Taking note of international developments in non-profit financial reporting

Updated July 2024

The origins of the International Financial Reporting for Non Profit Organisations (IFR4NPO) project lies in the findings of research undertaken by the Consultative Council of Accountancy Bodies in 2014. Unlike the UK and Ireland, many jurisdictions have no framework for non-profit financial reporting and the research found that there is a global demand for one.

In response, ACCA published the Companion Guide for Not-for-profits to the International Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) in 2015. The idea for a global solution was then taken up and progressed a partnership between the not-for-profit organisation (NPO) Humentum and the Chartered Institute for Public Finance and Accountancy.

In November 2022 the IFR4NPO project published the first of three planned consultations on the new International Non Profit Accountancy Guidance (INPAG), with the final guidance to be published in 2024 and effective from 2025. The INPAG is likely to affect those UK-Ireland NPOs and the future of UK-Ireland generally accepted accounting practice (GAAP) in a number of ways:

• UK or Ireland NPOs seeking funding from international donors might find that these donors want some reporting based on INPAG rather than GAAP.
• Local overseas offices of a UK or Ireland NPO may be required locally to account in a jurisdiction using INPAG and so this presents an issue for aggregation into the NPO’s accounts, or consolidation in the case of a subsidiary.
• If a UK or Ireland NPO has an overseas parent that reports using INPAG, adjustments may be required on consolidation.
• GAAP may look to align with INPAG by using it as a reference source in future iterations of GAAP post-2025.
• The Financial Reporting Council might choose to discontinue the Public Benefit Entity SORPs in favour of INPAG in the longer term. (This would not happen without a consultation exercise being held.)

To assist practitioners in getting to know what the implications might be, a series of research papers set out for each consultation what the differences are between the proposed INPAG and current GAAP, with particular reference to the Charities Statement of Recommended Practice (SORP). Practitioners can then decide whether to respond with comments on INPAG – for example, supporting the proposed guidance or advising changes that they would like to see. Both GAAP and INPAG draw on the IFRS for SMEs for inspiration but that does not mean that the two will end up coming to the same conclusions. A new research paper in the series now considers the second exposure draft.

ED3 completes the initial INPAG standard. Although INPAG is not GAAP, and so UK-Ireland practitioners will look to FRS 102 and the public benefit entity SORPs for their financial reporting, in the longer term the future of GAAP may be INPAG.

Nigel Davies FCCA is a member of the IFR4NPO Practitioners’ Advisory Group