Better news for charity shops from Accounting Standards Board
December 2011
The Accounting Standards Board (ASB) has published a statement providing guidance on on how donated stock and incoming resources from non-exchange transactions should be measured.
In the summer of 2011 the ASB closed a consultation on new reporting requirements for public benefit entities (FRSPBE). This included proposals for valuing incoming resources from non-exchange transactions. Worryingly, this would have included estimations of stock value for goods donated to charity shops. See Pesh Framjee’s article: ‘Proposed accounting standard likely to give charity shops a headache’ for a fuller background on this issue here
The ASB now states: “The Board tentatively agreed that incoming resources from non-exchange transactions should only be recognised when the resource (i.e. donated goods) can be measured reliably, and where consideration is given to the benefits and costs. Consequently, where it is not practical to estimate the value of donated goods with sufficient reliability or benefit the income is recognised when the donated goods are sold.”
Jane Tully, head of policy and public affairs at Charity Finance Directors’ Group (CFDG) said: “The wording of this ‘tentative’ decision is promising as it reflects the two main elements of the CFDG argument against the original proposals. These are the fundamental issues of practicality and reliability of such estimations of value, and importantly, significant doubts over the usefulness of such information to the users of accounts when the stock has no replacement cost and therefore no value to the charity until sold. We hope that the wording we see in the next draft of the standards continues to reflect this perspective and does not place unnecessary bureaucracy on charities that receive such donations.”
The full statement from the ASB can be found at:
CFDG's repsponse to the FRSPBE which contains further information on the ASB's original proposals and the CFDG position can be found here.
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