IDEAS home Printed from https://ideas.repec.org/a/bla/ausact/v33y2023i2p188-202.html
   My bibliography  Save this article

Barriers to the Usefulness of Non‐profit Financial Statements: Perspectives From Key Internal Stakeholders

Author

Listed:
  • David J. Gilchrist
  • Andrew West
  • Yuyu Zhang

Abstract

The extent to which financial reports are useful is of central importance in relation to the accounting standards that underpin them. This is as true of non‐profit financial reporting as it is of financial reporting in the commercial and public sectors. In this paper we report on our findings related to a research project focused on examining the usefulness of Australian accounting standards from the point of view of non‐profit directors, preparers of non‐profit financial statements and their auditors. Undertaking a series of round tables specific to each cohort, we examine the question of who is responsible, for what and to whom in the context of financial reporting. Our research reinforces a number of issues negatively impacting the usefulness of General Purpose Financial Reports (GPFRs) in the non‐profit sector. We draw particular attention to concerns around the financial literacy of non‐profit directors, potential misunderstandings in relation to financial profitability, and complexity across a range of issues, including revenue recognition. Overall, the project finds that there are manifest specific issues and aspects particular to the sector and that simply adopting the same approach with regard to accounting standards as taken in the for‐profit sector is insufficient to ensure the utility of non‐profit GPFRs. Undertaking round tables for non‐profit directors, preparers of non‐profit financial statements and auditors, we examine the issues negatively impacting the utility of General Purpose Financial Reports in the non‐profit sector. We draw attention to concerns around the financial literacy of non‐profit directors, misunderstandings in relation to financial profitability, and complexity across a range of issues, including revenue recognition.

