Understandability and Transparency of the Financial Statements of ...

„selling a story‟ makes them focus on pledges made rather than donations received. As
several interviewees reiterated, a pledge is just a promise so there is no certainty that it
will be received. Next, the matching concept especially in relation to grants and
donations received for a particular purpose will be examined.
6.2.3 Matching concept
Matching has its roots in the economic premise that sacrifices must generally be made
(costs must generally be incurred) to achieve benefits (revenues). The International
Accounting Standards Board considers that the „cost-revenue matching objective‟ is
where cost is expensed when the revenues to which the expense is considered to
contribute, is recognised (International Accounting Standards Board, 2005).
Several interviewees used the matching concept to justify why all donations were not
placed in revenue. In the current study interviewees who were aware of the matching
concept were likely to utilise it. However, many interviewees were not aware of the
concept, but after explaining to them its function and the justification for its use, many
interviewees who had previously not be aware of it appeared very keen to utilise it,
particularly to „smooth‟ out their surpluses and deficits.
I was trying to provide a reconciliation between cash received and the amount
that we were showing as income, and why was there a difference, because there
was income that we had [pause] ah sorry, cash that we‟d received, but we
hadn‟t earnt the income yet because if we don‟t do what we‟re supposed to, we
have to give it back. (Interviewee 13 B/A)
So, how much to apportion as income for this year and how much is apportioned
for next year? If we get that wrong, it really can have a huge impact on the
bottom line. And so I do spend some time at the end of each year, because they
[the grants] very rarely end within one financial year. I‟m calling them grants
received and advanced and stuff. So that‟s our biggest problem. If we aren‟t
aware, if we say put the whole income in this year, but we‟ve still got $30,000
worth of wages we have to pay to finish the contract, we can get ourselves into a
terrible state, not having provision for the staff to do that this year, and yet we
owe it on the contract. (Interviewee 15 M/B)
It took three years to work through it [the grant]. We just spread it over that
period of time that it was used. You just can‟t put it into that one year: it just
didn‟t relate to it [the year as the expense would be incurred in the next financial
year] at all. (Interviewee 36 T/B/A)
For a contrasting view of the matching concept, it is interesting to note that the Charity
Commission in England and Wales does not allow the matching concept in their SORP.
This was highlighted in Connolly, Hyndman & McMahon‟s (2009, p. 30) study where
one interviewee said “the matching principle was thrown out when the SORP came in. I
want it back”. In relation to the SOFA another interviewee states that “recognising
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