Non-profit organizations have unique accounting and reporting needs that had been addressed by section 4400 of the Canadian Institute of Chartered Accountants handbook.
With the move to International Financial Reporting Standards (IFRS), new standards needed to be created for not-for-profit organizations (NPOs) that are located in Part III of the Handbook—Accounting Standards for Not-for-Profit Organizations (ASNPO).
If the relevant item cannot be found in Part III, then the NPO should refer to and use the standard in Part II of the handbook.
The first interesting concept to note is that organizations that comply with ASNPO are also considered to be complying with Generally Accepted Accounting Principles (GAAP).
All NPOs must adopt ASNPO no later than the first fiscal year beginning on or after Jan. 1, 2012, but could have elected to have switched over prior to this deadline.
Because the financial statements disclose comparative information the actual transition date for a Dec. 3, 2012, year-end would have been Jan. 1, 2011.
All accounting policy changes and changes in measurement must be reported as of this date of transition.
There are some significant differences in application of the new standards to NPOs.
If the NPO prepares interim financial statements, it doesn’t necessarily need to be prepared in accordance with GAAP.
There is no longer the reporting standard to disclose comprehensive income in the balance sheet.
These items are now recorded in the income statement as if the organization were a private enterprise. Any equity investments in an active market will be reported at fair value.
There have been changes made to the standards surrounding the capitalization of tangible and intangible assets whereby an NPO can elect to capitalize a tangible asset, but not capitalize an intangible asset.
If the NPO capitalizes any asset, then it must capitalize all of those types of assets.
For example, if the NPO decides that it will capitalize furniture and fixtures, then the NPO must also capitalize all other tangible assets.
If the NPO has been following methods not in accordance with GAAP when amortizing its assets, it can elect to remeasure that asset in terms of GAAP on the date of transition.
In addition, when an NPO first adopts ASNPO, they have the option of measuring the capital assets at fair value, which would require the appraisal of the fair value items at the date of transition.
With respect to intangible assets, some NPOs may have been capitalizing costs for fundraising events. Under the new standards, these costs would now need to be treated as expenses.
Capitalized intangible assets need to be amortized over their useful lives to the NPO, however, there may be instances where the life may be indefinite.
There are also more disclosure requirements with the new standards.
The items that need to be disclosed are the accounting policies chosen and any changes to the policies, any risk and uncertainties and any unusual events.
Any amounts payable for government remittances must also be disclosed. A cash flow statement is always required.
If there are employees that attract any defined benefit plans or termination benefits, those must be disclosed.
Information on financial instruments must be disclosed so that risks to the NPO from these financial instruments can be determined. The revenue recognition policy for each material type of transaction must be disclosed.
Recently, I had the opportunity and absolute pleasure to be able to sponsor a production put on by one of our local NPOs, the Kelowna Actor’s Studio.
A comedy, Noises Off, that was originally done by actors like Carol Burnett, so you can imagine that it is a physical comedy.
I started giggling part way through the first act and didn’t stop until the show was over. The show is also very fast-paced with lots of different slapstick comedy happening at the same time.
The cast, crew and front office are made up of paid and volunteer staff.
You can opt to watch just the show, or if you would like, there is also dinner available which was absolutely delicious.