Charity accountant warns of burdensome new standards

CHARITY SHOPS could be burdened with extra reporting requirements if new accounting standards go ahead, according to Charity Commission policy accountant Janet Slade.

Slade said shops’ balance sheets will have to reflect the value of donated goods that have not yet been sold; existing rules do not require accounting for the value of unsold stock, Third Sector reports.

She told finance directors at a recent conference: “You are not alone in considering how donated goods might be valued…others have also raised the difficulties involved.”

Roger Marshall, chairman of the Accounting Standards Board, said the body is well aware of charities’ concerns and its sub-body, the Committee on Accounting for Public-benefit Entities, has looked into them.

He gave the example of a donated Picasso that would certainly be recorded on accounts before being sold, compared to a donation of bread from a supermarket that would be distributed free among the homeless as soon as it was received.

He said: “There is a huge variety of donations and that makes it very hard to set a threshold for accounting; I’m not saying we got it right, we will look at responses and think about it again.”

Marshall said the wording of the standards was an attempt to discourage the reporting of donations that are not material.

Janet Slade told the conference that basic accounting requirements were breached in around 15% of charity annual reports. To meet the standard set in the commission’s Statement of Recommended Practice (Sorp), the report had to be adequate with appropriate headings. “It didn’t have to reflect the current year, it didn’t have to be well-written and it could be a set of boilerplate statements: 15% still failed,” she concluded.

A new Sorp for public benefit entities is being developed and is expected to apply to charity accounts from 2013, after the ASB releases its new financial reporting requirements.

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Fiona Westwood of Smith and Williamson.