The origins of an international accounting standard for non-profits

The framework in the UK for charity accounting and reporting has been in place since the first Statement of Recommended Practice (SORP) - Accounting by charities- which was published by the Accounting Standards Committee in May 1988. Subsequently with the introduction of charity accounting and reporting regulations the SORP became a settled feature of UK accounting. This is not true though in most countries worldwide where there is no sector specific framework for non-profit accounting and financial reporting.

With international financial reporting standards (IFRS) and international public sector accounting standards (IPSAS) having already been developed this highlighted the existing gap for the non-profit sector which remained to be addressed. The catalyst for change was a seminar hosted by MHA at its London offices in July 2012. Representatives of the UK charity regulators, the UK accounting profession and the charity sector, including Charity Finance Group (CFG) came to the meeting to discuss how non-profit financial reporting could be developed internationally drawing on the UK experience. 

The final report of this project was published by the CCAB in February 2014. The report identified a strong case for a separate accounting framework for the not-for-profit sector. Among the members of the CCAB Project Steering Group were representatives of MHA, the accountancy profession including the Chartered Institute for Public Finance and Accountancy (CIPFA), and the sector including CFG and MANGO. The launch of the CCAB report was hosted at the House of Commons on 25 February 2014.

In response to the launch of the research report the Association of Chartered Certified Accountants (ACCA) in collaboration with the Accountancy Services team at the Charity Commission for England and Wales developed the Companion Guide for Not-for-profits to the International Financial Reporting Standard for Small and Medium Sized Entities (IFRS for SMEs). This Guide was the first authoritative global advice to non-profits and was intended for those accounting jurisdictions that had no dedicated accounting framework at all for non-profits. The Guide was published in September 2015 and drew heavily on the 2014 UK Charities SORP.

From 2014 to 2023 CIPFA had been contracted to provide the secretariat the Charities SORP Committee and drawing on this experience it established collaboration with the non-profit organisation Humentum (which formed following a merger of non-profit organisations including MANGO in 2017). The two organisations gained sponsorship from key donors to establish the IFR4NPO initiative in 2019.

IFR4NPO was to be the vehicle to progress the first authoritative international non-profits accounting guidance (INPAG). The Secretariat for IFR4NPO is provided by CIPFA and Humentum and the project is supported by three stakeholder groups: the donor reference group, the technical advisory group and the practitioners’ advisory group. Membership of the initial practitioners’ advisory panel included MHA reflecting our involvement at the very beginning of this initiative.

It could be that INPAG might yet become the first International Non-Profit Accounting Standard (INPAS) and if this happens then this would mark the non-profit sector coming of age in accounting.

Just like IFRS and IPSAS it will be up to each country to decide on whether to adopt INPAG (or IPSAS) into its Generally Accepted Accounting Practice (GAAP) for non-profit or to continue with its country specific GAAP framework. In the case of the UK this decision falls to the Financial Reporting Council (FRC) to make. In Ireland it would be for the Irish Auditing and Accounting Supervisory Authority (IASSA) in partnership with Chartered Accountants Ireland (CAI) to decide. INPAG is expected to published in the summer of 2025.