The Institute of Chartered Accountants in Ireland (ICAI), The Association of Chartered Certified Accountants (ACCA) and The Chartered Institute of Public Finance and Accountancy (CIPFA).  The CCAB appointed Sheffield Hallam University (SHU) to co-lead the project with colleagues from the University of Dundee, and with further support from University College, Dublin and Victoria University of Wellington, New Zealand.     

Although there were a number of mixed responses (by stakeholder group and world regions) to the survey, 72 per-cent of those surveyed did agree that international standards for financial reporting in the not-for-profit sector would be useful with 14 per-cent not in agreeing and 7 per-cent strongly disagreeing.  Of those that did not agree, the study finds that “the strongest objections appear to come from countries such as the UK, which already have well developed frameworks for NPO accounting”.  

The study notes that “this report is the first step towards establishing whether or not there is a case for developing harmonised international standards for NPO reporting” and identifies four possible ways forward, with option 4 commanding “a good deal of interest” based upon the survey results: 

  1. Do nothing;
  2. Press for improvements to existing national NPO financial reporting frameworks to address concerns identified in the study (no creation of an international standard);
  3. Seek to develop international guidance on NPO reporting but not a formal accounting standard;
  4. Development of international standards for NPO financial reporting, prepared by an international standard setting body, and (eventually) endorsed by appropriate regulatory regimes in jurisdictions across the globe. 

In understanding further the demand for an international standard for the not-for-profit sector and what such a standard may look like, the study highlights that “much more analysis and discussion will be needed between interested parties” including on areas such as: 

  • the extent to which a formal international standard for NPO reporting would be welcomed and adopted;
  • the form (content and scope) that any new standard should take;
  • whether the new standard would apply to all NPOs;
  • how a new standard would be developed and whether this would require a new standard-setting body for the not-for-profit sector; and
  • the basis (for example International Financial Reporting Standards (IFRSs)) for an international standard for financial reporting in the not-for-profit sector. 

The press release and full report can be obtained from the CCAB website.

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