The free online event held in English with resources in French and Spanish.
This webinar covered the proposals on classification of expenses in International Non-Profit Accounting Guidance Exposure Draft 3 (INPAG). This was relevant because:
- Consistency is important to achieve comparability, but NPOs are so different from each other.
- Readers may like to see a connection between the expenses and the NPO’s activities.
- Support costs, fundraising costs and capital expenditure are of particular interest, and divergent treatment internationally.
The participants learnt more about:
- How should NPOs present expenses – by nature, function or a mixture?
- How much flexibility or choice is there?
- What disclosures are required about certain types of costs?
- How are support costs and fundraising costs defined?
- How to treat capital expenditure (ie acquisition of assets / CAPEX)?
Here are the questions asked during the session:
- Does INPAG provide a recommended basis or broad principle for allocation of support costs?
- Will this treatment of grant-funded assets be retrospective?
- Will INPAG require NPOs to apply a consistent method of classifying expenses from year to year? Should changes in the method be treated in the same way as changes in accounting policies?
Genny: as previous advisory committee have stated, allocating an asset to restricted or unrestricted is too onerous and difficult as an asset could be funded from both donor funds and also unrestricted funds. - This disclosure of personal remuneration seems intrusive. Does it apply eg. to the CEO who attends the board but is not a Trustee?
- Also some funders fund depreciation rather than a capital costs. What is the proposed treatment for such an asset and presume then in donor reporting includes the depreciation.
- What steps can be taken to guarantee that the financial reports are easily understandable and thorough, giving stakeholders all the information they need to evaluate the nonprofit’s financial health and performance?
- Will Sarah’s explanation as to why there will be no guidance on allocation of support costs be set out in INPAG?
- Could the change in allocation method create a prior period error instead of a change in accounting policy?
- Change of presentation/methods applied retrospectively may need to affect on IFRS the OCI (Other Comprehensive Incomes). in the present case of INPAG, what would equate the OCI?
- Could you clarify how to distinguish fundraising costs from costs associated with earning specific funds or revenues? For example, when are investment property management fees considered fundraising costs, and when are they costs associated with earning rent income?
- Are there clear definitions / guidance for NGO costs items such as support costs to create clearer transparency and consistency?
- Some NGOs have a lot of projects such as one NGO has 180 projects. So it is not possible to allocate the mixed cost according to activities or project wise and it is also not possible to maintain project time sheet. What will be done? At present they are charging ICR to the projects.
- One could argue that fundraising costs are only those expenses incurred well in advance of generating funds and where the amount or probability of generating those funds is uncertain…
- What is an acceptable % of support costs with regards to program costs or funds raised?
The following questions were raised during the webinar but not addressed at the time. Some written responses are provided here.
- Where there are different policies on asset recognition from different funders. In that case, how the assets will be recognized in the financial statements as per INPAG? For example, some donors’ asset threshold is US$ 5,000, some others have $500 or more or less. Does this need any disclosure in FS?
- Fundraising costs could be similar to commission payments /payble in IFRS17. Maybe something to explore (without the complexity of IFRS 17)
- Some donors require project assets to be donated at the end of the project. These are treated as direct project expense upon purchase. Do we have to capitalize these in the financial statements and record depreciation?
- I believe that the main challenge of the project is to link the basic principle of recognition based on that expectation of linking expenses based on budgetary consumption. It is important to focus efforts on the classification according to the object of expenditure. What have the entities contributed in relation to these concerns?
- I would like to ask question in regards to section 33 about related parties, in my opinion it has focused more on individual parties, what about related parties with regard to organizations such as sub grantees or even major donors? would be more fair to show the transactions in regard to revenue and expenses incurred with related parties organization together with showing up the nature of the transactions during the year.
- If this some kind of a project like the Convergence Project between the IFRS and US Rule based GAAP?
- For first time adoption, how should we treat assets purchased by a fund but not capitalised?
