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/ 33
400 “Sater
Chapter 16
Non-profit Organizations
Learning Objectives
1. Explain the applicability of the PFRSs to NPOs.
2. Account for the assets, liabilities, equity, revenues
expenses of NPOs. /
3. Enumerate and describe the financial statements of NPOs
4. State the accounting procedures peculiar to specific type:
NPOs,
and
Sof
Introduction
Although the IFRSs/PFRSs are designed to apply to business
entities, they can also be applied to non-profit organizations, This
is evidenced by the following excerpts from the IFRSs/PFRSs:
» IFRSs are designed to apply to the general purpose financial
statements and other financial reporting of profit-oriented
entities. Although the IFRSs are not designed to apply to not-
for-profit activities, entities with such activities may find them
Appropriate.” (Preface to IFRSs.9)
» PAS 1 Presentation of Financial Statements uses terminology that
is suitable for profit-oriented entities. If entities with not-for
profit activities apply PAS 1, they may need to amend the
descriptions used for particular line
items in the financil
statements and for the financial st
atements themselves. (I'\5!°
IFRSs generally do not have scope limitati
profit activities, Although IFRSs are de
Oriented entities,
ions for not-ler
veloped for profit
* * . ired, OF
a not-for-profit entity might be requitt il,
choose, to apply TERSs, (15 4 Business Combinations BC63) —
fad CPT
sn
401
As can be inferre,
; d from the foregoing, statements, the
gas can’ be applied to
N
! all Feporling entities regardless of their
a sole Proprietorship,
operative) and purpose (ie,
cordingly, Most of the concepts that we will be learning in this
papter would be very familiar to you 49,
However, just like in the case of accounting for sole
oprictorships, partnerships, corporations and cooperatives, the
counting for non-profit organizations differs in respect of
counting for equity,
Le,
Partnership, corporation or
for-profit or not-for-profit).
-yrrent trend in practice
i practice, the accounting for non-profit
ssentially similar to the accounting for busine:
jifferences ate the terminologies used in the
vhich are modified to suit the Non-profit organization’s purpose,
ind the presentation and disclosure of equity.
Non-profit organizations in the Private sector are normally
oganized as non-stock, non-profit corporations. As such, they are
quired to file audited annual financial statements to the
Scurities and Exchange Commission (SEC). In most cases, the
uditors’ reports in these financial statements state an opinion on
4e organization's compliance with the PFRSs (or IFRSs, for
atermational organizations).
organizations is
sses. The notable
financial statements,
Sample 1: Auditors’ Report
the following is an excerpt from an Independent Auditor’s Report
1 published audited financial statements of a non-profit
“ganization:
=}
pinion
Nour opinion, the financial statements give a true and fair view
‘the financial position of the Organization as at 31 December
2, and of its finantial performance and its cash flows for the
“ar then ended in accordance with International Financial
“porting Standards. Chapter y
402
ide specific guidance
Since the PERSs do not provide specific guidance on the
Since ? . 7 . . -
non-profit organizations, many NON-profiy
, > fo ;
accounting — tor xemptions provided under PAS ¢
2 ssort to the &
A vienna Patios Changes in Accounting Estimates and Errors (ie,
hierarchy of financial reporting standards’). For example, IN Cases
where the PERSs are silent regarding the accounting treatment for,
or financial statement presentation of, a transaction peculiar to
non-profit organizations, the organization may refer to the general
guidelines set forth under the Conceptual Framework.
Example 2: Modified Statement of compliance
The following is an excerpt from the notes to financial statements
of a non-profit organization's published financial statements:
Note 2,1 Statement of compliance
The financial statements have been prepared in accordance with
and comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board
(IASB) and interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC) of the IASB and are
Presented in accordance with the Organization’s Financial
Regulations.
Currently, IFRS do not contain specific guidance for non-protit
organizations (NPO) concerning the accounting treatment and the
Presentation of financial statements. Where IFRS
Not give guidance on how to trea
for-profit sector, accounting
general principles of IFRS
Framework.
are silent or do
t transactions specific to the not
Policies have been based on the
a8 detailed in the IASB Conceptual | yit Organizations
1
wee
a 403
anaracteristics Of a Non-profit organization
om prafit organization (NPO) ~ (also called not-for-profit entity
ve or noncommercial organization 'NCO’) is one th
NF
at carries out
» socially desirable needs of the
ame community or its members
wd whose acti Not directed towards making profit.
: The main objective of NPOs may be educational, religious,
_xial, cultural or charitable. NPOs
aiucational institutions, hospitals
ities are
may be in the form of
and other health care providers,
wligious institutions, professional bodies, Sports, social or literary