Suggested Citation

  • David J. Gilchrist & Andrew West & Yuyu Zhang, 2023. "Barriers to the Usefulness of Non‐profit Financial Statements: Perspectives From Key Internal Stakeholders," Australian Accounting Review, CPA Australia, vol. 33(2), pages 188-202, June.
    • Handle: RePEc:bla:ausact:v:33:y:2023:i:2:p:188-202
    DOI: 10.1111/auar.12401
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/auar.12401
    Download Restriction: no
    File URL: https://libkey.io/10.1111/auar.12401?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Nives Botica Redmayne & Fawzi Laswad & Dimu Ehalaiye & Warwick Stent, 2022. "Insights on management commentary in financial reports: the views of users, preparers and auditors," Meditari Accountancy Research, Emerald Group Publishing Limited, vol. 31(4), pages 817-840, February.
    2. Carolyn Cordery & Gwynn Narraway, 2010. "Valuing Volunteers: Expanding the Relevance and Reliability Debate," Australian Accounting Review, CPA Australia, vol. 20(4), pages 334-342, December.
    3. Elka Johansson & Peter Carey & George Tanewski & Iliyas Yusoff, 2022. "The effect of members on charities’ annual reporting: evidence from companies limited by guarantee in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1851-1886, April.
    4. David J. Gilchrist & Roger Simnett, 2019. "Research horizons for public and private not‐for‐profit sector reporting: moving the bar in the right direction," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(1), pages 59-85, March.
    5. Dominic Cyr & Suzanne Landry & Anne Fortin, 2022. "Management of Charitable Program Expense Ratios in the Charity Sector," Australian Accounting Review, CPA Australia, vol. 32(1), pages 106-123, March.
    6. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.
    7. Chris Van Staden & James Heslop, 2009. "Implications of Applying a Private Sector Based Reporting Model to Not-for-Profit Entities: The Treatment of Charitable Distributions by Charities in New Zealand," Australian Accounting Review, CPA Australia, vol. 19(1), pages 42-53, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Manzurul Alam & Zahirul Hoque, 2021. "Boundary management and accounting visibility in social services: a case study," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5377-5401, December.
    2. Husam Aldamen & Keith Duncan, 2013. "Pricing of innate and discretionary accruals in Australian debt," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 31-53, March.
    3. Eunsoo Kim & Suyon Kim & Jaehong Lee, 2021. "Do Foreign Investors Affect Carbon Emission Disclosure? Evidence from South Korea," IJERPH, MDPI, vol. 18(19), pages 1-14, September.
    4. De George, Emmanuel T. & Li, Xi & Shivakumar, Lakshmanan, 2016. "A review of the IFRS adoption literature," LSE Research Online Documents on Economics 67599, London School of Economics and Political Science, LSE Library.
    5. Dan Dacian Cuzdriorean, 2013. "Most Recent Findings In Earnings Management Area: Interesting Insights From Traditionally Top 5 Leading Accounting Journals," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 1-5.
    6. Le, Ha Thi Thu & Vo, Xuan Vinh & Vo, Thi Thuc, 2021. "Accruals quality and the cost of debt: Evidence from Vietnam," International Review of Financial Analysis, Elsevier, vol. 76(C).
    7. Martin Bugeja & Stephanie Fohn & Zoltan Matolcsy & Neil Fargher, 2016. "Determinants of the levels and changes in non-executive director compensation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(3), pages 627-667, September.
    8. Zhao, Lexin & Peng, Gang & Feng, Qianbin, 2024. "VAT rate cut and corporate maturity mismatch: Evidence from China's VAT rate reform," International Review of Financial Analysis, Elsevier, vol. 93(C).
    9. Tatiana Dănescu & Ioan-Ovidiu Spătăcean & Maria-Alexandra Popa & Carmen-Gabriela Sîrbu, 2021. "The Impact of Corporate Governance Mechanism over Financial Performance: Evidence from Romania," Sustainability, MDPI, vol. 13(19), pages 1-14, September.
    10. Mian, Rehman U. & Irfan, Saadia & Mian, Affan, 2023. "Foreign institutional investment horizon and earnings management: Evidence from around the world," International Review of Financial Analysis, Elsevier, vol. 86(C).
    11. Pierre Chaigneau & Nicolas Sahuguet, 2023. "The Complementarity Between Signal Informativeness and Monitoring," Journal of Accounting Research, Wiley Blackwell, vol. 61(1), pages 141-185, March.
    12. Ghafran, Chaudhry & O'Sullivan, Noel, 2017. "The impact of audit committee expertise on audit quality: Evidence from UK audit fees," The British Accounting Review, Elsevier, vol. 49(6), pages 578-593.
    13. Katsuhiko Muramiya & Tomomi Takada, 2015. "Cross-Shareholdings and Information Environment," Discussion Papers in Economics and Business 15-20, Osaka University, Graduate School of Economics.
    14. Joohyung Ha, 2021. "Bank accounting conservatism and bank loan quality," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(3-4), pages 498-532, March.
    15. Jeong‐Bon Kim & Leye Li & Louise Yi Lu & Yangxin Yu, 2021. "Financial statement comparability and managers’ use of corporate resources," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 1697-1742, April.
    16. Freyburg, Tina & Garbe, Lisa & Wavre, Véronique, 2022. "The political power of internet business: A comprehensive dataset of Telecommunications Ownership and Control (TOSCO)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Online fi, pages 1-1.
    17. Kausar, Asad & Shroff, Nemit & White, Hal, 2016. "Real effects of the audit choice," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 157-181.
    18. Michael Minnis & Andrew Sutherland, 2017. "Financial Statements as Monitoring Mechanisms: Evidence from Small Commercial Loans," Journal of Accounting Research, Wiley Blackwell, vol. 55(1), pages 197-233, March.
    19. Hu, Jinshuai & Li, Annie Yuansha & Zhang, Feida (Frank), 2014. "Does accounting conservatism improve the corporate information environment?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 23(1), pages 32-43.
    20. Jing Wu & Qiuge Yao & Haoxiang Tong, 2019. "Does monetary policy tightening reduce the maturity mismatch of investment and financing: Empirical evidence from China," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(6), pages 1-3.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausact:v:33:y:2023:i:2:p:188-202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1035-6908 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.