Financial Statements

Financial Statements

June-July 2016

Non-Charities: How Should You Present Your Accounts?

There are no accounting standards governing the financial statements of small not-for-profits that are not Charities. Incorporated Societies must submit financial information each year, including income and expenditure and assets and liabilities, according to the Societies Act. Charitable Trusts have no reporting obligations.

The format usually only becomes an issue if a not-for-profit employs an accountant to compile the financials, or commissions an audit. Accountants are generally bound by their professional standards to apply best accounting practice, and an auditor has to check for compliance with relevant accounting standards. In practice most accountants apply taxation principles to generate such financial statements and this is often accepted by auditors. However, such financial statements will almost certainly be accrual-based.

Although the Financial Reporting standards recently introduced for Charities don’t apply to other not-for-profits, they have given accountants the option of compiling cash-based financial statements in accordance with the Tier 4 standard anyway (without the non-financial information requirements), and auditors can use this as a ‘relevant’ accounting standard. Where CCA has been asked to compile financials for such entities we have done so as this is the most economical solution.

Often not-for-profits generate their own reports, and as long as they are not misleading or hard to comprehend for an outsider we generally accept them at CCA, and audit them in this format. They often do not have Notes as people feel unsure about the technical language often used in those. The Notes are generally a tool to provide information which is not self-evident from the accounts, such as if you have used any unusual ways to arrive at your figures. They don’t have to be  – and shouldn’t be – full of jargon.