WHAT IS THE CHARITIES ACCOUNTING STANDARD?
In the area of financial reporting, charities in Singapore were given an effort-saving leg up in the form of the Charities Accounting Standard (CAS). However, very few have taken advantage of this.
The CAS was issued with the intention of making it easier for smaller charities to comply with accounting standards while ensuring charities present information that is fit-for-purpose.
Still, many charities in Singapore have chosen not to adopt CAS in their financial reporting, opting instead to adopt the Singapore Financial Reporting Standards (FRS).
This could be due to lack of familiarity with the CAS and reluctance to invest in the cost and effort of switching to the new standard. After all, CAS does require some changes - e.g. the presentation of a Statement of Financial Activities (SOFA) - which a charity's accounting records may not be able to support. It also requires additional disclosures, such as detailed disclosures of remuneration and other benefits paid to individual governing board members.
Nonetheless, these are mostly 'one-time' changes to systems and implementation. On an annual recurring basis, adoption of the CAS reporting framework will be simpler and yet provide better information to stakeholders.
THE BENEFITS OF SWITCHING TO CAS
Some of these benefits are:
1. CAS is a condensed volume, including only provisions in the FRS that are relevant to charities. As a result, governing board members and accounting personnel in charities would find CAS easier to understand and simpler to comply with.
2. CAS would have fewer revisions and additions of new requirements as compared to the FRS which is continually revised and amended with new standards issued.
3. CAS has guidance to meet the accounting needs of charities. e.g. It incorporates guidance on accounting for donations and account for separate funds. These provisions are helpful to assist charities to determine how such donations, as well as restricted and other funds, should be recorded and reported.
4. CAS also incorporates guidance on loans made by charities to other parties. CAS requires disclosures of relevant information to enable stakeholders to understand the terms of these loans. To make it simpler for charities, loans do not need to be recorded at amortised cost using the effective interest method as required by FRS.
5. CAS increases transparency and accountability in financial reporting by requiring the presentation of the SOFA. This provides a complete and summarised picture of a charity's incoming resources and how it applied its resources in all its various funds.
6. There are provisions in CAS on disclosures and presentation of restricted funds which would provide greater transparency and accountability in the financial statements.
CONCLUSION:Overall, the benefits of adopting the CAS outweigh the initial challenges at implementation. For charities that are eligible to adopt CAS and have not made the switch, we would advise governing boards to relook their concerns and weigh these against the benefits of improvements in the financial reporting process in the long-term.