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OSCR gives thumbs-down to new UK accounting proposals

Finance | Tania Mason | 9 Feb 2010

Scotland’s charity regulator has given short shrift to the Accounting Standards Board’s proposals to develop a new accounting standard for public benefit entities.

The Accounting Standards Board is currently trying to converge UK accounting principles (GAAP) with international financial reporting standards. As part of this it is consulting on how to address accounting for public benefit entities such as charities and housing associations. The ASB is inviting charities to submit their views on how the converged guidance might take shape, in order to make any new standards simpler and more relevant for them.

In its submission to the consultation, the Office of the Scottish Charity Regulator has warned against anything that would do away with the current ‘one-stop-shop’ guidance that is provided by the current Charities Sorp.

The nature of charity accounting laws in Scotland mean that even small charities would be affected by the ASB’s new proposals, and OSCR expressed concern that if they had to consult more than one standard or guidance, this could “divorce trustees from a real understanding of their responsibilities in relation to accounts”.

“It would damage the culture of transparency and accountability which we have sought to create and protect and which underpins the sector; in our view therefore these developments would be a retrograde step,” OSCR said.

It pointed out that the proportion of smaller charities that included a trustees’ annual report within their receipts and payments accounts increased to 80 per cent last year from just 33 per cent two years earlier – evidence that the current framework was working.

OSCR warned that users of any new standard should not have to refer to more than one document. “The sector desires and needs stability and, where possible, simplification of the applicable rules,” it said. “To confuse the sector or add undue complexity to the current arrangement would potentially have an adverse effect and undermine the progress made in the first four years of effective charity regulation in Scotland.”

OSCR also said it could be argued that the ASB’s definition of ‘public benefit entities’ is “more akin to that of a social enterprise” and could confusion if it differs materially from the charity law definition in Scotland.

On the basis of these perceived difficulties with the options outlined in the consultation, OSCR “strongly suggested” an alternative way forward – “a public benefit standard developed on a relatively conceptual basis”, with supplementary guidance in some form.

“There is a significant need to consider the large proportion of non-accountancy professionals who are involved with the charity sector and how any such changes might impact on the sector as a whole,” it said.

It suggested that the current Charities Sorp making body and Sorp Committee are best placed to devise any new material because they understand the sector. It also argued that the anticipated 1 January 2012 date for changing to any new framework was “overly ambitious” and that early 2013 was more realistic.

“If the timetables slips further beyond this date, there will be strong argument in favour of updating the current Charities Sorp in order to better meet the needs of smaller charities,” it concluded.

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Directory: Office of the Scottish Charity Regulator (OSCR)