Accounting Standards for European Non-profits. Reasons and Barriers for a Harmonisation Process

Abstract

Non-profits (NPOs) are one of the key agents in implementing socio-economic policies, financial reporting being relevant for their stakeholders. Different accounting regulations exist in Europe, with no required, common accounting standards to promote these entities’ participation in diverse countries and societies. We analyse the current differences among local accounting regulations related to the elaboration of financial reporting for European NPOs. We accomplish this by considering the primary elements that define an accounting system together with accounting regulations to elaborate on these organisations’ financial statements, and specific operations related to tangible fixed assets, donations and volunteering. Despite there are pressures to promote an isomorphic behaviour in the European context, our results evidence intense differences among European local regulations for NPOs, with origin in diverse cultural and non-profit traditions.

Keywords:

• accounting harmonisation
• institutional theory
• public benefit foundations
• non-profit

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 We use the term convergence to refer the evolution of national standards towards international or other national standards. The term harmonisation means the act or practice of making local accounting standards similar to those of a different country. In this study, we analyse the variation in local accounting standards as a preliminary step in a harmonisation process.

2 According to the Centre for Social Investment (2008), the following entities are considered public-benefit purpose foundations: (a) Fundación (Spain), (b) Fondazioni (Italy), (c) Fondation (France), (d) Fondation/Fondazioni/Stiftung (Switzerland), (e) Stiftelser (Norway), (f) Charity (United Kingdom), (g) фон (Russia), (h) Stichting (Netherlands), (h) Stiftung (Germany) and (i) Stiftelse (Sweden).

See http://ec.europa.eu/internal_market/company/docs/eufoundation/feasibilitystudy_en.pdf

3 Unlike private NPOs, public NPOs are created by public authorities and develop a subordinate relationship in terms of their resources, management and goals (Buse et al., 2016). Although these entities are functional extensions of public administrations – and thus, are public entities that depend on decisions by the authorities who created them – they are regulated in the context of private civil law (Overman et al., 2015). This phenomenon is known as the ‘flight of administrative law’, and implies the emergence of alternative legal forms, such as public NPOs, to achieve swifter, more flexible accounting and management procedures (Jiménez, 2009; Maldonado-Meléndez & Bringas, 2017). Consequently, these entities will exhibit similar accounting regimens as private NPOs. Therefore, we consider both categories as a single group.

4 In countries under the Mediterranean model (Spain or Italy), public authorities have commended the responsibility for regulation to autonomous bodies (ICAC, OIC). In contrast, in other models, (e.g. post-statist model: Russia), – involves public authorities’ more intense participation because no autonomous bodies exist, and accounting regulations depend on the Ministry of Finance. Professionals and private associations more intensely participate in other such models as the liberal, social-democratic or corporatist models.

5 Specifically, we contacted the Institute of Economics, Management and Law (Бугульминский филиал Института экономики, управления и права) in Russia’s Bulguma region.

6 We present the general regulations for the studied entities, although some cantons and regions can maintain local regulations that have not been analysed, such as those in Germany, Spain and Switzerland.

7 Index cards and summaries are available upon request.

8 Table 3 illustrates two accounting criteria, but it is possible to use a fiscal criterion to assess the acquired item by the value of the given item estimated by the amount related to the direct tax. In this case, fiscal expenses are neutralised and the annual benefit is not modified.

Additional information

Funding

This work was supported by Ministerio de Economía y Competitividad: [grant number ECO2016-77631- R / PID2019-104304GB-100,PID2019-107822RB-100 / ECO2016-74920-C2-1-R].