“Strategies are okayed in boardrooms that even a child would
say are bound to fail. The problem is there is never a child in the boardroom”
Victor Palmieri, American corporate turnaround specialist
A while ago an article on this site
by Ray Jones of the Charity Commission observed that sometimes, in the pursuit
of purity and consistency, accountants lose track of good sense.
It seems to have happened again, in some draft proposals put
forward recently by the Accounting Standards Board, which when finalised will
govern charity accounting for some years to come.
Yesterday, at the Charity Finance Directors’ Group northern
conference, Janet Slade of the Charity Commission told the audience that one of
the proposals in the draft Financial Reporting Standard for Public Benefit
Entities is that charities should recognise donated goods as income as soon as
those goods come through the door.*
This is admirably consistent with principles found elsewhere
in the ASB’s financial reporting standards, and it probably makes sense to a
purist.
But even a child could tell you it’s bound to fail.
It will fail because in practice it would require teams of
little old ladies in charity shops to value donated stock as soon as it comes
through the door. They would have to total the value of that stock. This figure
would have to make its way up through the organisation to the finance
department. This would have to be repeated hundreds of times. Loads of
man-hours and expense would be involved to produce something which would
basically amount to little more than a guess.
And it would all be more or less a waste of time, because
there is a perfectly good system at the moment, which no one seems unhappy
with.
The ASB has a good record of reacting well to feedback, and
it certainly seems likely to get plenty from charities (the PBE standard is
being consulted on until July 31). So it’s likely we’ll end up with the status
quo. But a lot of effort will have been expended in getting back to it.
* The PBE standard is a high-level reporting standard
produced by the ASB, which will govern charity accounting at a higher level
than the statement of recommended practice, or Sorp. It is being produced as
part of a move to converge UK accounting standards with international financial
reporting standards, which has been going on for some years.