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The Future of Financial Reporting by Not-for-Profit Organizations


Change is in the air!

Since becoming effective in 1997, there have been few revisions to the CICA Section 4400 Series of standards for not-for-profit organizations (NFPOs). However, this is about to change!

Over the past several years, the Accounting Standards Board (AcSB) and the Public Sector Accounting Board (PSAB) have been working to determine the appropriate financial reporting frameworks for all of Canada’s entities. As part of this process, consideration is now being given to the future of NFPOs' financial reporting.

In December 2008, the AcSB and the Public Sector Accounting Board (PSAB) jointly issued an Invitation to Comment (ITC) - Financial Reporting by Not-for-Profit Organizations, to solicit comments from stakeholders and users of NFPOs' financial statements on the future direction of financial reporting standards for NFPOs. The main focus of the ITC is to seek comment on issues such as the extent of linkage to other sectors’ accounting standards; whether there should be just one set of standards for all NFPOs; and whether there is support for different financial reporting framework and standards options for NFPOs, depending on whether they are in the private or public sector.

So, what are the issues for NFPOs – both private and public sector? Firstly, there’s the question of whether or not one set of standards should apply to all NFPOs, no matter their size or source of funding.

Secondly, if options are more appropriate, what would they be? There could be a separate set of stand-alone NFPO standards. This approach would mean there would be yet another set of GAAP, with all the costs and related demands on preparers and users that this entails. Alternatively, the AcSB and the PSAB have tentatively concluded that the following are viable options:

  • International Financial Reporting Standards (IFRS); or
  • Private-enterprises standards currently being developed by the AcSB, supplemented by standards specific to NFPOs; or
  • Public sector standards developed by the PSAB; or 
  • Public sector standards developed by the PSAB, supplemented by standards specific to NFPOs

IFRS do not currently contain any “special” standards that take into consideration the unique reporting needs of NFPOs, and such standards are at least a decade away. Private enterprise standards, supplemented by NFPO-specific standards, are likely the best understood, as this is the system presently in place. Anticipated changes in the private enterprise standards are designed to simplify recognition and disclosure requirements. The PSAB standards may be an attractive alternative, as both governments and NFPOs have the same focus on “best use of resources to provide services.”

The AcSB and the PSAB want your feedback. Which option would you consider the most appropriate?

For more information, please contact me or your local MNP advisor.