Understandability and Transparency of the Financial Statements of ...

Currently, there is no specific conceptual framework that applies to charities in
Australia (Arthur Cox & Centre for Voluntary Action Studies, 2002) as Australia
operates under sector neutrality i.e. a single conceptual framework using International
Financial Reporting Standards (IFRSs) for all sectors. The Institute of Chartered
Accountants in Australia (ICAA) has tried to aid NFPs in their preparation of financial
statements by producing a report of best practice for NFPs entitled „Enhancing not-for-
profit annual and financial reporting – Best practice reporting‟ (Institute of Chartered
Accountants in Australia, 2009a). CPA Australia had earlier also tried to assist NFPs
with their report „Financial Reporting by Not-for-Profit Entities‟ (CPA Australia,
2000).
The AASB and New Zealand‟s Financial Reporting Standards Board (FRSB) have
developed a process for modifying, or introducing additional requirements to IFRSs for
NFPs (Australian Accounting Standards Board & Financial Reporting Standards Board,
2009). Neither this process nor the above reports address the core issue, which is their
basis in IFRSs that are prepared for „for-profit‟ organisations rather than NFP
organisations (Dellaportas, Langton, & West, 2008; Ellwood & Newbury, 2006; Gurd,
Palmer, & Wilson, 2008). In fact, CPA Australia considers that Australia‟s move to
IFRS fails to take into account “how radically NFPs differ from commercial entities”
(CPA Australia, 2006b, p. 1). One country that has developed a conceptual framework
for its charity sector is England and Wales which will be considered next.
2.4.2 England and Wales
New Zealand has a similar regulatory environment for charities as England and Wales.
However, whilst New Zealand‟s Charities Commission has operated only since the 21st
century, in England and Wales there has been some form of Charity Commission,
covering both England and Wales, since the mid 19th Century (Tomlinson & McGlinn,
2004).
2.4.2.1 Regulatory framework
The duties of the Charity Commission were last reviewed in 2002 by the Cabinet Office
Strategy Unit (Charity Commission, 2003) which lead to the enactment of the Charities
Act 2006 that replaced the Charities Act 1960. As well as this primary legislation there
is some secondary legislation, including The Charities (Accounts & Reports)
Regulations 2008. As of 31 December 2009 New Zealand had 24,319 registered
charities (Charities Commission, 2009d) who were receiving NZD5.2 billion in income
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