Nonprofit Insider

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August 2011 Vol. 2 No. 4

U H Y LLP C e r t i f i e d P u b l i c A c c o u n t a n t s
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What Should Non-Profit Organizations Know About International Financial Reporting Standards (IFRS)?
By Marilyn Pendergast

he topic of international accounting standards and when or whetherthe U.S. will adopt or converge with the standards set under these rules is a topic that is being widely discussed. Non-profit board members who are involved in the changes in their own businesses or with other Board membership are frequently interested in what, if any, effect IFRS may have on nonprofit accounting and financial statements.

ment activities. These types of entities would follow the standards developed by the International Public Sector Accounting Standards Board (IPSAS) which reflect the standards of the International Accounting Standards Board (IASB) to the extent practicable for government entities. The broad principle in such accounting is accrual basis and would not differ significantly from the current FASB guidance related to non-profit entities. The IPSASs goal of international convergence is to establish a single set of high-quality, international standards that companies worldwide would use for both domestic and cross-border financial reporting. Since FASB is adopting new standards while moving toward convergence, the non-profit community has already been affected by such changes. An easy example is to look at the differences between last year and this year relative to the footnote to the financial statement regarding Fair Value Measurements.

Those changes included additional information related to investments including transfers among all levels of the fair value hierarchy and more detailed information regarding the types of investments. While for the most part there has not been significant change to the financial statement format for non-profits in recent years, there are a variety of additional footnote disclosures which provide enhanced information to users, whether they be Board members, donors, financers or regulators and such changes are likely to continue.

Timing
Conversion to IFRS, even for publicly listed companies is unlikely to be required before 2015. To date, the IASB has indicated that they are interested in specific non-profit accounting issues but do not have plans for a specific focus in this area currently. It is likely, therefore, that international standards for issues that apply specifically to non-profit organizations will be several years down the road and there will be an opportunity for commentary and consideration of the users views before any final decisions are made. The IASB is developing a version of IFRS for small and medium-size entities that is intended to minimize complexity and reduce preparation costs, however there has not been any specontinued on page 2

Background
In the United States, accounting principles are set by the Financial Accounting Standards Board (FASB) for private companies and non-profit organizations and the Governmental Accounting Standards Board (GASB) for government and related entities. In many countries there is not a significant private not-forprofit sector because such services are considered to be part of govern-

For more information, please contact Jennine Anderson at janderson@uhy-us.com

UHY LLP brings specialists in nonprofit solutions in accounting and tax.

August 2011 Vol. 2 No. 4

What Should Non-Profit Organizations Know About International Financial Reporting Standards (IFRS)?
continued from page 1

In Maryland:

cific mention of the non-profit industry in that context. The AICPA Blue Ribbon panel addressing how U.S. accounting standards could best meet the needs of users of private company financial statements has recommended a new standard-setting model and Board. There will be on-going discussions related to this but as of this moment, the non-profit community has not been included as a significant sector to influence the debate. Tragedies over the last several years, in Japan, Haiti, New Orleans and many other places, as well as the continuing needs for human services throughout the world, make it clear that the non-profit community is global and an essential part of the fabric of the United States. Donors and those who are assisted throughout the world deserve accountability for resources and a consistent method of reporting.

clude that, in our professional judgment, this guidance provides the most useful and appropriate use for donors and advocate that it be adopted worldwide. Those who invest in charities by contributing to help others should have the same transparency of information as those who invest in for-profits. International standards are currently being used in over 100 countries worldwide and if the SEC moves forward with its plan for convergence for public companies it will begin to trickle down to the nonprofit sector as well. Without a crystal ball it is not possible to predict precisely what changes will take place but change there will be. Your organization should consider how any change might affect you; each of you will have different answers depending upon your mission, your activities, your demographic base and the users of your services. We at UHY LLP will continue to provide information to keep you up to date about any proposed changes.
Marilyn Pendergast is a partner in UHY LLPs Albany office and is a member of the Transnational Audit Committee of the International Federation of Accountants.

If You Want to Renew Your Drivers License, Pay Your Taxes!

ffective June 1, 2011, if you owe taxes to the State of Maryland you may not be able to renew your drivers license or renew your vehicle registration. This applies to both individuals and businesses. The taxes included are income tax, sales and use tax, withholding tax, pass-through entity tax, alcohol tax, unemployment tax, tobacco tax, motor fuel and motor carrier tax. If you are not in a position to pay the taxes owed, you may request a payment plan be set up which, if approved by the State, should let you renew. More information is available at: http://www.comp. state.md.us/owe_taxes.asp We would suggest that any organization that had an outstanding tax liability to Maryland make sure that the account is paid or a payment plan is set up well in advance of registration renewal time.

The Way Forward

A major difference between current U.S. and international standards in non-profit accounting is the concept of funds and the specific guidance related to financial reporting that is provided in FASB Accounting Standards Codification 958 (Notfor-Profit Entities) (formerly FAS 116 and 117). International standards tend to be more principlesbased and less detailed than U.S. guidance overall and this is a very specific example. If the goal is to have financial reporting that is accepted worldwide, we might con-

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The statements contained herein are provided for informational purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. Furthermore, such statements are not presented or intended as, and should not be taken or assumed to constitute legal advice of any nature, for which advice it is recommended that you consult your own legal counselors or professionals. UHY Advisors, Inc., provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of UHY Advisors. UHY Advisors, Inc., and its subsidiary entities offer services from offices across the United States. UHY Advisors, Inc., and its subsidiary entities are not licensed CPA firms. UHY LLP is a licensed independent CPA firm that performs attest services. UHY Advisors, Inc., and UHY LLP are independent U.S. members of Urbach Hacker Young International Limited.