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International Non-Profit Accounting Guidance: second Exposure Draft

Author: ICAEW Insights

Published: 11 Oct 2023

Latest draft guidance covering revenue from grants and donations, grant expenses, inventories and foreign currency translation hopes to engender greater trust in the sector globally.

Efforts to improve the clarity and consistency of the financial reports of non-profit organisations (NPOs) took a step forward at the end of September after CIPFA and Humentum published the second Exposure Draft of International Non-Profit Accounting Guidance (INPAG). 

Currently there is no international accounting guidance for non-profit organisations. INPAG is being developed by CIPFA and Humentum through the IFR4NPO (International Financial Reporting for Non-Profit Organisations) project, which launched in 2019.

Samantha Musoke, IFR4NPO Project Director at Humentum, says: “Charities in the UK are mostly well served by the SORP [the Charities Statement of Recommended Practice], but most other countries don’t have any NPO-specific accounting guidance. This gap acts as a barrier to direct funding to local organisations. 

“Furthermore, application of for-profit standards often results in misunderstandings between NPOs and stakeholders, including tax authorities. The consistency of using international accounting standards has delivered significant benefits to other sectors in the last 50 years – it’s our time.”

Exposure Draft 2 addresses four main sector-specific accounting issues: revenue from grants and donations; grant expenses; inventories; and foreign currency translation. It is hoped that addressing these issues will result in greater credibility and trust in the sector globally.

“Grant revenue is often one of the biggest figures in the financial statements, with an impact on trend analysis and metrics,” Musoke says. “But who hasn’t sat in a meeting with auditors debating the meaning of a clause in a specific grant agreement, and its impact on whether or not the grant should be deferred? Is it a restriction or a condition? The proposals in ED2 will bring more clarity and consistency.”

The IFR4NPO project sought views, via a Consultation Paper issued in January 2021, on the

proposal that the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) be used as the basis for a single set of authoritative guidance for NPOs.

Having taken account of the feedback from the consultation, adaptations to the IFRS for SMEs Accounting Standard are being proposed to create international non-profit accounting guidance as NPO-specific financial reporting guidance.

This Exposure Draft is the second of three parts; individuals and organisations are encouraged to submit comments on it before 15 March 2024. The first Exposure Draft was published in November 2022 and focused on the overarching framework for NPO financial reporting. 

Rob Whiteman, CIPFA CEO, says: “International standards have brought great benefits to the for-profit and public sectors in recent decades. Today’s launch marks a crucial milestone on the journey to NPO-specific guidance, developed by the sector, for the sector.”

Christine Sow, Humentum CEO, says: “Accounting for grants opens up questions about risks, liabilities, rights and obligations, which are fundamental to shifting power in the sector. The proposals create a fantastic opportunity for the accountants, lawyers, compliance folk, local organisations and thought leaders in this space to come together and consider the implications.”

INPAG has been developed with input from the project’s technical and practitioner advisory groups with volunteer members from 24 countries, bringing expertise in the fields of standard-setting, auditing, reporting and grant-making. 


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