R-E-S-P-E-C-T: IFRS for Nonprofits

What might make some private companies or non-profit organizations in the United States adopt IFRS?
The eventual adoption of IFRS by small businesses and not-for-profit organizations is likely to be market driven. The IASB is developing a version of IFRS for small and medium-size entities that would minimize complexity and reduce the cost of financial statement preparation, yet allow users of those entities’ financial statements to assess financial position, cash flows, and performance.

That's the AICPA's position on the adoption by non-profit organizations of IFRS (International Financial Reporting Standards). We have the same issue here in Canada. The CICA (Canadian Institute of Chartered Accountants) is asking for input from charities. A number of church accountants convened recently in Toronto to consider the matter. We were unanimous: we like the current fund and deferral methods of accounting.

As it was explained to us, comparability is the goal of IFRS: every organization's financial statements need to be prepared on the same basis as every other organization. There is no provision for non-profits. There is no recognition that a non-profit is a fundamentally different kind of organization.

Fundamentally Different

When you buy a widget from ABC Company, you don't care what they do with the money you gave them. They could put it towards research, pay it out as a commission, dividend it to the owners, whatever. You don't care.

But when someone gives a dollar to a charity, they care where it is spent. They want to know which program it goes to, how much is used in administration and whether part of it has been saved as endowment capital. That's how fund accounting developed. A fund is like that jar in your kitchen you put a little of your pay into every week to save for a vacation. Funds are intuitive and simple. They keep the money sorted by the purpose it was intended for.

Another example: assets and liabilities are currently required to be valued at market value. Interest free loans are very common in charities. Discounting them using some arbitrary rate doesn't make sense in the non-profit world. The lender isn't looking for a monetary return on the loan. They want to support the cause. Charities end up having to set up complicated transactions in order for the "right" accounting result to be achieved under new rules. The donor's / lender's wishes have no effect.

The IFRS people really needed to get to know us before they threw us out with the bathwater! The overriding principles of non-profit accounting are stewardship and integrity: how well the non-profit looked after the resources put at its disposal and how well it fulfilled the funders' instructions. As the professional accountant was ending his IFRS explanation an image flashed into my mind. It was of a married couple sitting down with the financial statements of the Anglican (Episcopal) and United Churches and using financial analysis to decide which one to attend. I couldn't help but laugh.

All we want is a little R-E-S-P-E-C-T!

This blog

by Bill Kennedy, CA.IT, PMP - With over 25 years of accounting experience, Bill has a varied background in accounting management and accounting systems implementation, with a focus on the charitable sector. He is also an experienced volunteer board member and fundraiser.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

42125

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

74248

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

47095

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

86486
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
19718

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

54178

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

78761

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

24394

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

62536

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

33755
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
100380
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
24951

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

51022
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
26748
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
31067

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

97634

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

32252

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

108486

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

59171

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

38388
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
65223

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

90916

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

52044