The technical difference between a grant and a donation still needs to be clarified in the latest version of new accounting standards for charities, according to CFG.
CFG has submitted its response to the Accounting Standards Board’s (ASB) latest consultation document on converting to international financial reporting standards, and finds that there are still some drafting issues which need to be clarified to avoid "serious impact" on the charity financial reporting framework.
Following feedback to previous consultations, the ASB has released draft FRS 102, a new financial reporting standard for the UK. CFG has worked with the ASB over the last two years to iron out provisions for the sector in the new accounting framework that will be implemented in 2015, and has now released its latest official response, Consultation response: FREDs 46, 47 & 48 The Future of Financial Reporting in the UK and Republic of Ireland.
In the document, CFG praises the ASB’s responsiveness to earlier recommendations by the sector, but is concerned that some of the definitions in FRS 102 are misleading. The group believes that the technical difference between a grant and a donation must be clarified so as to avoid a situation where similar types of income are being recognised in vastly different ways. CFG is asking the ASB to make it clear when the specific proposals for reporting income from grants rather than donations are to be applied.
Further definitions that CFG would like cleared up are ‘performance condition’ and ‘restriction’, which it says are not consistent with charity law and the Charity Statement of Recommended Practice (Sorp) in the current draft. CFG is concerned that in their current state these definitions could dramatically change the recognition of donated funds, specifically that income currently recognised when receivable as restricted will need to be deferred. This instance could “significantly transform the look of charity balance sheets”, according to Caron Bradshaw (pictured), CEO at CFG.
New standards 'nearly there'
Despite some small grievances, however, CFG is confident that the ASB is “nearly there”.
“This has been a long journey but when it comes to having a final version of the new overarching standard we’re nearly there – an exciting step which will reduce UK accounting principles from a convoluted 5,000-page document to something in the area of 400 pages,” said Bradshaw. “There are however, some rather confused drafting issues which still need ironing out if this is going to be a smooth transition for the charity sector.”
CFG’s full consultation response can be found on its website here.
The full ASB consultation document and information on the conversion to International Financial Reporting Standards is available on its website here.
