Will public accountability destroy comparability in the not-for-profit sector?

Tuesday, January 26, 2010 | Posted by: Jenny Brown
Categories: Future of UK GAAP, UK GAAP | Tags: IFRS, charity, IFRS for SMEs, SMEs, not-for-profit

Who should the IFRS for SMEs apply to?

The proposed tier system identifies publicly accountable entities as those which have debt or equity instruments on a public market, are a deposit taking entities and/or hold assets in a fiduciary capacity for third parties.  These entities will apply full IFRS and not IFRS for SMEs.  This raises an interesting consideration for the not-for-profit sector: not only does the ‘public accountability’ definition have a different interpretation than that we are perhaps used to in the sector, but the definition may result in a greater degree of incomparability.  If the requirement for publicly accountable entities to follow full IFRS has no exceptions we may find situations where not-for-profit entities, through the virtue of individual transactions such as raising debt through a bond issue, follow completely different guidance from their closest peers.  Indeed, as full IFRS may not be covered by the not-for-profit standard those not-for-profit entities with public accountability may not even have the benefit of that ‘translation’.

The concept of public accountability therefore seems fundamental to the ‘post IFRS’ not-for-profit landscape and one which will be watched with close interest. 

Does this directly affect you?  Do you think that comparability is important to the sector?
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